Billing Code: 3510-33-P

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740, 742, and 748

[Docket No. 981208298-8298-01]

RIN 0694-AB82

Exports of High Performance Computers Under License Exception CTP

AGENCY: Bureau of Export Administration, Commerce

ACTION: Interim rule with request for comments.

SUMMARY: The Bureau of Export Administration (BXA) is amending the Export Administration Regulations by revising the requirements for exports of high performance computers to the People's Republic of China. This rule requires that exports of high performance computers, regardless of value, to the People's Republic of China under License Exception CTP be supported by a PRC End-User Certificate. The PRC End-User Certificate must be obtained by the exporter prior to export. In addition, this rule also removes the $5,000 End-User Certification exemption for license applications for exports of high performance computers to the People's Republic of China.

DATES: Effective Date: This rule is effective January 14, 1999. Comment Date: Comments on this rule must be received on or before March 1, 1999.

ADDRESSES: Written comments should be sent to Patricia Muldonian, Regulatory Policy Division, Bureau of Export Administration, Department of Commerce, P.O. Box 273, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Regulatory Policy Division, Bureau of Export Administration, Telephone: (202) 482-2440.

SUPPLEMENTARY INFORMATION:

Background

The National Defense Authorization Act for Fiscal Year 1998 (NDAA) requires the Department of Commerce to conduct a post shipment verification of each high performance computer exported to a country in Computer Tier 3 as defined §740.7(d) of the Export Administration Regulations. For purposes of this post shipment verification requirement, the NDAA defines a high performance computer as one with a composite theoretical performance greater than 2,000 millions of theoretical operations per second. Tier 3 includes the People's Republic of China. In order to facilitate the Department's ability to conduct the required verifications, the Bureau of Export Administration is amending the Export Administration Regulations to require the exporter to obtain a PRC End-User Certificate issued by the Ministry of Foreign Trade and Economic Cooperation before exporting any high performance computer to the People's Republic of China if the computer is to be exported under the authority of an export license or License Exception CTP regardless of value. This rule also requires exporters to report the End- User Certificate number to the Bureau of Export Administration. This amendment does not affect the requirements for reexports of high performance computers because the NDAA does not require the Department to conduct post shipment verifications on those computers.

Although the Export Administration Act (EAA) expired on August 20, 1994, the President invoked the International Emergency Economic Powers Act and continued in effect the EAR and, to the extent permitted by law, the provisions of the EAA in Executive Order 12924 of August 19, 1994, as extended by the President's notices of August 15, 1995 (60 FR 42767), August 14, 1996 (61 FR 42527), August 13, 1997 (62 FR 43629) and August 13, 1998 (63 FR 44121).

Savings Clause

Shipments of items now subject to a PRC End-User Certificate as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export pursuant to actual orders for export before January 28, 1999 may be exported up to and including February 11, 1999. Any such items not actually exported before midnight February 11, 1999, require a PRC End-User Certificate, in accordance with this regulation.

Rulemaking Requirements

1. This interim rule has been determined to be significant for purposes of E.O. 12866.

2. Notwithstanding any other provision of law, no person is required to, nor shall any person be subject to a penalty for failure to comply with a collection of information, subject to the Paperwork Reduction Act (PRA), unless that collection of information displays a currently valid OMB Control Number. This rule involves collections of information subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). These collections have been approved by the Office of Management and Budget under control number 0694-0088, "Multi- Purpose Application," which carries a burden hour estimate of 52.5 minutes per submission and control number 0694-0107, "National Defense Authorization Act," Advance Notifications and Post-Shipment Verification reports. Reports in support of Post-Shipment Verifications require 15 minutes per submission, whether the Post-Shipment Verification is conducted on an export authorized under a license or License Exception CTP. In addition, this rule contains a new collection of information requirement approved under control number 0694-0112, which carries a burden hour estimate of 15 minutes per submission for obtaining and maintaining the PRC End-Use Certificate for License Exception CTP shipments. An additional 1 minute per submission is needed for recordkeeping. Comments are invited on: (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments regarding these burden estimates or any other aspect of the collection of information, including suggestions for reducing the burdens, should be forwarded to Patricia Muldonian, Regulatory Policy Division, Office of Exporter Services, Bureau of Export Administration, Department of Commerce, P.O. Box 273, Washington, DC 20044, and David Rostker, Office of Management and Budget, OMB/OIRA, 725 17th Street, NW, NEOB Rm. 10202, Washington, DC 20503.

3. This rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under Executive Order 12612.

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 and foreign affairs function of the United States (Sec. 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 interim rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under 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, because of the importance of the issues raised by these regulations, this rule is being issued in interim form and comments will be considered in the development of final regulations.

Accordingly, the Department encourages interested persons who wish to comment to do at the earliest possible time to permit the fullest consideration of views.

The period for submission of comments will close March 1, 1999. The Department will consider all comments received before the close of the comment period in developing final regulations. Comments received after the end of the comment period will be considered if possible, but their consideration cannot be assured. The Department will not accept public comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the persons submitting the comments and will not consider them in the development of final regulations. All public comments on these regulations will be a matter of public record and will be available for public inspection and copying. In the interest of accuracy and completeness, the Department requires comments in written form.

Oral comments must be followed by written memoranda, which will also be a matter of public record and will be available for public review and copying. Communications from agencies of the United States Government or foreign governments will not be available for public inspection.

The public record concerning these regulations will be maintained in the Bureau of Export Administration Freedom of Information Records Inspection Facility, Room 4525, Department of Commerce, 14th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20230. Records in this facility, including written public comments and memoranda summarizing the substance of oral communications, may be inspected and copied in accordance with regulations published in part 4 of Title 15 of the Code of Federal Regulations. Information about the inspection and copying of records at the facility may be obtained from Henry Gaston, Bureau of Export Administration Freedom of Information Officer, at the above address or by calling (202) 482- 0500.

List of Subjects

15 CFR Parts 740 and 748

Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements.

15 CFR Part 742

Exports, Foreign trade, Terrorism.

Accordingly, parts 740, 742, and 748 of the Export Administration Regulations (15 CFR parts 730-799) are amended to read as follows:

1. The authority citation for part 740 is revised to read as follows:

Authority: 50 U.S.C. app. 4201 et seq.; 50 U.S.C. 1701 et seq.; E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995, 3 CFR, 1995 Comp. 501 (1996); notice of August 14, 1996 (61 FR 42527, August 15, 1996); Notice of August 13, 1997 (62 FR 43629, August 15, 1997); P.L. 105-85, 111 Stat. 1629; and Notice of August 13, 1998 (63 FR 44121).

2. The authority citation for part 742 is revised to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 18 U.S.C. 2510 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 3 CFR, 1993 Comp., p. 608; E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3 CFR, 1994 Comp., p. 950; E.O. 13020, 3 CFR, 1996 Comp. p. 219; E.O. 13026, 3 CFR, 1996 Comp., p. 228; Notice of August 13, 1997 (62 FR 43629, August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

3. The authority citation for part 748 is revised to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 12924, 3 CFR, 1994 Comp., p. 917; E.O. 13026, 3 CFR, 1996 Comp., p. 228; Notice of August 13, 1997 (62 FR 43629, August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

PART 740 - [AMENDED]

4. Section 740.7 is amended:

a. By redesignating paragraph (d)(4) as (d)(5) and by adding a new paragraph (d)(4);

b. By amending newly designated paragraph (d)(5) as follows:

i. In newly designated paragraph (d)(5), revise the phrase "paragraph (d)(4)(iv) of this section" to read "paragraph (d)(5)(iv) of this section" as it appears in paragraph (d)(5)(iii);

ii. In newly designated paragraph (d)(5)(v) introductory text, revise the phrase "paragraph (d)(4)(v)" to read "paragraph (d)(5)(v)";

iii. In newly designated paragraph (d)(5)(v)(A) introductory text, revise the phrase "paragraph (d)(4)(v)(B)" to read "paragraph (d)(5)(v)(B)";

iv. In newly designated paragraph (d)(5)(v)(A), add a "note" immediately following paragraph (d)(5)(A)(v)(8); and

c. By revising newly designated paragraph (d)(5)(v)(B);

The additions and revisions read as follows:

§740.7 Computers (CTP).

* * * * *

(d) * * *

(4) Supporting documentation. Exports of computers as described by paragraph (d)(2) of this section, regardless of value, to the People's Republic of China must be supported by a PRC End-User Certificate. (See §748.10(c)(3) of the EAR for information on obtaining the PRC End- User Certificate.) Exporters are required to obtain a PRC End-User Certificate before exporting computers regardless of value to the People's Republic of China. Exporters are also required to provide the PRC End-User Certificate Number to BXA as part of their post-shipment report (see paragraph (d)(5) of this section). When providing the PRC End-User Certificate Number to BXA, you must identify the transaction in the post shipment report to which that PRC End-User Certificate Number applies. The original PRC End-User Certificate shall be retained in the exporter's files in accordance with the recordkeeping provisions of §762.2 of the EAR.

(5) * * *

(v) * * *

(A) * * *

Note to paragraph (d)(5)(v)(A): For exports authorized under License Exception CTP to the Peoples Republic of China (PRC), you must submit the PRC End-User Certificate Number identifying the transaction for which the End-User Certificate Number applies.

(B) Mailing address. A copy of the post-shipment report[s] required under paragraph (d)(5)(v)(A) of this section shall be delivered to one of the following addresses. Note that BXA will not accept reports sent C.O.D.

(1) For deliveries by U.S. postal service:

Bureau of Export Administration

U.S. Department of Commerce

P.O. Box 273

Attn: HPC Team

Washington, D.C. 20044

(2) For courier deliveries:

U.S. Department of Commerce

Office of the Assistant Secretary

for Export Enforcement

Room 3721, 14th Street and

Constitution Ave. NW
Washington, DC 20230

* * * * *

PART 742 - [AMENDED]

5. Section 742.12 is amended:

a. By revising paragraph (b)(3)(i)(C); and

b. By revising paragraph (b)(3)(iv)(B) to read as follows:

§742.12 High performance computers.

* * * * *

(b) * * *

(3) * * *

(i) * * *

(C) A license may be required to export or reexport computers with a CTP greater than 2,000 MTOPS to countries in Computer Tier 3 pursuant to the NDAA (see §740.7(d)(5) of the EAR).

* * * * *

(iv) * * *

(B) Mailing address. A copy of the post-shipment report[s] required under paragraph (b)(3)(vi)(A) of this section shall be delivered to one of the following addresses. Note that BXA will not accept reports sent C.O.D.

(1) For deliveries by U.S. postal service:

Bureau of Export Administration

U.S. Department of Commerce

P.O. Box 273

Attn: HPC Team

Washington, D.C. 20044

(2) For courier deliveries:

U.S. Department of Commerce

Office of the Assistant Secretary

for Export Enforcement

Room 3721, 14th Street and

Constitution Ave. NW
Washington, DC 20230

* * * * *

PART 748 - [AMENDED]

6. Section 748.9 is amended by removing paragraph (b)(2)(i)(1) and redesignating paragraphs (b)(2)(i)(2) and (b)(2)(i)(3), as paragraphs (b)(2)(i)(A) and (b)(2)(i)(B), respectively.

7. Section 748.10 is amended by removing "; and" at the end of paragraph (b)(2) and adding a period in its place, redesignating paragraph (b)(3) as paragraph (b)(4), by adding a new paragraph (b)(3), and by revising the introductory text of newly designated paragraph (b)(4) to read as follows:

§748.10 Import and End-User Certificates.

* * * * *

(b) * * *

(3) Your transaction involves an export of a computer with a Composite Theoretical Performance (CTP) greater than 2,000 Million Operations Per Second (MTOPS) under either a license application or under License Exception CTP to the People's Republic of China, you must obtain a PRC End-User Certificate, regardless of dollar value.

(4) Your license application involves the export of commodities and software classified in a single entry on the CCL, the total value of which exceeds $5,000. Note that this $5,000 threshold, does not apply to exports of computers with a CTP exceeding 2,000 MTOPS to the People's Republic of China.

* * * * *

DATED:

R. Roger Majak

Assistant Secretary

for Export Administration