BIS Final Rule Revises and Clarifies Certain EAR Provisions

The Bureau of Industry and Security (BIS) has issued a final rule which amends the Export Administration Regulations (EAR), effective September 16, 2005, by making certain revisions and clarifications.

According to BIS, the purpose of these amendments is to make corrections and clarifications to the EAR so the public will find them easier to use.

BIS Clarifies EAR, Inserts Omitted Material, Clarifies Certain Instructions, Etc.

The amendments and clarifications made to the EAR by this final rule are as follows:

UN Embargo omission. In 15 CFR 738.2(d)(2)(i)(A), an omission is corrected by adding "UN United Nations Embargo'' in alphabetical order to the list of all possible Reasons for Control. That phrase was previously inadvertently omitted.

Information on export/reexport controls for North Korea amended. In 15 CFR 742.19, BIS states that references to ECCNs 2B994 and 2C994, which do not exist, are removed, and references to ECCNs 2D994 and 2E994 are added. In June 2000, the EAR were amended to reduce export and reexport controls to North Korea. Prior to publication of that rule, almost all exports and reexports to North Korea of items subject to the EAR required a license.

BIS explains that although that rule reduced license requirements to North Korea overall, it retained license requirements for most items controlled on the Commerce Control List (CCL). These license requirements were enumerated in a newly created 15 CFR 742.19 and included all items on the CCL except those items controlled under ECCNs 0A988 and 0A989. This was clarified as including all items controlled for Anti-Terrorism (AT) reasons, including any item on the CCL containing AT column 1 or AT column 2 in the Country Chart column of the License Requirements section of an ECCN, as well as numerous specifically identified ECCNs which were controlled for AT reasons but which did not make reference to the Country Chart. When listing the ECCNs of items controlled for AT reasons but which did not make reference to the Country Chart, the rule mistakenly listed ECCNs 2B994 and 2C994, which did not then (and still do not) exist.

In addition, the rule neglected to specifically mention ECCNs 2D994 and 2E994, both of which were controlled for AT reasons but did not reference the Country Chart. This rule corrects that error by replacing the references in 15 CFR 742.19(a)(1) to 2B994 and 2C994 with references to 2D994 and 2E994.

Alias for Chinese university added to Entity List. BIS also states that supplement No. 4 to 15 CFR Part 744 (Entity List) is amended by revising the entry for the Beijing University of Aeronautics and Astronautics (BUAA) by adding an alias, Beihang University. This alias is being added because the Chinese name for BUAA is sometimes translated into English as Beihang University. The Entity List now notifies the public that a license is required for the export or reexport of all items subject to the EAR to the "Beijing University of Aeronautics and Astronautics (BUAA), a.k.a. Beihang University''.

Instructions for applying for authorization to transfer items subject to the EAR in-country added. In 15 CFR 748.8 (Unique Application and Submission Requirements), this final rule adds instructions on how to apply for authorization to transfer items subject to the EAR in-country using the BIS Multipurpose Application (Form 748-P) and its electronic equivalent in the Simplified Network Application Process (SNAP). According to BIS, this final rule adds paragraph "(v) In-country transfers'' to 15 CFR 748.8 and adds specific instructions for filling out applications for in-country transfers in Supplement No. 2 to 15 CFR part 748 (Unique Application and Submission Requirements). These application instructions will insure that applications for in-country transfer authorization are filled out correctly, and will also clarify for the public that a temporary license application process created in 2004 is no longer necessary and should no longer be used due to improvements in BIS software. The history of the application process for in-country transfer authorization is explained in more detail below:

BIS explains that in July 2004, the EAR were amended when licensing responsibility for exports and reexports to Iraq of items subject to the EAR reverted from the Department of the Treasury to the Department of Commerce. These amendments created a new requirement for authorization to make certain in-country transfers in Iraq. Because of an inability at that time to modify the BIS software that processes and tracks license application data submitted through the Multipurpose Application, BIS created a unique process to apply for authorization to transfer items in-country, which did not require use of either BIS Form 748-P or its electronic equivalent, but required the applicant to submit a letter request to BIS. That process was explained in guidance published on the BIS Web site. Since July 2004, additional requirements for in-country transfer authorization have been issued, specifically in 15 CFR 744.3 and 744.4.

From November 17, 2004 to June 17, 2005, BIS received 209 applications for in-country transfer authorization under 15 CFR 746.3 and part 744 of the EAR, and pursuant to conditions that had been placed on licenses issued by BIS. Only one of these applications was submitted according to the letter process set up in July 2004, and the

rest were submitted using BIS Form 748-P. To improve the handling of these applications, BIS updated its software, which can now more effectively process and track in-country transfer application data received from the Multipurpose Application. With this improved software, BIS is now eliminating the letter application process created in July 2004, and is instead requiring all in-country transfer authorization applications to be submitted using BIS Form 748-P or its electronic equivalent. This new process will apply to applications to make in-country transfers under the EAR, including under 15 CFR 744.3, 744.4, 744.6, 744.18 and 746.3 of the EAR, and pursuant to conditions imposed on licenses issued under the EAR.

Despite the progress that has been made updating BIS software, it still has not been modified to process and track data provided through fields that are not currently available on the BIS Form 748-P and its electronic equivalent. Therefore, as an interim measure, BIS requires an applicant for in-country transfer authorization to designate its

proposed transaction as a "reexport'' in Box 5 of the BIS 748-P or its electronic equivalent, which will allow BIS software to process and track information regarding both an original ultimate consignee and a new ultimate consignee related to the transaction.

BIS' final rule also instructs the applicant to enter "in-country transfer'' in Box 9 of BIS 748-P or its electronic equivalent, which will allow BIS software to recognize that the application is for in-country transfer authorization, rather than reexport authorization. Further, the applicant is directed by this rule to state the same foreign country for both the original ultimate consignee and the new ultimate consignee.

Typographical error fixed in nuclear nonproliferation controls paragraph. In 15 CFR 738.4(b)(3) (Sample analysis), a typographical error is fixed in the third sentence by inserting the preposition "of'' into the phrase discussing nuclear nonproliferation controls. The phrase "I understand that though nuclear nonproliferation controls apply to a portion the entry * * *'' now reads "I understand that though nuclear nonproliferation controls apply to a portion of the entry * * *''.

Redundant paragraph removed from Administrative Order Two. A redundant paragraph is deleted in Supplement No. 2 to 15 CFR part 736, which sets forth BIS' Administrative Orders. Prior to the publication of this final rule, Administrative Order Two contained a paragraph designated as (a), the introductory text of which merely repeated the title of the order. The order contained no paragraph designated as (b). This final rule removes the introductory text of paragraph (a) and redesignates all subsequent paragraphs accordingly.

(Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, as extended by the Notice of August 2, 2005, has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act.)

-BIS states that written comments on this final rule are welcome

BIS Contact - Timothy Mooney (202) 482-2440

BIS Final Rule (D/N 050803216-5216-01, FR Pub 09/16/05) available athttp://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-18373.pdf