[Title 15 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2005 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          15


          Parts 300 to 799

                         Revised as of January 1, 2005


          Commerce and Foreign Trade
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2005
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 15:
    Subtitle B--Regulations Relating to Commerce and Foreign 
      Trade (Continued)
          Chapter III--International Trade Administration, 
          Department of Commerce                                     5
          Chapter IV--Foreign-Trade Zones Board, Department of 
          Commerce                                                  59
          Chapter VII--Bureau of Industry and Security, 
          Department of Commerce                                    79
  Finding Aids:
      Table of CFR Titles and Chapters........................     799
      Alphabetical List of Agencies Appearing in the CFR......     817
      List of CFR Sections Affected...........................     827

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 15 CFR 301.1 refers 
                       to title 15, part 301, 
                       section 1.

                     ----------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
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parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
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LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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the revision dates of the 50 CFR titles.

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[[Page vii]]

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2005.

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                               THIS TITLE

    Title 15--Commerce and Foreign Trade is composed of three volumes. 
The parts in these volumes are arranged in the following order: parts 0-
299, 300-799, and part 800-End. The first volume containing parts 0-299 
is comprised of Subtitle A--Office of the Secretary of Commerce, 
Subtitle B, chapter I--Bureau of the Census, Department of Commerce, and 
chapter II--National Institute of Standards and Technology, Department 
of Commerce. The second volume containing parts 300-799 is comprised of 
chapter III--International Trade Administration, Department of Commerce, 
chapter IV--Foreign-Trade Zones Board, and chapter VII--Bureau of 
Industry and Security, Department of Commerce. The third volume 
containing part 800-End is comprised of chapter VIII--Bureau of Economic 
Analysis, Department of Commerce, chapter IX--National Oceanic and 
Atmospheric Administration, Department of Commerce, chapter XI--
Technology Administration, Department of Commerce, chapter XIII--East-
West Foreign Trade Board, chapter XIV--Minority Business Development 
Agency, chapter XX--Office of the United States Trade Representative, 
and chapter XXIII--National Telecommunications and Information 
Administration, Department of Commerce. The contents of these volumes 
represent all current regulations codified under this title of the CFR 
as of January 1, 2005.

    For this volume, Ruth Green was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of Frances D. 
McDonald, assisted by Alomha S. Morris.

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                  TITLE 15--COMMERCE AND FOREIGN TRADE




                   (This book contains parts 300-799)

  --------------------------------------------------------------------
                                                                    Part

     SUBTITLE B--Regulations Relating to Commerce and Foreign Trade 
                                (Continued)

chapter iii--International Trade Administration, Department 
  of Commerce...............................................         301

chapter iv--Foreign-Trade Zones Board, Department of 
  Commerce..................................................         400

chapter vii--Bureau of Industry and Security, Department of 
  Commerce..................................................         700

[[Page 3]]

     Subtitle B--Regulations Relating to Commerce and Foreign Trade 
                               (Continued)

[[Page 5]]



 CHAPTER III--INTERNATIONAL TRADE ADMINISTRATION, DEPARTMENT OF COMMERCE




  --------------------------------------------------------------------

                 SUBCHAPTER A--MISCELLANEOUS REGULATIONS
Part                                                                Page
301             Instruments and apparatus for educational 
                    and scientific institutions.............           7
302             [Reserved]
303             Watches, watch movements and jewelry program          19
310             Official U.S. Government recognition of and 
                    participation in international 
                    expositions held in the United States...          36
315             Determination of bona fide motor-vehicle 
                    manufacturer............................          41
325             Export trade certificates of review.........          42
335             Imports of worsted wool fabric..............          51
340             Modification of the tariff rate quota 
                    limitation on worsted wool fabric 
                    imports.................................          55

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                 SUBCHAPTER A_MISCELLANEOUS REGULATIONS





PART 301_INSTRUMENTS AND APPARATUS FOR EDUCATIONAL AND SCIENTIFIC 
INSTITUTIONS--Table of Contents




Sec.
301.1 General provisions.
301.2 Definitions.
301.3 Application for duty-free entry of scientific instruments.
301.4 Processing of applications by the Department of the Treasury (U.S. 
          Customs Service).
301.5 Processing of applications by the Department of Commerce.
301.6 Appeals.
301.7 Final disposition of an application.
301.8 Instructions for entering instruments through U.S. Customs under 
          subheading 9810.00.60, HTSUS.
301.9 Uses and disposition of instruments entered under subheading 
          9810.00.60, HTSUS.
301.10 Importation of repair components and maintenance tools under 
          HTSUS subheadings 9810.00.65 and 9810.00.67 for instruments 
          previously the subject of an entry liquidated under subheading 
          9810.00.60, HTSUS.

    Authority: Sec. 6(c), Pub. L. 89-651, 80 Stat. 897, 899; Sec. 2402, 
Pub. L. 106-36, 113 Stat. 127, 168.

    Source: 47 FR 32517, July 28, 1982, unless otherwise noted.



Sec. 301.1  General provisions.

    (a) Purpose. This part sets forth the regulations of the Department 
of Commerce and the Department of the Treasury applicable to the duty-
free importation of scientific instruments and apparatus by public or 
private nonprofit institutions.
    (b) Background. (1) The Agreement on the importation of Educational, 
Scientific and Cultural Materials (Florence Agreement; ``the 
Agreement'') is a multinational treaty, which seeks to further the cause 
of peace through the freer exchange of ideas and knowledge across 
national boundaries, primarily by eliminating tariffs on certain 
educational, scientific and cultural materials.
    (2) Annex D of the Agreement provides that scientific instruments 
and apparatus intended exclusively for educational purposes or pure 
scientific research use by qualified nonprofit institutions shall enjoy 
duty-free entry if instruments or apparatus of equivalent scientific 
value are not being manufactured in the country of importation.
    (3) The Annex D provisions are implemented for U.S. purposes in 
Subchapter X, Chapter 98, Harmonized Tariff Schedule of the United 
States (HTSUS).
    (c) Summary of statutory procedures and requirements. (1) U.S. Note 
1, Subchapter X, Chapter 98, HTSUS, provides, among other things, that 
articles covered by subheadings 9810.00.60 (scientific instruments and 
apparatus), 9810.00.65 (repair components therefor) and 9810.00.67 
(tools for maintaining and testing the above), HTSUS, must be 
exclusively for the use of the institutions involved and not for 
distribution, sale, or other commercial use within five years after 
entry. These articles may be transferred to another qualified nonprofit 
institution, but any commercial use within five years of entry shall 
result in the assessment of applicable duties pursuant to Sec. 
301.9(c).
    (2) An institution wishing to enter an instrument or apparatus under 
tariff subheading 9810.00.60, HTSUS, must file an application with the 
Secretary of the Treasury (U.S. Customs Service) in accordance with the 
regulations in this section. If the application is made in accordance 
with the regulations, notice of the application is published in the 
Federal Register to provide an opportunity for interested persons and 
government agencies to present views. The application is reviewed by the 
Secretary of Commerce (Director, Statutory Import Programs Staff) , who 
decides whether or not duty-free entry may be accorded the instrument 
and publishes the decision in the Federal Register. An appeal of the 
final decision may be filed with the U.S. Court of Appeals for the 
Federal Circuit, on questions of law only, within 20 days after 
publication in the Federal Register.
    (3) Repair components for instruments or apparatus admitted duty-
free

[[Page 8]]

under subheading 9810.00.60, HTSUS require no application and may be 
entered duty-free in accordance with the procedures prescribed in Sec. 
301.10.
    (4) Tools specifically designed to be used for the maintenance, 
checking, gauging or repair of instruments or apparatus admitted under 
subheadings 9810.00.65 and 9810.00.67, HTSUS, require no application and 
may be entered duty-free in accordance with the procedures prescribed in 
Sec. 301.10.
    (d) Authority and delegations. The Act authorizes the Secretaries of 
Commerce and the Treasury to prescribe joint regulations to carry out 
their functions under U.S. Note 6, Subchapter X, Chapter 98, HTSUS. The 
Secretary of the Treasury has delegated authority to the Assistant 
Secretary for Enforcement, who has retained rulemaking authority and 
further delegated administration of the regulations to the Commissioner 
of the U.S. Customs Service. The authority of the Secretary of Commerce 
has been delegated to the Assistant Secretary for Import Administration 
who has retained rulemaking authority and further delegated 
administration of the regulations to the Director of the Statutory 
Import Programs Staff.

[47 FR 32517, July 28, 1982; 47 FR 34368, Aug. 9, 1982, as amended at 66 
FR 28832, May 25, 2001]



Sec. 301.2  Definitions.

    For the purposes of these regulations and the forms used to 
implement them:
    (a) Director means the Director of the Statutory Import Programs 
Staff, International Trade Administration, U.S. Department of Commerce.
    (b) Customs means the U.S. Customs Service and the ``The 
Commissioner'' means Commissioner of the U.S. Customs Service, or the 
official(s) designated to act on the Commissioner's behalf.
    (c) Customs Port or the Port means the port where a particular claim 
has been or will be made for duty-free entry of a scientific instrument 
or apparatus under subheading 9810.00.60, HTSUS.
    (d) Entry means entry of an instrument into the Customs territory of 
the United States for consumption or withdrawal of an instrument from a 
Customs bonded warehouse for consumption.
    (e) United States includes only the several States, the District of 
Columbia and the Commonwealth of Puerto Rico.
    (f) Instrument means instruments and apparatus specified in U.S. 
Note 6(a), Subchapter X, Chapter 98, HTSUS. A combination of basic 
instrument or apparatus and accompanying accessories shall be treated as 
a single instrument provided that, under normal commercial practice, 
such combination is considered to be a single instrument and provided 
further that the applicant has ordered or, upon favorable action on its 
application, firmly intends to order the combination as a unit. The term 
``instrument'' also covers separable components of an instrument that 
are imported for assembly in the United States in such instrument where 
that instrument, due to its size, cannot feasibly be imported in its 
assembled state. The components, as well as the assembled instrument 
itself, must be classifiable under the tariff provisions listed in U.S. 
Note 6(a), Subchapter X, Chapter 98, HTSUS. See paragraph (k) of this 
section and Sec. 301.3(f). Unless the context indicates otherwise, 
instrument or apparatus shall mean a foreign ``instrument or apparatus'' 
for which duty-free entry is sought under subheading 9810.00.60, HTSUS. 
Spare parts typically ordered and delivered with an instrument are also 
considered part of an instrument for purposes of these regulations. The 
term ``instruments'' shall not include:
    (1) Materials or supplies used in the operation of instruments and 
apparatus such as paper, cards, tapes, ink, recording materials, 
expendable laboratory materials, apparatus that loses identity or is 
consumed by usage or other materials or supplies.
    (2) Ordinary equipment for use in building construction or 
maintenance; or equipment for use in supporting activities of the 
institution, such as its administrative offices, machine shops, 
libraries, centralized computer facilities, eating facilities, or 
religious facilities; or support equipment such as copying machines, 
glass working apparatus and film processors.

[[Page 9]]

    (3) General purpose equipment such as air conditioners, electric 
typewriters, electric drills, refrigerators.
    (4) General-purpose computers. Accessories to computers which are 
not eligible for duty-free treatment are also ineligible. Scientific 
instruments containing embedded computers which are to be used in a 
dedicated process or in instrument control, as opposed to general data 
processing or computation, are, however, eligible for duty-free 
consideration.
    (5) Instruments initially imported solely for testing or review 
purposes which were entered under bond under subheading 9813.00.30, 
HTSUS, subject to the provisions of U.S. Note 1(a), Subchapter XIII, 
Chapter 98, HTSUS, and must be exported or destroyed within the time 
period specified in that U.S. Note.
    (g) Domestic instrument means an instrument which is manufactured in 
the United States. A domestic instrument need not be made exclusively of 
domestic components or accessories.
    (h) Accessory has the meaning which it has under normal commercial 
usage. An accessory, whether part of an instrument or an attachment to 
an instrument, adds to the capability of an instrument. An accessory for 
which duty-free entry is sought under subheading 9810.00.60, HTSUS shall 
be the subject of a separate application when it is not an accompanying 
accessory. The existing instrument, for which the accessory is being 
purchased, may be domestic or, if foreign, it need not have entered duty 
free under subheading 9810.00.60, HTSUS.
    (i) Accompanying accessory means an accessory for an instrument that 
is listed as an item in the same purchase order and that is necessary 
for accomplishment of the purposes for which the instrument is intended 
to be used.
    (j) Ancillary equipment means an instrument which may be 
functionally related to the foreign instrument but is not operationally 
linked to it. Examples of ancillary equipment are vacuum evaporators or 
ultramicrotomes, which can be used to prepare specimens for electron 
microscopy. Further, equipment which is compatible with the foreign 
instrument, but is also clearly compatible with similar domestic 
instruments, such as automatic sampling equipment sold for use with a 
variety of mass spectrometers, will be treated as ancillary equipment. A 
separate application will be required for ancillary equipment even if 
ordered with the basic instrument.
    (k) Components of an instrument means parts or assemblies of parts 
which are substantially less than the instrument to which they relate. A 
component enables an instrument to function at a specified minimum 
level, while an accessory adds to the capability of an instrument. 
Applications shall not be accepted for components of instruments that 
did not enter duty-free under subheading 9810.00.60, HTSUS or for 
components of instruments being manufactured or assembled by a 
commercial firm or entity in the U.S. In determining whether an item is 
a component ineligible for duty-free consideration or an accessory 
eligible for such consideration, Customs shall take into account such 
factors as the item's complexity, novelty, degree of integration and 
pertinency to the research purposes to be performed by the instrument as 
a whole. The above notwithstanding, separable components of some 
instruments may be eligible for duty-free treatment. See paragraph (f) 
of this section.
    (l) Produced for stock means an instrument which is manufactured, on 
sale and available from a stock.
    (m) Produced on order means an instrument which a manufacturer lists 
in current catalog literature and is able and willing to produce and 
have available without unreasonable delay to the applicant.
    (n) Custom-made means an instrument which a manufacturer is willing 
and able to make to purchaser's specifications. Instruments resulting 
from a development effort are treated as custom-made for the purposes of 
these regulations. Also, a special-order variant of a produced on order 
instrument, with significant modifications specified by the applicant, 
may be treated as custom-made.
    (o) Same general category means the category in which an instrument 
is customarily classified in trade directories and product-source lists, 
e.g., scanning electron microscope, mass

[[Page 10]]

spectrometer, light microscope, x-ray spectrometer.
    (p) Comparable domestic instrument means a domestic instrument 
capable or potentially capable of fulfilling the applicant's technical 
requirements or intended uses, whether or not in the same general 
category as the foreign instrument.
    (q) Specifications means the particulars of the structural, 
operational and performance characteristics or capabilities of a 
scientific instrument.
    (r) Guaranteed specifications are those specifications which are an 
explicit part of the contractual agreement between the buyer and the 
seller (or which would become part of the agreement if the buyer 
accepted the seller's offer), and refer only to the minimum and 
routinely achievable performance levels of the instrument under 
specified conditions. If a capability is listed or quoted as a range 
(e.g., ``5 to 10 nanometers'') or as a minimum that may be exceeded 
(e.g., ``5 angstroms or better''), only the inferior capability may be 
considered the guaranteed specification. Evidence that specifications 
are ``guaranteed'' will normally consist of their being printed in a 
brochure or other descriptive literature of the manufacturer; being 
listed in a purchase agreement upon which the purchase is conditioned; 
or appearing in a manufacturer's formal response to a request for quote. 
If, however, no opportunity to submit a bid was afforded the domestic 
manufacturer or if, for any other reason, comparable guaranteed 
specifications of the foreign and domestic instruments do not appear on 
the record, other evidence relating to a manufacturer's ability to 
provide an instrument with comparable specifications may, at the 
discretion of the Director, be considered in the comparison of the 
foreign and domestic instruments' capabilities. Performance results on a 
test sample run at the applicant's request may be cited as evidence for 
or against a guaranteed specification.
    (s) Pertinent specifications are those specifications necessary for 
the accomplishment of the specific scientific research or science-
related educational purposes described by the applicant. Specifications 
of features (even if guaranteed) which afford greater convenience, 
satisfy personal preferences, accommodate institutional commitments or 
limitations, or assure lower costs of acquisition, installation, 
operation, servicing or maintenance are not pertinent. For example, a 
design feature, such as a small number of knobs or controls on an 
instrument primarily designed for research purposes, would be a 
convenience. The ability to fit an instrument into a small room, when 
the required operations could be performed in a larger room, would be 
either a cost consideration or a matter of convenience and not a 
pertinent specification. In addition, mere difference in design (which 
would, for example, broaden the educational experience of students but 
not provide superior scientific capability) would not be pertinent. 
Also, characteristics such as size, weight, appearance, durability, 
reliability, complexity (or simplicity), ease of operation, ease of 
maintenance, productivity, versatility, ``state of the art'' design, 
specific design and compatibility with currently owned or ordered 
equipment are not pertinent unless the applicant demonstrates that the 
characteristic is necessary for the accomplishment of its scientific 
purposes.

[47 FR 32517, July 28, 1982; 47 FR 34368, Aug. 9, 1982, as amended at 66 
FR 28832, May 25, 2001]



Sec. 301.3  Application for duty-free entry of scientific instruments.

    (a) Who may apply. An applicant for duty-free entry of an instrument 
under subheading 9810.00.60, HTSUS must be a public or private nonprofit 
institution which is established for educational or scientific purposes 
and which has placed a bona fide order or has a firm intention to place 
a bona fide order for a foreign instrument within 60 days following a 
favorable decision on the institution's application.
    (b) Application forms. Applications must be made on form ITA-338P 
which may be obtained from the Statutory Import Programs Staff, 
International Trade Administration, U.S. Department of Commerce, 
Washington, DC

[[Page 11]]

20230, or from the various District Offices of the U.S. Department of 
Commerce. (Approved by the Office of Management and Budget under control 
number 0625-0037)
    (c) Where to apply. Applications must be filed with the U.S. Customs 
Service, Department of the Treasury, at the address specified on page 1 
of the form.
    (d) Five copies of the form, including relevant supporting 
documents, must be submitted. One of these copies shall be signed in the 
original by the person in the applicant institution under whose 
direction and control the foreign instrument will be used and who is 
familiar with the intended uses of the instrument. The remaining four 
copies of the form may be copies of the original. Attachments should be 
fully identified and referenced to the question(s) on the form to which 
they relate.
    (e) A single application (in the requisite number of copies) may be 
submitted for any quantity of the same type or model of foreign 
instrument provided that the entire quantity is intended to be used for 
the same purposes and provided that all units are included on a single 
purchase order. A separate application shall be submitted for each 
different type or model or variation in the type or model of instrument 
for which duty-free entry is sought even if covered by a single purchase 
order. Orders calling for multiple deliveries of the same type or model 
of instrument over a substantial period of time may, at the discretion 
of the Director, require multiple applications.
    (f) An application for components of an instrument to be assembled 
in the United States as described in Sec. 301.2(f) may be filed 
provided that all of the components for the complete, assembled 
instrument are covered by, and fully described in, the application. See 
also Sec. 301.2(k).
    (g) Failure to answer completely all questions on the form in 
accordance with the instructions on the form or to supply the requisite 
number of copies of the form and supporting documents may result in 
delays in processing of the application while the deficiencies are 
remedied, return of the application without processing, or denial of the 
application without prejudice to resubmission. Any questions on these 
regulations or the application form should be addressed to the Director.

[47 FR 32517, July 28, 1982, as amended at 50 FR 11501, Mar. 22, 1985; 
66 FR 28833, May 25, 2001]



Sec. 301.4  Processing of applications by the Department of the 
Treasury (U.S. Customs Service).

    (a) Review and determination. The Commissioner shall date each 
application when received by Customs. If the application appears to be 
complete, the Commissioner shall determine:
    (1) Whether the institution is a nonprofit private or public 
institution established for research and educational purposes and 
therefore authorized to import instruments into the U.S. under 
subheading 9810.00.60, HTSUS. In making this determination, the 
Commissioner may require applicants to document their eligibility under 
this paragraph;
    (2) Whether the instrument or apparatus falls within the classes of 
instruments eligible for duty-free entry consideration under subheading 
9810.00.60, HTSUS. For eligible classes, see U.S. Note 6(a), Subchapter 
X, Chapter 98, HTSUS; and
    (3) Whether the instrument or apparatus is for the exclusive use of 
the applicant institution and is not intended to be used for commercial 
purposes. For the purposes of this section, commercial uses would 
include, but not necessarily be limited to: Distribution, lease or sale 
of the instrument by the applicant institution; any use by, or for the 
primary benefit of, a commercial entity; or use of the instrument for 
demonstration purposes in return for a fee, price discount or other 
valuable consideration. Evaluation, modification or testing of the 
foreign instrument, beyond normal, routine acceptance testing and 
calibration, to enhance or expand its capabilities primarily to benefit 
the manufacturer in return for a discount or other valuable 
consideration, may be considered a commercial benefit. In making the 
above determination, the Commissioner may consider, among other things, 
whether the results of any research to be performed with the instrument 
will be fully and timely made

[[Page 12]]

available to the public. For the purposes of this section, use of an 
instrument for the treatment of patients is considered noncommercial.

If any of the Commissioner's determinations is in the negative, the 
application shall be found to be outside the scope of the Act and shall 
be returned to the applicant with a statement of the reason(s) for such 
findings.

    (b) Forwarding of applications to the Department of Commerce. If the 
Commissioner finds the application to be within the scope of the Act and 
these regulations, the Commissioner shall (1) assign a number to the 
application and (2) forward one copy to the Secretary of the Department 
of Health and Human Services (HHS), and two copies, including the one 
that has been signed in the original, to the Director. The Commissioner 
shall retain one copy and return the remaining copy to the applicant 
stamped ``Accepted for Transmittal to the Department of Commerce.'' The 
applicant shall file the stamped copy of the form with the Port when 
formal entry of the article is made. If entry has already occurred under 
a claim of subheading 9810.00.60, HTSUS , the applicant (directly or 
through his/her agent) shall at the earliest possible date supply the 
stamped copy to the Port. Further instructions for entering instruments 
are contained in Sec. 301.8 of the regulations.

[47 FR 32517, July 28, 1982; 47 FR 34368, Aug. 9, 1982, as amended at 50 
FR 11501, Mar. 22, 1985; 66 FR 28833, May 25, 2001]



Sec. 301.5  Processing of applications by the Department of Commerce.

    (a) Public notice and opportunity to present views. (1) Within 5 
days of receipt of an application from the Commissioner, the Director 
shall make a copy available for public inspection during ordinary 
business hours of the Department of Commerce. Unless the Director 
determines that an application has deficiencies which preclude 
consideration on its merits (e.g., insufficient description of intended 
purposes to rule on the scientific equivalency of the foreign instrument 
and potential domestic equivalents), he shall publish in the Federal 
Register a notice of the receipt of the application to afford all 
interested persons a reasonable opportunity to present their views with 
respect to the question ``whether an instrument or apparatus of 
equivalent scientific value for the purpose for which the article is 
intended to be used is being manufactured in the United States.'' The 
notice will include the application number, the name and address of the 
applicant, a description of the instrument(s) for which duty-free entry 
is requested, the name of the foreign manufacturer and a brief summary 
of the applicant's intended purposes extracted from the applicant's 
answer to question 7 of the application. In addition, the notice shall 
specify the date the application was accepted by the Commissioner for 
transmittal to the Department of Commerce.
    (2) If the Director determines that an application is incomplete or 
is otherwise deficient, he may request the applicant to supplement the 
application, as appropriate, prior to publishing the notice of 
application in the Federal Register. Supplemental information/material 
requested under this provision shall be supplied to the Director in two 
copies within 20 days of the date of the request and shall be subject to 
the certification on the form. Failure to provide the requested 
information on time shall result in a denial of the application without 
prejudice to resubmission pursuant to paragraph (e) of this section.
    (3) Requirement for presentation of views (comments) by interested 
persons. Any interested person or government agency may make written 
comments to the Director with respect to the question whether an 
instrument of equivalent scientific value, for the purposes for which 
the foreign instrument is intended to be used, is being manufactured in 
the United States. Except for comments specified in paragraph (a)(4) of 
this section, comments should be in the form of supplementary answers to 
the applicable questions on the application form. Comments must be 
postmarked no later than 20 days from the date on which the notice of 
application is published in the Federal Register. In order to be 
considered, comments and related attachments must be submitted to the 
Director in duplicate; shall state the name, affiliation and address of 
the person submitting the comment; and shall

[[Page 13]]

specify the application to which the comment applies. In order to 
preserve the right to appeal the Director's decision on a particular 
application pursuant to Sec. 301.6 of these regulations, a domestic 
manufacturer or other interested person must make timely comments on the 
application. Separate comments should be supplied on each application in 
which a person has an interest. However, brochures, pamphlets, printed 
specifications and the like, included with previous comments, if 
properly identified, may be incorporated by reference in subsequent 
comments.
    (4) Comments by domestic manufacturers. Comments of domestic 
manufacturers opposing the granting of an application should:
    (i) Specify the domestic instrument considered to be scientifically 
equivalent to the foreign article for the applicant's specific intended 
purposes and include documentation of the domestic instrument's 
guaranteed specifications and date of availability.
    (ii) Show that the specifications claimed by the applicant in 
response to question 8 to be pertinent to the intended purpose can be 
equaled or exceeded by those of the listed domestic instrument(s) 
whether or not it has the same design as the foreign instrument; that 
the applicant's alleged pertinent specifications should not be 
considered pertinent within the meaning of Sec. 301.2(s) of the 
regulations for the intended purposes of the instrument described in 
response to question 7 of the application; or that the intended purposes 
for which the instrument is to be used do not qualify the instrument for 
duty-free consideration under the Act.
    (iii) Where the comments regarding paragraphs (a)(4)(i) and 
(a)(4)(ii) of this section relate to a particular accessory or optional 
device offered by a domestic manufacturer, cite the type, model or other 
catalog designation of the accessory device and include the 
specification therefor in the comments.
    (iv) Where the justification for duty-free entry is based on 
excessive delivery time, show whether:
    (A) The domestic instrument is as a general rule either produced for 
stock, produced on order, or custom-made and;
    (B) An instrument or apparatus of equivalent scientific value to the 
article, for the purposes described in response to question 7, could 
have been produced and delivered to the applicant within a reasonable 
time following the receipt of the order.
    (v) Indicate whether the applicant afforded the domestic 
manufacturer an opportunity to furnish an instrument or apparatus of 
equivalent scientific value to the article for the purposes described in 
response to question 7 and, if such be the case, whether the applicant 
issued an invitation to bid that included the technical requirements of 
the applicant.
    (5) Untimely comments. Comments must be made on a timely basis to 
ensure their consideration by the Director and the technical 
consultants, and to preserve the commenting person's right to appeal the 
Director's decision. The Director, at his discretion, may take into 
account factual information contained in untimely comments.
    (6) Provision of general comments. A domestic manufacturer who does 
not wish to oppose duty-free entry of a particular application, but who 
desires to inform the Director of the availability and capabilities of 
its instrument(s), may at any time supply documentation to the Director 
without reference to a particular application. Such documentation shall 
be taken into account by the Director when applications involving 
comparable foreign instruments are received. The provision of general 
comments does not preserve the provider's right to appeal the Director's 
decision.
    (b) Additions to the record. The Director may solicit from the 
applicant, from foreign or domestic manufacturers, their agents, or any 
other person or Government agency considered by the Director to have 
related competence, any additional information the Director considers 
necessary to make a decision. The Director may attach conditions and 
time limitations upon the provision of such information and may draw 
appropriate inferences from a person's failure to provide the requested 
information.
    (c) Advice from technical consultants.
    (1) The Director shall consider any written advice from the 
Secretary of

[[Page 14]]

HHS, or his delegate, on the question whether a domestic instrument of 
equivalent scientific value to the foreign instrument, for the purposes 
for which the instrument is intended to be used, is being manufactured 
in the United States.
    (2) After the comment period has ended (Sec. 301.5(a)(3)), the 
complete application and any comments received and related information 
are forwarded to appropriate technical consultants for their advice.
    (3) The technical consultants relied upon for advice include, but 
are not limited to, the National Institutes of Health (delegated the 
function by the Secretary of HHS), the National Institute of Standards 
and Technology and the National Oceanographic and Atmospheric 
Administration.
    (d) Criteria for the determinations of the Department of Commerce--
(1) Scientific equivalency. (i) The determination of scientific 
equivalency shall be based on a comparison of the pertinent 
specifications of the foreign instrument with similar pertinent 
specifications of comparable domestic instruments (see Sec. 301.2(s) 
for the definition of pertinent specification). Ordinarily, the Director 
will consider only those performance characteristics which are 
``guaranteed specifications'' within the meaning of Sec. 301.2(r) of 
this part. In no event, however, shall the Director consider performance 
capabilities superior to the manufacturer's guaranteed specifications or 
their equivalent. In making the comparison the Director may consider a 
reasonable combination of domestic instruments that brings together two 
or more functions into an integrated unit if the combination of domestic 
instruments is capable of accomplishing the purposes for which the 
foreign instrument is intended to be used. If the Director finds that a 
domestic instrument possesses all of the pertinent specifications of the 
foreign instrument, he shall find that there is being manufactured in 
the United States an instrument of equivalent scientific value for such 
purposes as the foreign instrument is intended to be used. If the 
Director finds that the foreign instrument possesses one or more 
pertinent specifications not possessed by the comparable domestic 
instrument, the Director shall find that there is not being manufactured 
in the United States an instrument of equivalent scientific value to the 
foreign instrument for such purposes as the foreign instrument is 
intended to be used.
    (ii) Programs that may be undertaken at some unspecified future date 
shall not be considered in the Director's comparison. In making the 
comparison, the Director shall consider only the instrument and 
accompanying accessories described in the application and determined 
eligible by the U.S. Customs Service. The Director shall not consider 
the planned purchase of additional accessories or the planned adaptation 
of the article at some unspecified future time.
    (iii) In order for the Director to make a determination with respect 
to the ``scientific equivalency'' of the foreign and domestic 
instruments, the applicant's intended purposes must include either 
scientific research or science-related educational programs. Instruments 
used exclusively for nonscientific purposes have no scientific value, 
thereby precluding the requisite finding by the Director with respect to 
``whether an instrument or apparatus of equivalent scientific value to 
such article, for the purposes for which the article is intended to be 
used, is being manufactured in the United States.'' In such cases the 
Director shall deny the application for the reason that the instrument 
has no scientific value for the purposes for which it is intended to be 
used. Examples of nonscientific purposes would be the use of an 
instrument in routine diagnosis or patient care and therapy (as opposed 
to clinical research); in teaching a nonscientific trade (e.g., 
printing, shoemaking, metalworking or other types of vocational 
training); in teaching nonscientific courses (e.g., music, home 
economics, journalism, drama); in presenting a variety of subjects or 
merely for presenting coursework, whether or not science related (e.g., 
video tape editors, tape recorders, projectors); and in conveying 
cultural information to the public (e.g., a planetarium in the 
Smithsonian Institution).
    (2) Manufactured in the United States. An instrument shall be 
considered as being manufactured in the United

[[Page 15]]

States if it is customarily ``produced for stock,'' ``produced on 
order'' or ``custom-made'' within the United States. In determining 
whether a U.S. manufacturer is able and willing to produce an 
instrument, and have it available without unreasonable delay, the normal 
commercial practices applicable to the production and delivery of 
instruments of the same general category shall be taken into account, as 
well as other factors which in the Director's judgment are reasonable to 
take into account under the circumstances of a particular case. For 
example, in determining whether a domestic manufacturer is able to 
produce a custom-made instrument, the Director may take into account the 
production experience of the domestic manufacturer including (i) the 
types, complexity and capabilities of instruments the manufacturer has 
produced, (ii) the extent of the technological gap between the 
instrument to which the application relates and the manufacturer's 
customary products, (iii) the manufacturer's technical skills, (iv) the 
degree of saturation of the manufacturer's production capability, and 
(v) the time required by the domestic manufacturer to produce the 
instrument to the purchaser's specification. Whether or not the domestic 
manufacturer has field tested or demonstrated the instrument will not, 
in itself, enter into the decision regarding the manufacturer's ability 
to manufacture an instrument. Similarly, in determining whether a 
domestic manufacturer is willing to produce an instrument, the Director 
may take into account the nature of the bid process, the manufacturer's 
policy toward manufacture of the product(s) in question, the minimum 
size of the manufacturer's production runs, whether the manufacturer has 
bid similar instruments in the past, etc. Also, if a domestic 
manufacturer was formally requested to bid an instrument, without 
reference to cost limitations and within a leadtime considered 
reasonable for the category of instrument involved, and the domestic 
manufacturer failed formally to respond to the request, for the purposes 
of this section the domestic manufacturer would not be considered 
willing to have supplied the instrument.
    (3) Burden of proof. The burden of proof shall be on the applicant 
to demonstrate that no instrument of equivalent scientific value for the 
purposes for which the foreign instrument is to be used is being 
manufactured in the United States. Evidence of applicant favoritism 
towards the foreign manufacturer (advantages not extended to domestic 
firms, such as additional lead time, know-how, methods, data on 
pertinent specifications or intended uses, results of research or 
development, tools, jigs, fixtures, parts, materials or test equipment) 
may be, at the Director's discretion, grounds for rejecting the 
application.
    (4) Excessive delivery time. Duty-free entry of the instrument shall 
be considered justified without regard to whether there is being 
manufactured in the United States an instrument of equivalent scientific 
value for the intended purposes if excessive delivery time for the 
domestic instrument would seriously impair the accomplishment of the 
applicant's intended purposes. For purposes of this section, (i) except 
when objective and convincing evidence is presented that, at the time of 
order, the actual delivery time would significantly exceed quoted 
delivery time, no claim of excessive delivery time may be made unless 
the applicant has afforded the domestic manufacturer an opportunity to 
quote and the delivery time for the domestic instrument exceeds that for 
the foreign instrument; and (ii) failure by the domestic manufacturer to 
quote a specific delivery time shall be considered a non-responsive bid 
(see Sec. 301.5(d)(2)). In determining whether the difference in 
delivery times cited by the applicant justifies duty-free entry on the 
basis of excessive delivery time, the Director shall take into account 
(A) the normal commercial practice applicable to the production of the 
general category of instrument involved; (B) the efforts made by the 
applicant to secure delivery of the instruments (both foreign and 
domestic) in the shortest possible time; and (C) such other factors as 
the Director finds relevant under the circumstances of a particular 
case.
    (5) Processing of applications for components. (i) The Director may 
process an application for components which

[[Page 16]]

are to be assembled in the United States into an instrument or apparatus 
which, due to its size, cannot be imported in its assembled state (see 
Sec. 301.2(k)) as if it were an application for the assembled 
instrument. A finding by the Director that no equivalent instrument is 
being manufactured in the United States shall, subject to paragraph 
(d)(5)(ii) of this section, qualify all the associated components, 
provided they are entered within the period established by the Director, 
taking into account both the scientific needs of the importing 
institution and the potential for development of related domestic 
manufacturing capacity.
    (ii) Notwithstanding a finding under paragraph (d)(5)(i) of this 
section that no equivalent instrument is being manufactured in the 
United States, the Director shall disqualify a particular component for 
duty-free treatment if the Director finds that the component is being 
manufactured in the United States.
    (e) Denial without prejudice to resubmission (DWOP). The Director 
may, at any stage in the processing of an application by the Department 
of Commerce, DWOP an application if it contains any deficiency which, in 
the Director's judgment, prevents a determination on its merits. The 
Director shall state the deficiencies of the application in the DWOP 
letter to the applicant.
    (1) The applicant has 60 days from the date of the DWOP to correct 
the cited deficiencies in the application unless a request for an 
extension of time for submission of the supplemental information has 
been received by the Director prior to the expiration of the 60-day 
period and is approved.
    (2) If granted, extensions of time will generally be limited to 30 
days.
    (3) Resubmissions must reference the application number of the 
earlier submission. The resubmission may be made by letter to the 
Director. The record of a resubmitted application shall include the 
original submission on file with the Department. Any new material or 
information contained in a resubmission, which should address the 
specific deficiencies cited in the DWOP letter, should be clearly 
labeled and referenced to the applicable question on the application 
form. The resubmission must be for the instrument covered by the 
original application unless the DWOP letter specifies to the contrary. 
The resubmission shall be subject to the certification made on the 
original application.
    (4) If the applicant fails to resubmit within the applicable time 
period, the prior DWOP shall, irrespective of the merits of the case, 
result in a denial of the application.
    (5) The Director shall use the postmark date of the fully completed 
resubmission in determining whether the resubmission was made within the 
allowable time period. Certified or registered mail, or some other means 
which can unequivocally establish the date of mailing, is recommended. 
Resubmission by fax, e-mail or other electronic means is acceptable 
provided an appropriate return number or address is provided in the 
transmittal. Resubmissions must clearly indicate the date of transmittal 
to the Director.
    (6) The applicant may, at any time prior to the end of the 
resubmission period, notify the Director in writing that it does not 
intend to resubmit the application. Upon such notification, the 
application will be deemed to have been withdrawn. (See Sec. 301.5(g).)
    (7) Information provided in a resubmission that, in the judgment of 
the Director, contradicts or conflicts with information provided in a 
prior submission, or is not a reasonable extension of the information 
contained in the prior submission, shall not be considered in making the 
decision on an application that has been resubmitted. Accordingly, an 
applicant may elect to reinforce an orginal submission by elaborating in 
the resubmission on the description of the purposes contained in a prior 
submission and may supply additional examples, documentation and/or 
other clarifying detail, but the applicant shall not introduce new 
purposes or other material changes in the nature of the original 
application. The resubmission should address the specific deficiencies 
cited in the DWOP. The Director may draw appropriate inferences from the 
failure of an applicant to attempt to provide the information requested 
in the DWOP.

[[Page 17]]

    (8) In the event an applicant fails to address the noted 
deficiencies in the response to the DWOP, the Director may deny the 
application.
    (f) Decisions on applications. The Director shall prepare a written 
decision granting or denying each application. However, when he deems 
appropriate, the Director may issue a consolidated decision on two or 
more applications. The Director shall promptly forward a copy of the 
decision to each applicant institution and to the Federal Register for 
publication.
    (g) Withdrawal of applications. The Director shall discontinue 
processing an application withdrawn by the applicant and shall publish 
notice of such withdrawal in the Federal Register. If at any time while 
its application is pending before the Director, either during the 
intital application or resubmission stage, an applicant cancels an order 
for the instrument to which the application relates or ceases to have a 
firm intention to order such instrument or apparatus, the institution 
shall promptly notify the Director. Such notification shall constitute a 
withdrawal. Withdrawals shall be considered as having been finally 
denied for purposes of Sec. 301.7(c) below.
    (h) Nothing in this subsection shall be construed as limiting the 
Director's discretion at any stage of processing to insert into the 
record and consider in making his decision any information in the public 
domain which he deems relevant.

[47 FR 32517, July 28, 1982; 47 FR 34368, Aug. 9, 1982, as amended at 50 
FR 11501, Mar. 22, 1985; 66 FR 28833, May 25, 2001]



Sec. 301.6  Appeals.

    (a) An appeal from a final decision made by the Director under Sec. 
301.5(f) may be taken in accordance with U.S. Note 6(e), Subchapter X, 
Chapter 98, HTSUS, only to the U.S. Court of Appeals for the Federal 
Circuit and only on questions of law, within 20 days after publication 
of the decision in the Federal Register. If at any time while its 
application is under consideration by the Court of Appeals on an appeal 
from a finding by the Director an institution cancels an order for the 
instrument to which the application relates or ceases to have a firm 
intention to order such instrument, the institution shall promptly 
notify the court.
    (b) An appeal may be taken by: (1) The institution which makes the 
application;
    (2) A person who, in the proceeding which led to the decision, 
timely represented to the Secretary of Commerce in writing that he/she 
manufactures in the United States an instrument of equivalent scientific 
value for the purposes for which the instrument to which the application 
relates is intended to be used;
    (3) The importer of the instrument, if the instrument to which the 
application relates has been entered at the time the appeal is taken; or
    (4) An agent of any of the foregoing.
    (c) Questions regarding appeal procedures should be addressed 
directly to the U.S. Court of Appeals for the Federal Circuit, Clerk's 
Office, Washington, DC 20439.

[47 FR 32517, July 28, 1982, as amended at 66 FR 28834, May 25, 2001]



Sec. 301.7  Final disposition of an application.

    (a) Disposition of an application shall be final when 20 days have 
elapsed after publication of the Director's final decision in the 
Federal Register and no appeal has been taken pursuant to Sec. 301.6 of 
these regulations, of if such appeal has been taken, when final judgment 
is made and entered by the Court.
    (b) The Director shall notify the Customs Port when disposition of 
an application becomes final. If the Director has not been advised of 
the port of entry of the instrument, or if entry has not been made when 
the decision on the application becomes final, the Director shall notify 
the Commissioner of final disposition of the application.
    (c) An instrument, the duty-free entry of which has been finally 
denied, may not be the subject of a new application from the same 
institution.

[47 FR 32517, July 28, 1982, as amended at 66 FR 28834, May 25, 2001]

[[Page 18]]



Sec. 301.8  Instructions for entering instruments through U.S. Customs 
under subheading 9810.00.60, HTSUS.

    Failure to follow the procedures in this section may disqualify an 
instrument for duty-free entry notwithstanding an approval of an 
application on its merits by the Department of Commerce.
    (a) Entry procedures. (1) An applicant desiring duty-free entry of 
an instrument may make a claim at the time of entry of the instrument 
into the Customs territory of the United States (as defined in 19 CFR 
101.1) that the instrument is entitled to duty-free classification under 
subheading 9810.00.60, HTSUS.
    (2) If no such claim is made the instrument shall be immediately 
classified without regard to subheading 9810.00.60, HTSUS , duty will be 
assessed, and the entry liquidated in the ordinary course.
    (3) If a claim is made for duty-free entry under subheading 
9810.00.60, HTSUS , the entry shall be accepted without requiring a 
deposit of estimated duties provided that a copy of the form, stamped by 
Customs as accepted for transmittal to the Department of Commerce in 
accordance with Sec. 301.4(b), is filed simultaneously with the entry.
    (4) If a claim for duty-free entry under subheading 9810.00.60, 
HTSUS is made but is not accompanied by a copy of the properly stamped 
form, a deposit of the estimated duty is required. Liquidation of the 
entry shall be suspended for a period of 180 days from the date of 
entry. On or before the end of this suspension period the applicant must 
file with the Customs Port a properly stamped copy of the form. In the 
event that the Customs Port does not receive a copy of the properly 
stamped form within 180 days the instrument shall be classified and 
liquidated in the ordinary course, without regard to subheading 
9810.00.60, HTSUS.
    (5) Entry of an instrument after the Director's approval of an 
application. Whenever an institution defers entry until after it 
receives a favorable final determination on the application for duty-
free entry of the instrument, either by delaying importation or by 
placing the instrument in a bonded warehouse or foreign trade zone, the 
importer shall file with the entry of the instrument (i) the stamped 
copy of the form, (ii) the institution's copy of the favorable final 
determination and (iii) proof that a bona fide order for the merchandise 
was placed on or before the 60th day after the favorable decision became 
final pursuant to Sec. 301.7 of these regulations. Liquidation in such 
case shall be made under subheading 9810.00.60, HTSUS.
    (b) Normal Customs entry requirements. In addition to the entry 
requirements in paragraph (a) of this section, the normal Customs entry 
requirements must be met. In most of the cases, the value of the 
merchandise will be such that the formal Customs entry requirements, 
which generally include the filing of a Customs entry bond, must be 
complied with. (For further information, see 19 CFR 142.3 and 142.4 (TD-
221).)
    (c) Late filing. Notwithstanding the preceding provisions of this 
section any document, form, or statement required by regulations in this 
section to be filed in connection with the entry may be filed at any 
time before liquidation of the entry becomes final, provided that 
failure to file at the time of entry or within the period for which a 
bond was filed for its production was not due to willful negligence or 
fraudulent intent. Liquidation of any entry becomes conclusive upon all 
persons if the liquidation is not protested in writing in accordance 
with 19 CFR part 174, or the necessary document substantiating duty-free 
entry is not produced in accordance with 19 CFR 10.112, within 90 days 
after notice of liquidation. Upon notice of such final and conclusive 
liquidation, the Department of Commerce will cease the processing of any 
pending application for duty-free entry of the subject article. In all 
other respects, the provisions of this section do not apply to 
Department of Commerce responsibilities and procedures for processing 
applications pursuant to other sections of these regulations.
    (d) Payment of duties. The importer of record will be billed for 
payment of duties when Customs determines that such payment is due. If a 
refund of a deposit made pursuant to paragraph

[[Page 19]]

(a)(4) of this section is due, the importer should contact Customs 
officials at the port of entry, not the Department of Commerce.

[47 FR 32517, July 28, 1982, as amended at 66 FR 28834, May 25, 2001]



Sec. 301.9  Uses and disposition of instruments entered under 
subheading 9810.00.60, HTSUS.

    (a) An instrument granted duty-free entry may be transferred from 
the applicant institution to another eligible institution provided the 
receiving institution agrees not to use the instrument for commercial 
purposes within 5 years of the date of entry of the instrument. In such 
cases title to the instrument must be transferred directly between the 
institutions involved. An institution transferring a foreign instrument 
entered under subheading 9810.00.60, HTSUS within 5 years of its entry 
shall so inform the Customs Port in writing and shall include the 
following information:
    (1) The name and address of the transferring institution.
    (2) The name and address of the transferee.
    (3) The date of transfer.
    (4) A detailed description of the instrument.
    (5) The serial number of the instrument and any accompanying 
accessories.
    (6) The entry number, date of entry, and port of entry of the 
instrument.
    (b) Whenever the circumstances warrant, and occasionally in any 
event, the fact of continued use for 5 years for noncommercial purposes 
by the applicant institution shall be verified by Customs.
    (c) If an instrument is transferred in a manner other than specified 
above or is used for commercial purposes within 5 years of entry, the 
institution for which such instrument was entered shall promptly notify 
the Customs officials at the Port and shall be liable for the payment of 
duty in an amount determined on the basis of its condition as imported 
and the rate applicable to it.

[47 FR 32517, July 28, 1982, as amended at 66 FR 28834, May 25, 2001]



Sec. 301.10  Importation of repair components and maintenance tools 

under HTSUS subheadings 9810.00.65 and 9810.00.67 for instruments 
previously the subject of 
          an entry liquidated under subheading 9810.00.60, HTSUS.

    (a) An institution owning an instrument that was the subject of an 
entry liquidated duty-free under subheading 9810.00.60, HTSUS, that 
wishes to enter repair components or maintenance tools for that 
instrument may do so without regard to the application procedures 
required for entry under subheading 9810.00.60, HTSUS. The institution 
must certify to Customs officials at the port of entry that such 
components are repair components for that instrument under subheading 
9810.00.65, HTSUS, or that the tools are maintenance tools necessary for 
the repair, checking, gauging or maintenance of that instrument under 
subheading 9810.00.67, HTSUS.
    (b) Instruments entered under subheading 9810.00.60, HTSUS, and 
subsequently returned to the foreign manufacturer for repair, 
replacement or modification are not covered by subheading 9810.00.65 or 
9810.00.67, HTSUS, although they may, upon return to the United States, 
be eligible for a reduced duty payment under subheading 9802.00.40 or 
9802.00.50, HTSUS (covering articles exported for repairs or 
alterations) or may be made the subject of a new application under 
subheading 9810.00.60, HTSUS.

[66 FR 28834, May 25, 2001]

                           PART 302 [RESERVED]



PART 303_WATCHES, WATCH MOVEMENTS AND JEWELRY PROGRAM--Table of Contents




                  Subpart A_Watches and Watch Movements

Sec.
303.1 Purpose.
303.2 Definitions and forms.
303.3 Determination of the total annual duty-exemption.
303.4 Determination of territorial distribution.
303.5 Application for annual allocations of duty-exemptions.

[[Page 20]]

303.6 Allocation and reallocation of exemptions among producers.
303.7 Issuance of licenses and shipment permits.
303.8 Maintenance of duty-exemption entitlements.
303.9 Restrictions on the transfer of duty-exemptions.
303.10-303.11 [Reserved]
303.12 Issuance and use of production incentive certificates.
303.13 Appeals.
303.14 Allocation factors and miscellaneous provisions.

                            Subpart B_Jewelry

303.15 Purpose.
303.16 Definitions and forms.
303.17 Annual jewelry application.
303.18 Sale and transfer of business.
303.19 Issuance and use of production incentive certificates.
303.20 Duty refund.
303.21 Appeals.

    Authority: Pub. L. 97-446, 96 Stat. 2331 (19 U.S.C. 1202, note); 
Pub. L. 103-465, 108 Stat. 4991; Pub. L. 94-241, 90 Stat. 263 (48 U.S.C. 
1681, note); Pub. L. 106-36, 113 Stat. 167.

    Source: 49 FR 17740, Apr. 25, 1984, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 303 appear at 68 FR 
56555, Oct. 1, 2003.



                  Subpart A_Watches and Watch Movements



Sec. 303.1  Purpose.

    (a) This part implements the responsibilities of the Secretaries of 
Commerce and the Interior (``the Secretaries'') under Pub. L. 97-446, 
enacted on 12 January 1983, which substantially amended Pub. L. 89-805, 
enacted 10 November 1966, amended by Pub. L. 94-88, enacted 8 August 
1975, and amended by Pub. L. 94-241, enacted 24 March 1976, and amended 
by Pub. L. 103-465, enacted 8 December 1994. The law provides for 
exemption from duty of territorial watches and watch movements without 
regard to the value of the foreign materials they contain, if they 
conform with the provisions of U.S. Legal Note 5 to Chapter 91 of the 
Harmonized Tariff Schedule of the United States (``91/5''). 91/5 denies 
this benefit to articles containing any material which is the product of 
any country with respect to which Column 2 rates of duty apply; 
authorizes the Secretaries to establish the total quantity of such 
articles, provided that the quantity so established does not exceed 
10,000,000 units or one-ninth of apparent domestic consumption, 
whichever is greater, and provided also that the quantity is not 
decreased by more than ten percent nor increased by more than twenty 
percent (or to more than 7,000,000 units, whichever is greater) of the 
quantity established in the previous year.
    (b) The law directs the International Trade Commission to determine 
apparent domestic consumption for the preceding calendar year in the 
first year U.S. insular imports of watches and watch movements exceed 
9,000,000 units. 91/5 authorizes the Secretaries to establish 
territorial shares of the overall duty-exemption within specified 
limits; and provides for the annual allocation of the duty-exemption 
among insular watch producers equitably and on the basis of allocation 
criteria, including minimum assembly requirements, that will reasonably 
maximize the net amount of direct economic benefits to the insular 
possessions.
    (c) The amended law also provides for the issuance to producers of 
certificates entitling the holder (or any transferee) to obtain duty 
refunds on watches and watch movements and parts (except discrete 
watchcases) imported into the customs territory of the United States. 
The amounts of these certificates may not exceed specified percentages 
of the producers' verified creditable wages in the insular possessions 
(90% of wages paid for the production of the first 300,000 units and 
declining percentages, established by the Secretaries, of wages paid for 
incremental production up to 750,000 units by each producer) nor an 
aggregate annual amount for all certificates exceeding $5,000,000 
adjusted for growth by the ratio of the previous year's gross national 
product to the gross national product in 1982. Refund requests are 
governed by regulations issued by the Department of Homeland Security. 
The Secretaries are authorized to issue regulations necessary to carry 
out their duties under Headnote 6 and may

[[Page 21]]

cancel or restrict the license or certificate of any insular 
manufacturer found violating the regulations.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
53 FR 52994, Dec. 30, 1988; 61 FR 55884, Oct. 30, 1996]



Sec. 303.2  Definitions and forms.

    (a) Definitions. Unless the context indicates otherwise:
    (1) Act means Pub. L. 97-446, enacted January 12, 1983 (19 U.S.C. 
1202), 96 Stat. 2329, as amended by Pub. L. 103-465, enacted on December 
8, 1994, 108 Stat. 4991.
    (2) Secretaries means the Secretary of Commerce and the Secretary of 
Interior or their delegates, acting jointly.
    (3) Director means the Director of the Statutory Import Programs 
Staff, International Trade Administration, U.S. Department of Commerce.
    (4) Sale or tranfer of a business means the sale or transfer of 
control, whether temporary or permanent, over a firm to which a duty-
exemption has been allocated, to any other firm, corporation, 
partnership, person or other legal entity by any means whatsoever, 
including, but not limited to, merger and transfer of stock, assets or 
voting trusts.
    (5) New firm is a watch firm not affiliated through ownership or 
control with any other watch duty-refund recipient. In assessing whether 
persons or parties are affiliated, the Secretaries will consider the 
following factors, among others: stock ownership; corporate or family 
groupings; franchise or joint venture agreements; debt financing; and 
close supplier relationships. The Secretaries may not find that control 
exists on the basis of these factors unless the relationship has the 
potential to affect decisions concerning production, pricing, or cost. 
Also, no watch duty-refund recipient may own or control more than one 
jewelry duty-refund recipient. A new entrant is a new watch firm which 
has received an allocation.
    (6) Producer means a duty-exemption holder which has maintained its 
eligibility for further allocations by complying with these regulations.
    (7) Established industry means all producers, including new 
entrants, that have maintained their eligibility for further 
allocations.
    (8) Territories, territorial, and insular possessions refer to the 
insular possessions of the United States (i.e., the U.S. Virgin Islands, 
Guam, and American Samoa) and the Northern Mariana Islands.
    (9) Duty-exemption refers to the authorization of duty-free entry of 
a specified number of watches and watch movements into the Customs 
Territory of the United States.
    (10) Total annual duty-exemption refers to the entire quantity of 
watches or watch components which may enter duty-free into the customs 
territory of the United States from the territories under 91/5 in a 
calendar year, as determined by the Secretaries or by the International 
Trade Commission in accordance with the Act.
    (11) Territorial distribution refers to the apportionment by the 
Secretaries of the total annual duty-exemption among the separate 
territories; territorial share means the portion consigned to each 
territory by this apportionment.
    (12) Allocation refers to the distribution of all parts of a 
territorial share, or a portion thereof, among the several producers in 
a territory.
    (13) Creditable wages means all wages, up to an amount equal to 65% 
of the contribution and benefit base for Social Security as defined in 
the Social Security Act for the year in which the wages were earned, 
paid to permanent residents of the territories employed in a firm's 91/5 
watch and watch movement assembly operations, plus wages paid for the 
repair of non-91/5 watches up to an amount equal to 50% of the firm's 
total creditable wages, and for wages paid for the complete assembly of 
watches in the insular possession, with the exception of the movement, 
only in situations where the desired movement can not be purchased in an 
unassembled condition. Excluded, however, are wages paid to any outside 
consultants or other professional personnel, such as lawyers and 
accountants, or to those persons not involved in the day-to-day assembly 
operations or servicing and maintenance of equipment and fixtures 
necessary for the assembly or manufacturing operations or

[[Page 22]]

administrative work and security activities directly related to the 
operations of the company, such as gardeners or construction workers, 
and for the repair of non-91/5 watches and movements to the extent that 
such wages exceed the foregoing percentage. Wages paid to persons 
engaged in both creditable and non-creditable assembly and repair 
activities may be credited proportionately provided the firm maintains 
production and payroll records adequate for the Departments' 
verification of the creditable portion.
    (14) Non-91/5 watches and watch movements include, but are not 
limited to, watches and movements which are liquidated as dutiable by 
the Bureau of Customs and Border Protection but do not include, for 
purposes of the duty refund, watches that are completely assembled in 
the insular possessions, with the exception of a desired movement if the 
movement cannot be purchased in an unassembled condition; contains any 
material which is the product of any country with respect to which 
Column 2 rates of duty apply; are ineligible for duty-free treatment 
pursuant to law or regulation; or are units the assembly of which the 
Departments have determined not to involve substantial and meaningful 
work in the territories (as elsewhere defined in these regulations).
    (15) Discrete movements and components means screws, parts, 
components and subassemblies not assembled together with another part, 
component or subassembly at the time of importation into the territory. 
(A mainplate containing set jewels or shock devices, together with other 
parts, would be considered a single discrete component, as would a 
barrel bridge subassembly.)
    (16) Permanent resident means a person with one residence which is 
in the insular possessions or a person with one or more residences 
outside the insular possessions who meets criteria that include 
maintaining his or her domicile in the insular possessions, residing 
(i.e., be physically present for at least 183 days per year) and working 
in the territory at a program company, and maintaining his or her 
primary office for day-to-day work in the insular possessions.
    (b) Forms--(1) ITA-334P ``Application for License to Enter Watches 
and Watch Movements into the Customs Territory of the United States.'' 
This form must be completed annually by all producers desiring to 
receive an annual allocation. It is also used, with appropriate special 
instructions for its completion, by new firms applying for duty-
exemptions and by producers who wish to receive the duty refund in 
installments on a biannual basis.
    (2) ITA-333 ``License to Enter Watches and Watch Movements into the 
Customs Territory of the United States.'' This form is issued by the 
Director to producers who have received an allocation and constitutes 
authorization for issuing specific shipment permits by the territorial 
governments. It is also used to record the balance of a producer's 
remaining duty-exemptions after each shipment permit is issued.
    (3) ITA-340 ``Permit to Enter Watches and Watch Movements into the 
Customs Territory of the United States.'' This form may be obtained, by 
producers holding a valid license, from the territorial government or 
may be produced by the licensee in an approved computerized format or 
any other medium or format approved by the Departments of Commerce and 
the Interior. The completed form authorizes duty-free entry of a 
specified amount of watches or watch movements at a specified U.S. 
Customs port.
    (4) ITA-360P ``Certificate of Entitlement to Secure the Refund of 
Duties on Watches and Watch Movements.'' This document authorizes an 
insular producer to request the refund of duties on imports of watches, 
watch movements and parts therefor, with certain exceptions, up to a 
specified value. Certificates may be used to obtain duty refunds only 
when presented with a properly executed Form ITA-361P.
    (5) ITA-361P ``Request for Refund of Duties on Watches and Watch 
Movements.'' This form must be completed to obtain the refund of duties 
authorized by the Director through Form ITA-360P. After authentication 
by the Department of Commerce, it may be used for the refund of duties 
on items which were entered into the customs territory of the United 
States during a

[[Page 23]]

specified time period. Copies of the appropriate Customs entries must be 
provided with this form to establish a basis for issuing the claimed 
amounts. The forms may also be used to transfer all or part of the 
producer's entitlement to another party. (See Sec. 303.12.)

(The information collection requirements in paragraph (b)(1) were 
approved by the Office of Management and Budget under control number 
0625-0040. The information collection requirements in paragraphs 
(b)[hairsp](4) through (6) were approved under control number 0625-0134)

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
53 FR 52994, Dec. 30, 1988; 56 FR 9621, Mar. 7, 1991; 61 FR 55884, 
55885, Oct. 30, 1996; 65 FR 8049, Feb. 17, 2000; 66 FR 34812, July 2, 
2001; 67 FR 77408, Dec. 18, 2002; 68 FR 56555, Oct. 1, 2003]



Sec. 303.3  Determination of the total annual duty-exemption.

    (a) Procedure for determination. If, after considering the 
productive capacity of the territorial watch industry and the economic 
interests of the territories, the Secretaries determine that the amount 
of the total annual duty-exemption, or the territorial shares of the 
total amount, should be changed, they shall publish in the Federal 
Register a proposed limit on the quantity of watch units which may enter 
duty-free into the customs territory of the United States and proposed 
territorial shares thereof and, after considering comments, establish 
the limit and shares by Federal Register notice. If the Secretaries take 
no action under this section, they shall make the allocations in 
accordance with the limit and shares last established by this procedure.
    (b) Standards for determination. (1) Notwithstanding paragraph 
(b)(2) of this section, the limit established for any year may be 
7,000,000 units if the limit established for the preceding year was a 
smaller amount.
    (2) Subject to paragraph (c) of this section, the total annual duty-
exemption shall not be decreased by more than 10% of the quantity 
established for the preceding calendar year, or increased, if the 
resultant total is larger than 7,000,000, by more than 20% of the 
quantity established for the calendar year immediately preceding.
    (3) The Secretaries shall determine the limit after considering the 
interests of the territories; the domestic or international trade policy 
objectives of the United States; the need to maintain the competitive 
nature of the territorial industry; the total contribution of the 
industry to the economic well-being of the territories; and the 
territorial industry's utilization of the total duty-exemption 
established in the preceding year.
    (c) Determinations based on consumption. (1) The Secretaries shall 
notify the International Trade Commission whenever they have reason to 
believe duty-free watch imports from the territories will exceed 
9,000,000 units, or whenever they make a preliminary determination that 
the total annual duty-exemption should exceed 10,000,000 units.
    (2) In addition to the limitations in paragraph (b) of this section, 
the Secretaries shall not establish a limit exceeding one-ninth of 
apparent domestic consumption if such consumption, as determined by 
International Trade Commission, exceeds 90 million units.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 7170, Feb. 21, 1985; 50 
FR 43568, Oct. 28, 1985; 53 FR 52994, Dec. 30, 1988]



Sec. 303.4  Determination of territorial distribution.

    (a) Procedure for determination. The Secretaries shall determine the 
territorial shares concurrently with their determination of the total 
annual duty exemption, and in the same manner (see Sec. 303.3, above).
    (b) Standards for determination--(1) Limitations. A territorial 
share may not be reduced by more than 500,000 units in any calendar 
year. No territorial share shall be less than 500,000 units.
    (2) Criteria for setting precise quantities. The Secretaries shall 
determine the precise quantities after considering, inter alia, the 
territorial capacity to produce and ship watch units. The Secretaries 
shall further bear in mind the aggregate benefits to the territories, 
such as creditable wages paid, creditable wages per unit exported, and 
corporate income tax payments.
    (3) Limitations on reduction of share. The Secretaries shall not 
reduce a territory's share if its producers use 85%

[[Page 24]]

or more of the quantity distributed to that territory in the immediately 
preceding year, except in the case of a major increase or decrease in 
the number of producers in a territory or if they believe that a 
territorial industry will decrease production by more than 15% from the 
total of the preceding year.
    (4) Standby redistribution authority. The Secretaries may 
redistribute territorial shares if such action is warranted by 
circumstances unforeseen at the time of the initial distributions, such 
as that a territory will use less than 80% of its total by the end of a 
calendar year, or if a redistribution is necessary to maintain the 
competitive nature of the territorial industries.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 7170, Feb. 21, 1985]



Sec. 303.5  Application for annual allocations of duty-exemptions.

    (a) Application forms (ITA-334P) shall be furnished to producers by 
January 1, and must be completed and returned to the Director no later 
than January 31, of each calendar year.
    (b) All data supplied are subject to verification by the Secretaries 
and no allocation shall be made to producer until the Secretaries are 
satisfied that the data are accurate. To verify the data, 
representatives of the Secretaries shall have access to relevant company 
records including:
    (1) Work sheets used to answer all questions on the application 
form;
    (2) Original records from which such data are derived;
    (3) Records pertaining to ownership and control of the company and 
to the satisfaction of eligibility requirements of duty-free treatment 
of its product by the Bureau of Customs and Border Protection;
    (4) Records pertaining to corporate income taxes, gross receipts 
taxes and excise taxes paid by each producer in the territories on the 
basis of which a portion of each producer's annual allocation is or may 
be predicated;
    (5) Customs, bank, payroll, and production records;
    (6) Records on purchases of components, including documentation on 
the purchase of any preassembled movements, which demonstrate that such 
movements could not have been purchased from the vendor in an 
unassembled condition, and records on the sales of insular watches and 
movements, including proof of payment; and
    (7) Any other records in the possession of the parent or affiliated 
companies outside the territory pertaining to any aspect of the 
producer's 91/5 watch assembly operation.
    (c) Data verification shall be performed in the territories, unless 
other arrangements satisfactory to the Departments are made in advance, 
by the Secretaries' representatives by the end of February of each 
calendar year. In the event a company cannot substantiate the data in 
its application before allocations must be calculated, the Secretaries 
shall determine which data will be used.
    (d) Records subject to the requirements of paragraph (b), above, 
shall be retained for a period of two years following their creation.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
53 FR 52994, Dec. 30, 1988; 68 FR 56556, Oct. 1, 2003]



Sec. 303.6  Allocation and reallocation of exemptions among producers.

    (a) Interim allocations. As soon as practicable after January 1 of 
each year the Secretaries shall make an interim allocation to each 
producer equaling 70% of the number of watch units it has entered duty-
free into the customs territory of the United States during the first 
eight months of the preceding calendar year, or any lesser amount 
requested in writing by the producer. The Secretaries may also issue a 
lesser amount if, in their judgment, the producer might otherwise 
receive an interim allocation in an amount greater than the producer's 
probable annual allocation. In calculating the interim allocations, the 
Director shall count only duty-free watches and watch movements verified 
by the Bureau of Customs and Border Protection, or verified by other 
means satisfctory to the Secretaries, as having been entered on or 
before August 31 of the preceding year. Interim allocations shall not be 
published.
    (b) Annual allocations. (1) By March 1 of each year the Secretaries 
shall make annual allocations to the producers in

[[Page 25]]

accordance with the allocation formula based on data supplied in their 
annual application (Form ITA-334P) and verified by the Secretaries.
    (2) The excess of a producer's duty-exemption earned under the 
allocation criteria over the amount formally requested by the producer 
shall be considered to have been relinquished voluntarily (see paragraph 
(f) below). A producer's request may be modified by written 
communication received by the Secretaries by February 28, or, at the 
discretion of the Secretaries, before the annual allocations are made. 
An allocation notice shall be published in the Federal Register.
    (c) Supplemental allocations. At the request of a producer, the 
Secretaries may supplement a producer's interim allocation if the 
Secretaries determine the producer's interim allocation will be used 
before the Secretaries can issue the annual allocation. Allocations to 
supplement a producer's annual allocation shall be made under the 
reallocation provisions prescribed below.
    (d) Allocations to new entrants. In making interim and annual 
allocations to producers selected the preceding year as new entrants, 
the Secretaries shall take into account that such producers will not 
have had a full year's operation as a basis for computation of its duty-
exemption. The Secretaries may make an interim or annual allocation to a 
new entrant even if the firm did not operate during the preceding 
calendar year.
    (e) Special allocations. A producer may request a special allocation 
if unusual circumstances kept it from making duty-free shipments at a 
level comparable with its past record. In considering such requests, the 
Secretaries shall take into account the firm's proposed assembly 
operations; its record in contributing to the territorial economy; and 
its intentions and capacity to make meaningful contributions to the 
territory. They shall also first determine that the amount of the 
special allocation requested will not significantly affect the amounts 
allocated to other producers pursuant to Sec. 303.6(b)(1).
    (f) Reallocations. Duty-exemptions may become available for 
reallocation as a result of cancellation or reduction for cause, 
voluntary relinquishment or nonplacement of duty-exemption set aside for 
new entrants. At the request of a producer, the Secretaries may 
reallocate such duty-exemptions among the remaining producers who can 
use additional quantities in a manner judged best for the economy of the 
territories. The Secretaries shall consider such factors as the wage and 
income tax contributions of the respective producers during the 
preceding year and the nature of the producer's present assembly 
operations. In addition, the Secretaries may consider other factors 
which, in their judgment, are relevant to determining that applications 
from new firms, in lieu of reallocations, should be considered for part 
or all of unused portions of the total duty exemptions. Such factors may 
include:
    (1) The ability of the established industry to use the duty-
exemption;
    (2) Whether the duty-exemption is sufficient to support new entrant 
operations;
    (3) The impact upon the established industry if new entrants are 
selected, particularly with respect to the effect on local employment, 
tax contributions to the territorial government, and the ability of the 
established industry to maintain satisfactory production levels; and
    (4) Whether additional new entrants offer the best prospect for 
adding economic benefits to the territory.
    (g) Section 303.14 of this part contains the criteria and formulae 
used by the Secretaries in calculating each watch producer's annual 
watch duty-exemption allocation, and other special rules or provisions 
the Secretaries may periodically adopt to carry out their 
responsibilities in a timely manner while taking into account changing 
circumstances. References to duty-exemptions, unless otherwise 
indicated, are to the amount available for reallocation in the current 
calendar year. Specifications of or references to data or bases used in 
the calculation of current year allocations (e.g., economic 
contributions and shipments) are, unless indicated otherwise, those 
which were generated in the previous year.
    (h) The Secretaries may propose changes to Sec. 303.14 at any time 
they

[[Page 26]]

consider it necessary to fulfill their responsibilities. Normally, such 
changes will be proposed towards the end of each calendar year. 
Interested parties shall be given an opportunity to submit written 
comments on proposed changes.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
61 FR 55885, Oct. 30, 1996; 63 FR 5888, Feb. 5, 1998]



Sec. 303.7  Issuance of licenses and shipment permits.

    (a) Issuance of Licenses (ITA-333). (1) Concurrently with annual 
allocations under Sec. 303.5 the Director shall issue a non-
transferable license (Form ITA-333) to each producer. The Director shall 
also issue a replacement license if a producer's allocation is reduced 
pursuant to Sec. 303.6.
    (2) Annual duty-exemption licenses shall be for only that portion of 
a producer's annual duty-exemption not previously licensed.
    (3) If a producer's duty-exemption has been reduced, the Director 
shall not issue a replacement license for the reduced amount until the 
producer's previous license has been received for cancellation by the 
Director.
    (4) A producer's license shall be used in their entirety, except 
when they expire or are cancelled, in order of their date of issuance, 
i.e., an interim license must be completely used before shipment permits 
can be issued against an interim supplemental license.
    (5) Outstanding licenses issued by the Director automatically expire 
at midnight, December 31, of each calendar year. No unused allocation of 
duty-exemption may be carried over into the subsequent calendar year.
    (6) The Director shall ensure that all licenses issued are 
conspicuously marked to show the type of license issued, the identity of 
the producer, and the year for which the license is valid. All licenses 
shall bear the signature of the Director.
    (7) Each producer is responsible for the security of its licenses. 
The loss of a license shall be reported immediately to the Director. 
Defacing, tampering with, and unauthorized use of a license are 
forbidden.
    (b) Shipment Permit Requirements (ITA-340). (1) Producers may obtain 
shipment permits from the territorial government officials designated by 
the Governor. Permits may also be produced in any computerized or other 
format or medium approved by the Departments. The permit is for use 
against a producer's valid duty-exemption license and a permit must be 
completed for every duty-free shipment.
    (2) Each permit must specify the license and permit number, the 
number of watches and watch movements included in the shipment, the 
unused balance remaining on the producer's license, pertinent shipping 
information and must have the certification statement signed by an 
official of the licensee's company. A copy of the completed permit must 
be sent electronically or taken to the designated territorial government 
officials, no later than the day of shipment, for confirmation that the 
producer's duty-exemption license has not been exceeded and that the 
permit is properly completed.
    (3) The permit (form ITA-340) shall be filed with Customs along with 
the other required entry documents to receive duty-free treatment unless 
the importer or its representative clears the documentation through 
Customs' automated broker interface. Entries made electronically do not 
require the submission of a permit to Customs, but the shipment data 
must be maintained as part of a producer's recordkeeping 
responsibilities for the period prescribed by Customs' recordkeeping 
regulations. Bureau of Customs and Border Protection Import Specialists 
may request the documentation they deem appropriate to substantiate 
claims for duty-free treatment, allowing a reasonable amount of time for 
the importer to produce the permit.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
61 FR 55885, Oct. 30, 1996]



Sec. 303.8  Maintenance of duty-exemption entitlements.

    (a) The Secretaries may order a producer to show cause within 30 
days of receipt of the order why the duty-exemption to which the firm 
would otherwise be entitled should not be cancelled, in whole or in 
part, if:
    (1) At any time after June 30 of the calendar year:

[[Page 27]]

    (i) A producer's assembly and shipment record provides a reasonable 
basis to conclude that the producer will use less than 80 percent of its 
total allocation by the end of the calendar year, and
    (ii) The producer refuses a request from the Departments to 
relinquish that portion of its allocation which they conclude will not 
be used; or
    (2) A producer fails to satisfy or fulfill any term, condition or 
representation, whether undertaken by itself or prescribed by the 
Departments, upon which receipt of allocation has been predicated or 
upon which the Departments have relied in connection with the sale or 
transfer of a business together with its allocation; or
    (3) A producer, in the judgment of the Secretaries, has failed to 
make a meaningful contribution to the territory for a period of two or 
more consecutive calendar years, when compared with the performance of 
the duty-free watch assembly industry in the territory as a whole. This 
comparison shall include the producer's quantitative use of its 
allocations, amount of direct labor employed in the assembly of watches 
and watch movements, and the net amount of corporate income taxes paid 
to the government of the territory. If the producer fails to satisfy the 
Secretaries as to why such action should not be taken, the firm's 
allocation shall be reduced or cancelled, whichever is appropriate under 
the show-cause order. The eligibility of a firm whose allocation has 
been cancelled to receive further allocations may also be terminated.
    (b) The Secretaries may also issue a show-cause order to reduce or 
cancel a producer's allocation or production incentive certificate (see 
Sec. 303.12, below), as appropriate, or to declare the producer 
ineligible to receive an allocation or certificate if it violates any 
regulation in this part, uses a form, license, permit, or certificate in 
an unauthorized manner, or fails to provide information or data required 
by these regulations or requested by the Secretaries or their delegates 
in the performance of their responsibilities.
    (c) If a firm's allocation is reduced or cancelled, or if a firm 
voluntarily relinquishes a part of its allocation, the Secretaries may:
    (1) Reallocate the allocation involved among the remaining producers 
in a manner best suited to contribute to the economy of the territory;
    (2) Reallocate the allocation or part thereof to a new entrant 
applicant; or
    (3) Do neither of the above if deemed in the best interest of the 
territories and the established industry.

[49 FR 17740, Apr. 25, 1984, as amended at 61 FR 55885, Oct. 31, 1996]



Sec. 303.9  Restrictions on the transfer of duty-exemptions.

    (a) The sale or transfer of a duty-exemption from one firm to 
another shall not be permitted.
    (b) The sale or transfer of a business together with its duty-
exemption shall be permitted with prior written notification to the 
Departments. Such notification shall be accompanied by certifications 
and representations, as appropriate, that:
    (1) If the transferee is a subsidiary of or in any way affiliated 
with any other company engaged in the production of watch movements 
components being offered for sale to any territorial producer, the 
related company or companies will continue to offer such watch and watch 
movement components on equal terms and conditions to all willing buyers 
and shall not engage in any practice, in regard to the sale of 
components, that competitively disadvantages the non-affiliated 
territorial producers vis-a-vis the territorial subsidiary;
    (2) The sale or transfer price for the business together with its 
duty-exemption does not include the capitalization of the duty-exemption 
per se;
    (3) The transferee is neither directly or indirectly affiliated with 
any other territorial duty-exemption holder in any territory;
    (4) The transferee will not modify the watch assembly operations of 
the duty-exemption firm in a manner that will significantly diminish its 
economic contributions to the territory.
    (c) At the request of the Departments, the transferee shall permit 
representatives of the Departments to inspect whatever records are 
necessary to establish to their satisfaction that the certifications and 
representations

[[Page 28]]

contained in paragraph (b) of this section have been or are being met.
    (d) Any transferee who is either unwilling or unable to make the 
certifications and representations specified in paragraph (b) of this 
section shall secure the Departments' approval in advance of the sale or 
transfer of the business together with its duty-exemption. The request 
for approval shall specify which of the certifications specified in 
paragraph (b) of this section the firm is unable or unwilling to make, 
and give reasons why such fact should not constitute a basis for the 
Departments' disapproval of the sale or transfer.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985]



Sec. Sec. 303.10-303.11  [Reserved]



Sec. 303.12  Issuance and use of production incentive certificates.

    (a) Issuance of certificates. (1) The total annual amount of the 
Certificate of Entitlement, Form ITA-360, may be divided and issued on a 
biannual basis. The first portion of the total annual certificate amount 
will be based on reported duty-free shipments and creditable wages paid 
during the first six months of the calendar year, using the formula in 
Sec. 303.14(c). The Departments require the receipt of the data by July 
31 for each producer who wishes to receive an interim duty refund 
certificate. The interim duty refund certificate will be issued on or 
before August 31 of the same calendar year in which the wages were 
earned unless the Departments have unresolved questions. The process of 
determining the total annual amount of the duty refund will remain the 
same. The completed annual application (Form ITA-334P) shall be received 
by the Departments on or before January 31 and the annual verification 
of data and the calculation of each producer's total annual duty refund, 
based on the verified data, will continue to take place in February. 
Once the calculations for each producer's duty refund has been 
completed, the portion of the duty refund that has already been issued 
to each producer will be deducted from the total amount of each 
producer's annual duty refund amount. The duty refund certificate will 
continue to be issued by March 1 unless the Departments have unresolved 
questions.
    (2) Certificates shall not be issued to more than one company in the 
territories owned or controlled by the same corporate entity.
    (b) Securities and handling of certificates. (1) Certificate holders 
are responsible for the security of the certificates. The certificates 
shall be kept at the territorial address of the insular producer or at 
another location having the advance approval of the Departments.
    (2) All refund requests made pursuant to the certificates shall be 
entered on the reverse side of the certificate.
    (3) Certificates shall be returned by registered, certified or 
express carrier mail to the Departments when:
    (i) A refund is requested which exhausts the entitlement on the face 
of the certificate,
    (ii) The certificate expires, or
    (iii) The Departments request their return with good cause.
    (4) Certificate entitlements may be transferred according to the 
procedures described in (c) of this section.
    (c) The use and transfer of certificate entitlements. (1) Insular 
producers issued a certificate may request a refund by executing a Form 
ITA-361P (see Sec. 303.2(b)(5) and the instructions on the form). After 
authentication by the Department of Commerce, the Form ITA-361P may be 
used to obtain duty refunds on watch movements, watches, and parts 
therefor. Duties on watchcases not containing a movement and on articles 
containing any material which is the product of a country with respect 
to which Column 2 rates of duty apply may not be refunded. Articles for 
which duty refunds are claimed must have entered the customs territory 
of the United States during the two-year period prior to the issue date 
of the certificate or during the one-year period the certificate remains 
valid. Copies of the appropriate Customs entries must be provided with 
the refund request in order to establish a basis for issuing the claimed 
amounts. Certification regarding drawback claims and liquidated refunds 
relating to the presented entries is required from the claimant on the 
form.

[[Page 29]]

    (2) Regulations issued by the Bureau of Customs and Border 
Protection, U.S. Department of Homeland Security, govern the refund of 
duties under Pub. L. 97-446, as amended by Public Law 103-465. If the 
Departments receive information from the Bureau of Customs and Border 
Protection that a producer has made unauthorized use of any official 
form, they shall cancel the affected certificate.
    (3) The insular producer may transfer a portion of all of its 
certificate entitlement to another party by entering in block C of Form 
ITA-361P the name and address of the party.
    (4) After a Form ITA-361P transferring a certificate entitlement to 
a party other than the certificate holder has been authenticated by the 
Department of Commerce, the form may be exchanged for any consideration 
satisfactory to the two parties. In all cases, authenticated forms shall 
be transmitted to the certificate holder or its authorized custodian for 
disposition (see paragraph (b) above).
    (5) All disputes concerning the use of an authenticated Form ITA-
361P shall be referred to the Departments for resolution. Any party 
named on an authenticated Form ITA-361P shall be considered an 
``interested party'' within the meaning of Sec. 303.13 of this part.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
56 FR 9621, Mar. 7, 1991; 61 FR 55885, Oct. 30, 1996; 66 FR 34812, July 
2, 2001]



Sec. 303.13  Appeals.

    (a) Any official decision or action relating to the allocation of 
duty-exemptions or to the issuance or use of production incentive 
certificates may be appealed to the Secretaries by any interested party. 
Such appeals must be received within 30 days of the date on which the 
decision was made or the action taken in accordance with the procedures 
set forth in paragraph (b) of this section. Interested parties may 
petition for the issuance of a rule, or amendment or repeal of a rule 
issued by the Secretaries. Interested parties may also petition for 
relief from the application of any rule on the basis of hardship or 
extraordinary circumstances resulting in the inability of the petitioner 
to comply with the rule.
    (b) Petitions shall bear the name and post office address of the 
petitioner and the name and address of the principal attorney or 
authorized representative (if any) for the party concerned. They shall 
be addressed to the Secretaries and filed in one original and two copies 
with the U.S. Department of Commerce, Import Administration, 
International Trade Administration, Washington, D.C. 20230, Attention: 
Statutory Import Programs Staff. Petitions shall contain the following:
    (1) A reference to the decision, action or rule which is the subject 
of the petition;
    (2) A short statement of the interest of the petitioner;
    (3) A statement of the facts as seen by the petitioner;
    (4) The petitioner's argument as to the points of law, policy of 
fact. In cases where policy error is contended, the alleged error 
together with the policy the submitting party advocates as the correct 
one should be described in full;
    (5) A conclusion specifying the action that the petitioner believes 
the Secretaries should take.
    (c) The Secretaries may at their discretion schedule a hearing and 
invite the participation of other interested parties.
    (d) The Secretaries shall communicate their decision which shall be 
final, to the petitioner by registered mail.
    (e) If the outcome of any petition materially affects the amount of 
the petitioner's allocation and if the Secretaries' consideration of the 
petition continues during the calculation of the annual allocations, the 
Secretaries shall set aside a portion of the affected territorial share 
in an amount which, in their judgment, protects the petitioner's 
interest and shall allocate the remainder among the other producers.

[49 FR 17740, Apr. 25, 1984, as amended at 56 FR 9622, Mar. 7, 1991]



Sec. 303.14  Allocation factors and miscellaneous provisions.

    (a) The allocation formula. (1) Except as provided in (a)(2) of this 
section, the territorial shares (excluding any

[[Page 30]]

amount set aside for possible new entrants) shall be allocated among the 
several producers in each territory in accordance with the following 
formula:
    (i) Fifty percent of the territorial share shall be allocated on the 
basis of the net dollar amount of economic contributions to the 
territory consisting of the dollar amount of creditable wages, up to an 
amount equal to 65% of the contribution and benefit base for Social 
Security as defined in the Social Security Act for the year in which the 
wages were earned, paid by each producer to territorial residents, plus 
the dollar amount of income taxes (excluding penalty and interest 
payments and deducting any income tax refunds and subsidies paid by the 
territorial government), and
    (ii) Fifty percent of the territorial share shall be allocated on 
the basis of the number of units of watches and watch movements 
assembled in the territory and entered by each producer duty-free into 
the customs territory of the United States.
    (2) If there is only one producer in a territory, the entire 
territorial share, excluding any amount set aside for possible new 
entrants, may be allocated without recourse to any distributive formula.
    (b) Minimum assembly requirements and prohibition of preferential 
supply relationship. (1) No insular watch movement or watch may be 
entered free of duty into the customs territory of the United States 
unless the producer used 30 or more discrete parts and components to 
assemble a mechanical watch movement and 33 or more discrete parts and 
components to assemble a mechanical watch.
    (2) Quartz analog watch movements must be assembled from parts 
knocked down to the maximum degree possible for the technical 
capabilities of the insular industry as a whole. The greatest degree of 
disassembly specified, for each manufacturer's brand and model, by any 
producer in any territory purchasing such brands and models shall 
constitute the disassembly required as a minimum for the industry as a 
whole.
    (3) Watch movements and watches assembled from components with a 
value of more than $35 for watch movements and $800 for watches shall 
not be eligible for duty-exemption upon entry into the U.S. Customs 
territory. Value means the value of the merchandise plus all charges and 
costs incurred up to the last point of shipment (i.e., prior to entry of 
the parts and components into the territory).
    (4) No producer shall accept from any watch parts and components 
supplier advantages and preferences which might result in a more 
favorable competitive position for itself vis-a-vis other territorial 
producers relying on the same supplier. Disputes under this paragraph 
may be resolved under the appeals procedures contained in Sec. 
303.13(b).
    (c) Calculation of the value of production incentive certificates. 
(1) The value of each producer's certificate shall equal the producer's 
average creditable wages per unit shipped (including non-91/5 units as 
provided for in Sec. 303.2(a)(13)) multiplied by the sum of:
    (i) The number of units shipped up to 300,000 units times a factor 
of 90%; plus
    (ii) Incremental units shipped up to 450,000 units times a factor of 
85%; plus
    (iii) Incremental units shipped up to 600,000 times a factor of 80%; 
plus
    (iv) Incremental shipments up to 750,000 units times a factor of 
75%.
    (2) The Departments may make adjustments for these data in the 
manner set forth in Sec. 303.5(c).
    (d) New entrant invitations. Applications from new firms are invited 
for any unused portion of any territorial share.
    (e) Territorial shares. The shares of the total duty exemption are 
1,866,000 for the Virgin Islands, 500,000 for Guam, 500,000 for American 
Samoa, and 500,000 for the Northern Mariana Islands.

[49 FR 17740, Apr. 25, 1984, as amended at 50 FR 43568, Oct. 28, 1985; 
53 FR 17825, May 19, 1988; 53 FR 52679, Dec. 29, 1988; 53 FR 52994, Dec. 
30, 1988; 56 FR 9622, Mar. 7, 1991; 58 FR 21348, Apr. 21, 1993; 59 FR 
8847, 8848, Feb. 24, 1994; 61 FR 55885, Oct. 30, 1996; 63 FR 49667, 
Sept. 17, 1998; 65 FR 8049, Feb. 17, 2000; 69 FR 51533, Aug. 20, 2004]



                            Subpart B_Jewelry

    Source: 64 FR 67150, Dec. 1, 1999, unless otherwise noted.

[[Page 31]]



Sec. 303.15  Purpose.

    (a) This subpart implements the responsibilities of the Secretaries 
of Commerce and the Interior (``the Secretaries'') under Pub. L. 106-36, 
enacted 25 June 1999 which substantially amended Pub. L. 97-446, enacted 
12 January 1983, amended by Pub. L. 89-805, enacted 10 November 1966, 
amended by Pub. L. 94-88, enacted 8 August 1975, amended by Pub. L. 94-
241, enacted 24 March 1976, and amended by Pub. L. 103-465, enacted 8 
December 1994.
    (b) The amended law provides for the issuance of certificates to 
insular jewelry producers who have met the requirements of the laws and 
regulations, entitling the holder (or any transferee) to obtain refunds 
of duties on watches and watch movements and parts (except discrete 
watch cases) imported into the customs territory of the United States. 
The amounts of these certificates may not exceed specified percentages 
of the producers' verified creditable wages in the insular possessions 
(90% of wages paid for the production of the first 300,000 duty-free 
units and declining percentages, established by the Secretaries, of 
wages paid for incremental production up to 750,000 units by each 
producer) nor an aggregate annual amount for all certificates exceeding 
$5,000,000 adjusted for growth by the ratio of the previous year's gross 
national product to the gross national product in 1982. However, the law 
specifies that watch producer benefits are not to be diminished as a 
consequence of extending the duty refund to jewelry manufacturers. In 
the event that the amount of the calculated duty refunds for watches and 
jewelry exceeds the total aggregate annual amount that is available, the 
watch producers shall receive their calculated amounts and the jewelry 
producers would receive amounts proportionately reduced from the 
remainder. Refund requests are governed by regulations issued by the 
Department of Homeland Security (see 19 CFR 7.4).
    (c) Section 2401(a) of Pub. L. 106-36 and additional U.S. note 5 to 
chapter 91 of the HTSUS authorize the Secretaries to issue regulations 
necessary to carry out their duties. The Secretaries may cancel or 
restrict the certificate of any insular manufacturer found violating the 
regulations.



Sec. 303.16  Definitions and forms.

    (a) Definitions. For purposes of the subpart, unless the context 
indicates otherwise:
    (1) Act means Pub. L. 97-446, enacted 12 January 1983 (19 U.S.C. 
1202), 96 Stat. 2329, as amended by Pub. L. 103-465, enacted on 8 
December 1994, 108 Stat. 4991 and, as amended by Pub. L. 106-36, enacted 
on 25 June 1999.
    (2) Secretaries means the Secretary of Commerce and the Secretary of 
the Interior or their delegates, acting jointly.
    (3) Director means the Director of the Statutory Import Programs 
Staff, International Trade Administration, U.S. Department of Commerce.
    (4) Sale or transfer of a business means the sale or transfer of 
control, whether temporary or permanent, over a firm which is eligible 
for a jewelry program duty-refund to any other firm, corporation, 
partnership, person or other legal entity by any means whatsoever, 
including, but not limited to, merger and transfer of stock, assets or 
voting trusts.
    (5) New firm means a jewelry company which has requested in writing 
to the Secretaries permission to participate in the program. In addition 
to any other information required by the Secretaries, new firm requests 
shall include a representation that the company agrees to abide by the 
laws and regulations of the program, an outline of the company's 
anticipated economic contribution to the territory (including the number 
of employees) and a statement as to whether the company is affiliated by 
ownership or control with any other watch or jewelry company in the 
insular possessions. The Secretaries will then review the request and 
make a decision based on the information provided and the economic 
contribution to the territory. A new jewelry firm may not be affiliated 
through ownership or control with any other jewelry duty-refund 
recipient. In assessing whether persons or parties are affiliated, the 
Secretaries will consider the following factors, among others: stock 
ownership; corporate or family groupings; franchise or joint venture

[[Page 32]]

agreements; debt financing; and close supplier relationships. The 
Secretaries may not find that control exists on the basis of these 
factors unless the relationship has the potential to affect decisions 
concerning production, pricing, or cost. Also, no jewelry duty-refund 
recipient may own or control more than one watch duty-refund recipient.
    (6) Jewelry producer means a company, located in one of the insular 
territories (see paragraph (a)(8) of this section), that produces 
jewelry provided for in heading 7113, HTSUS, which meets all the Bureau 
of Customs and Border Protection requirements for duty-free entry set 
forth in General Note 3(a)(iv), HTSUS, and 19 CFR 7.3, and has 
maintained its eligibility for duty refund benefits by complying with 
these regulations.
    (7) Unit of jewelry means a single article, pair (example: earrings, 
cufflinks), subassembly or component which is contained in HTSUS heading 
7113.
    (8) Territories, territorial and insular possessions refers to the 
insular possessions of the United States (i.e., the U.S. Virgin Islands, 
Guam, American Samoa and the Northern Mariana Islands).
    (9) Creditable wages means all wages, up to an amount equal to 65% 
of the contribution and benefit base for Social Security as defined in 
the Social Security Act for the year in which the wages were earned, 
paid to permanent residents of the territories employed in the firm's 
manufacture of HTSUS heading 7113 articles of jewelry which are a 
product of the insular possessions and have met the Bureau of Customs 
and Border Protection's criteria for duty-free entry into the United 
States, plus any wages paid for the repair of non-insular HTSUS heading 
7113 jewelry up to an amount equal to 50 percent of the firm's total 
creditable wages. Excluded, however, are wages paid for outside 
consultants or other professional personnel, such as lawyers and 
accountants, or those persons not involved in the day-to-day assembly 
operations or servicing and maintenance of equipment and fixtures 
necessary for the assembly or manufacturing operations or the 
administrative work and security activities directly related to the 
operations of the company, such as gardeners or construction workers, 
plus any wages paid for the assembly of dutiable jewelry or for the 
repair of dutiable jewelry to the extent that such wages exceed the 
percentage set forth above. No more than two insular producers may have 
their wages credited for their portion of the wages paid for work on a 
single piece of jewelry which entered the U.S. free of duty under the 
program. Wages paid by the two producers will be credited proportionally 
provided both producers demonstrate to the satisfaction of the 
Secretaries that they worked on the same piece of jewelry, the jewelry 
received duty-free treatment into the U.S., and the producers maintained 
production and payroll records sufficient for the Departments' 
verification of the creditable wage portion (see Sec. 303.17(b)). Wages 
paid to persons engaged in production of jewelry that has entered the 
U.S. both duty-free and duty-paid may be credited proportionately 
provided the firm maintains production and payroll records adequate for 
the Departments' verification of the creditable wages portion (see Sec. 
303.17(b)).
    (10) Dutiable jewelry includes jewelry which does not meet the 
requirements for duty-free entry under General Note 3(a)(iv), HTSUS, and 
19 CFR 7.3, contains any material which is the product of any country 
with respect to which Column 2 rates of duty apply or is ineligible for 
duty-free treatment pursuant to other laws or regulations.
    (11) Permanent resident means a person with one residence which is 
in the insular possessions or a person with one or more residences 
outside the insular possessions who meets criteria that include 
maintaining his or her domicile in the insular possessions, residing 
(i.e., be physically present for at least 183 days per year) and working 
in the territory at a program company, and maintaining his or her 
primary office for day-to-day work in the insular possessions.
    (b) Forms. (1) ITA--334P ``Annual Application for License to Enter 
Watches and Watch Movements into the Customs Territory of the United 
States.'' The Director shall issue instructions for jewelry 
manufacturers on the completion of the relevant portions of the

[[Page 33]]

form. The form must be completed annually by all jewelry producers 
desiring to receive a duty refund and, with special instructions for its 
completion, by producers who wish to receive the total annual amount of 
the duty refund in installments on a biannual basis.
    (2) ITA--360P ``Certificate of Entitlement to Secure the Refund of 
Duties on Watches and Watch Movements.'' This document authorizes a 
territorial jewelry producer to request the refund of duties on imports 
of watches, watch movements and parts therefor, with certain exceptions, 
up to a specified value. Certificates may be used to obtain duty refunds 
only when presented with a properly executed Form ITA-361P.
    (3) ITA--361P ``Request for Refund of Duties on Watches and Watch 
Movements.'' This form must be completed to obtain the refund of duties 
authorized by the Director through Form ITA-360P. After authentication 
by the Department of Commerce, it may be used for the refund of duties 
on items which were entered into the customs territory of the United 
States during a specified time period. Copies of the appropriate Customs 
entries must be provided with this form to establish a basis for issuing 
the claimed amounts. The forms may also be used to transfer all or part 
of the producer's entitlement to another party (see Sec. 303.19(c)).

(The information collection requirements in paragraph (b)(1) were 
approved by the Office of Management and Budget under control number 
0625-0040. The information collection requirements in paragraphs (b) (2) 
and (3) were approved under control number 0625-0134)

[64 FR 67150, Dec. 1, 1999, as amended at 65 FR 8049, Feb. 17, 2000; 66 
FR 34812, July 2, 2001; 67 FR 77409, Dec. 18, 2202]



Sec. 303.17  Annual jewelry application.

    (a) Form ITA-334P shall be furnished to producers by January 1 and 
must be completed and returned to the Director no later than January 31 
of each calendar year.
    (b) All data supplied are subject to verification by the Secretaries 
and no duty refund shall be made to producers until the Secretaries are 
satisfied that the data are accurate. To verify the data, 
representatives of the Secretaries shall have access to relevant company 
records including, but not limited to:
    (1) Work sheets used to answer all questions on the application 
form, as specified by the instructions;
    (2) Original records from which such data are derived;
    (3) Records pertaining to ownership and control of the company;
    (4) Records pertaining to all duty-free and dutiable shipments of 
HTSUS 7113 jewelry, including Customs entry documents, or the 
certificate of origin for the shipment, or, if a company did not receive 
such documents from Customs, a certification from the consignee that the 
jewelry shipment received duty-free treatment, or a certification from 
the producer, if the producer can attest that the jewelry shipment 
received duty-free treatment;
    (5) Records pertaining to corporate income taxes, gross receipts 
taxes and excise taxes paid by each producer in the territories;
    (6) Customs, bank, payroll, and production records;
    (7) Records on purchases of components and sales of jewelry, 
including proof of payment; and
    (8) Any other records in the possession of the parent or affiliated 
companies outside the territory pertaining to any aspect of the 
producer's jewelry operations.
    (c) Data verification shall be performed in the territories, unless 
other arrangements satisfactory to the Departments are made in advance, 
by the Secretaries' representatives by the end of February of each 
calendar year. In the event a company cannot substantiate the data in 
its application, the Secretaries shall determine which data will be 
used.
    (d) Records subject to the requirements of paragraph (b) of this 
section, shall be retained for a period of two years following their 
creation.

[49 FR 17740, Apr. 25, 1984, as amended at 66 FR 34813, July 2, 2001]



Sec. 303.18  Sale or transfer of business.

    (a) The sale or transfer of a business together with its duty refund 
entitlement shall be permitted with prior

[[Page 34]]

written notification to the Departments. Such notification shall be 
accompanied by certifications and representations, as appropriate, that:
    (1) The transferee is neither directly nor indirectly affiliated 
with any other territorial duty refund jewelry recipient in any 
territory;
    (2) The transferee will not modify the jewelry operations in a 
manner that will significantly diminish its economic contributions to 
the territory.
    (b) At the request of the Departments, the transferee shall permit 
representatives of the Departments to inspect whatever records are 
necessary to establish to their satisfaction that the certifications and 
representations contained in paragraph (a) of this section have been or 
are being met.
    (c) Any transferee who is either unwilling or unable to make the 
certifications and representations specified in paragraph (a) of this 
section shall secure the Departments' approval in advance of the sale or 
transfer of the business. The request for approval shall specify which 
of the certifications specified in paragraph (a) of this section the 
firm is unable or unwilling to make, and give reasons why such fact 
should not constitute a basis for the Departments' disapproval of the 
sale or transfer.



Sec. 303.19  Issuance and use of production incentive certificates.

    (a) Issuance of certificates. (1) The total annual amount of the 
Certificate of Entitlement, Form ITA-360, may be divided and issued on a 
biannual basis. The first portion of the total annual certificate amount 
will be based on reported duty-free shipments and creditable wages paid 
during the first six month of the calendar year, using the formula in 
Sec. 303.20(b). The Departments require the receipt of the data by July 
31 for each producer who wishes to receive an interim duty refund 
certificate. The interim duty refund certificate will be issued on or 
before August 31 of the same year in which the wages were earned unless 
the Departments have unresolved questions. The process of determining 
the total annual amount of the duty refund will remain the same. The 
completed annual application (Form ITA-334P) shall be received by the 
Departments on or before January 31 and the annual verification of data 
and calculation of each producer's total annual duty refund, based on 
the verified data, will continue to take place in February. Once the 
calculations for each producer's duty refund has been completed, the 
portion of the duty refund that has already been issued to each producer 
will be deducted from the total amount of each producer's annual duty 
refund amount. The duty refund certificate will continue to be issued by 
March 1 unless the Departments have unresolved questions.
    (2) Certificates shall not be issued to more than one jewelry 
company in the territories owned or controlled by the same corporate 
entity.
    (b) Security and handling of certificates. (1) Certificate holders 
are responsible for the security of the certificates. The certificates 
shall be kept at the territorial address of the producer or at another 
location having the advance approval of the Departments.
    (2) All refund requests made pursuant to the certificates shall be 
entered on the reverse side of the certificate.
    (3) Certificates shall be returned by registered, certified or 
express carrier mail to the Department of Commerce when:
    (i) A refund is requested which exhausts the entitlement on the face 
of the certificate,
    (ii) The certificate expires, or
    (iii) The Departments request their return with good cause.
    (4) Certificate entitlements may be transferred according to the 
procedures described in paragraph (c) of this section.
    (c) The use and transfer of certificate entitlements. (1) Insular 
producers issued a certificate may request a refund by executing a Form 
ITA-361P (see Sec. 303.16(b)(3)) and the instructions on the form). 
After authentication by the Department of Commerce, Form ITA-361P may be 
used to obtain duty refunds on watch movements, watches, and parts 
therefor. Duties on watch cases not containing a movement and on 
articles containing any material which is the product of a country with 
respect to which Column 2 rates of

[[Page 35]]

duty apply may not be refunded. Articles for which duty refunds are 
claimed must have entered the customs territory of the United States 
during the two-year period prior to the issue date of the certificate or 
during the one-year period the certificate remains valid. Copies of the 
appropriate Customs entries must be provided with the refund request in 
order to establish a basis for issuing the claimed amounts. 
Certification regarding drawback claims and liquidated refunds relating 
to the presented entries is required from the claimant on the form.
    (2) Regulations issued by the Bureau of Customs and Border 
Protection, U.S. Department of Homeland Security, govern the refund of 
duties under 19 CFR 7.4. If the Departments receive information from the 
Bureau of Customs and Border Protection that a producer has made 
unauthorized use of any official form, they may cancel the affected 
certificate.
    (3) The territorial producer may transfer a portion of all of its 
certificate entitlement to another party by entering in block C of Form 
ITA-361P the name and address of the party.
    (4) After a Form ITA-361P transferring a certificate entitlement to 
a party other than the certificate holder has been authenticated by the 
Department of Commerce, the form may be exchanged for any consideration 
satisfactory to the two parties. In all cases, authenticated forms shall 
be transmitted to the certificate holder or its authorized custodian for 
disposition (see paragraph (b) of this section).
    (5) All disputes concerning the use of an authenticated Form ITA-
361P shall be referred to the Departments for resolution. Any party 
named on an authenticated Form ITA-361P shall be considered an 
``interested party'' within the meaning of Sec. 303.21 of this part.

[49 FR 17740, Apr. 25, 1984, as amended at 66 FR 34813, July 2, 2001]



Sec. 303.20  Duty refund.

    (a) Territorial jewelry producers are entitled to duty refund 
certificates only for jewelry that they produce which is provided for in 
heading 7113, HTSUS, is a product of a territory and otherwise meets the 
requirements for duty-free entry under General Note 3 (a)(iv), HTSUS, 
and 19 CFR 7.3.
    (1) An article of jewelry is considered to be a product of a 
territory if:
    (i) The article is wholly the growth or product of the territory; or
    (ii) The article became a new and different article of commerce as a 
result of production or manufacture performed in the territories.
    (2) Two-year exception. Any article of jewelry provided for in 
heading 7113, HTSUS, entered or withdrawn from warehouse for consumption 
during the two-year period beginning August 9, 1999, that is assembled 
in a territory shall be considered a product of the insular possessions. 
At the expiration of the two-year period, only jewelry which satisfies 
either of the criteria set forth in paragraph (a)(1) of this section 
shall be considered a product of an insular possession.
    (b) Calculation of the value of production incentive certificates. 
(1) The value of each producer's certificate shall equal the producer's 
average creditable wages per unit shipped free of duty into the United 
States multiplied by the sum of:
    (i) The number of units shipped up to 300,000 units times a factor 
of 90%; plus
    (ii) Incremental units shipped up to 450,000 units times a factor of 
85%; plus
    (iii) Incremental units shipped up to 600,000 times a factor of 80%; 
plus
    (iv) Incremental shipments up to 750,000 units times a factor of 
75%.
    (2) The Departments may make adjustments for these data in the 
manner set forth in Sec. 303.17(c).



Sec. 303.21  Appeals.

    (a) Any official decision or action relating to the issuance or use 
of production incentive certificates may be appealed to the Secretaries 
by any interested party. Such appeals must be received within 30 days of 
the date on which the decision was made or the action taken in 
accordance with the procedures set forth in paragraph (b) of this 
section. Interested parties may petition for the issuance of a rule, or 
amendment or repeal of a rule issued by the Secretaries. Interested 
parties may also petition for relief from the application of any rule on 
the basis of

[[Page 36]]

hardship or extraordinary circumstances resulting in the inability of 
the petitioner to comply with the rule.
    (b) Petitions shall bear the name and post office address of the 
petitioner and the name and address of the principal attorney or 
authorized representative (if any) for the party concerned. They shall 
be addressed to the Secretaries and filed in one original and two copies 
with the U.S. Department of Commerce, Import Administration, 
International Trade Administration, Washington, DC 20230, Attention: 
Statutory Import Programs Staff. Petitions shall contain the following:
    (1) A reference to the decision, action or rule which is the subject 
of the petition;
    (2) A short statement of the interest of the petitioner;
    (3) A statement of the facts as seen by the petitioner;
    (4) The petitioner's argument as to the points of law, policy or 
fact. In cases where policy error is contended, the alleged error 
together with the policy the submitting party advocates as the correct 
one should be described in full;
    (5) A conclusion specifying the action that the petitioner believes 
the Secretaries should take.
    (c) The Secretaries may at their discretion schedule a hearing and 
invite the participation of other interested parties.
    (d) The Secretaries shall communicate their decision, which shall be 
final, to the petitioner by registered, certified or express mail.



PART 310_OFFICIAL U.S. GOVERNMENT RECOGNITION OF AND PARTICIPATION IN 
INTERNATIONAL EXPOSITIONS HELD IN THE UNITED STATES--Table of Contents




Sec.
310.1 Background and purpose.
310.2 Definitions.
310.3 Applications for Federal recognition.
310.4 Action on application.
310.5 Report of the Secretary on Federal recognition.
310.6 Recognition by the President.
310.7 Statement for Federal participation.
310.8 Proposed plan for Federal participation.
310.9 Report of the Secretary on Federal participation.

    Authority: Pub. L. 91-269, 84 Stat. 271 (22 U.S.C. 2801 et seq.).

    Source: 40 FR 34107, Aug. 14, 1975, unless otherwise noted. 
Redesignated at 46 FR 57457, Nov. 24, 1981.



Sec. 310.1  Background and purpose.

    The regulations in this part are issued under the authority of Pub. 
L. 91-269 (84 Stat. 271, 22 U.S.C. 2801 et seq.) which establishes an 
orderly procedure for Federal Government recognition of, and 
participation in, international expositions to be held in the United 
States. The Act provides, inter alia, that Federal recognition of an 
exposition is to be granted upon a finding by the President that such 
recognition will be in the national interest. In making this finding, 
the President is directed to consider, among other factors, a report 
from the Secretary of Commerce as to the purposes and reasons for an 
exposition and the extent of financial and other support to be provided 
by the State and local officials and business and community leaders 
where the exposition is to be held, and a report by the Secretary of 
State to determine whether the exposition is qualified for registration 
under Bureau of International Expositions (BIE) rules. The BIE is an 
international organization established by the Paris Convention of 1928 
(T.I.A.S. 6548 as amended by T.I.A.S. 6549) to regulate the conduct and 
scheduling of international expositions in which foreign nations are 
officially invited to participate. The BIE divides international 
expositions into different categories and types and requires each member 
nation to observe specified minimum time intervals in scheduling each of 
these categories and types of expositions. \1\

[[Page 37]]

Under BIE rules, member nations may not ordinarily participate in an 
international exposition unless such exposition has been approved by the 
BIE. The United States became a member of the BIE on April 30, 1968, 
upon ratification of the Paris Convention by the U.S. Senate (114 Cong. 
Rec. 11012).
---------------------------------------------------------------------------

    \1\ The BIE defines a General Exposition of the First Category as an 
exposition dealing with progress achieved in a particular field applying 
to several branches of human activity at which the invited countries are 
obligated to construct national pavilions. A General Exposition of the 
Secondary Category is a similar exposition at which invited countries 
are not authorized to construct national pavilions, but occupy space 
provided by the exposition sponsors. Special Category Expositions are 
those dealing only with one particular technique, raw material, or basic 
need.
    The BIE frequency rules require that an interval of 15 years must 
elapse between General Expositions of the First Category held in one 
country. General Expositions of the Second Category require an interval 
of 10 years. An interval of 5 years must ordinarily elapse between 
Special Category Expositions of the same kind in one country or three 
months between Special Category Expositions of different kinds. These 
frequency intervals are computed from the date of the opening of the 
exposition.
    More detailed BIE classification criteria and regulations are 
contained in the Paris Convention of 1928, as amended in 1948 and 1966. 
Applicants not having a copy of the text of this convention may obtain 
one by writing the Director. (The Convention may soon be amended by a 
Protocol which has been approved by the BIE and ratified by the United 
States. This amendment would increase authorized frequencies or 
intervals for BIE approved expositions.)


Federal participation in a recognized international exposition requires 
a specific authorization by the Congress, upon a finding by the 
President that such participation would be in the national interest. The 
Act provides for the transmission to Congress of a participation 
proposal by the President. This proposal transmits to the Congress 
information regarding the exposition, including a statement that it has 
been registered by the BIE and a plan for Federal participation prepared 
by the Secretary of Commerce in cooperation with other interested 
Federal departments and agencies.



Sec. 310.2  Definitions.

    For the purpose of this part, except where the context requires 
otherwise:
    (a) Act means Pub. L. 91-269.
    (b) Secretary means the Secretary of Commerce.
    (c) Commissioner General means the person appointed to act as the 
senior Federal official for the exposition as required by BIE rules and 
regulations.
    (d) Director means the Director of the International Expositions 
Staff, Office of the Deputy Assistant Secretary for Export Development, 
International Trade Administration, Department of Commerce.
    (e) Applicant means a State, County, municipality, a political 
subdivision of the foregoing, private non-profit or not-for-profit 
organizations, or individuals filing an application with the Director 
seeking Federal recognition of an international exposition to be held in 
the United States.
    (f) State means one of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Trust Territory of the Pacific 
Islands.
    (g) Exposition means an international exposition proposed to be held 
in the United States for which an application has been filed with the 
Director seeking Federal recognition under the Act; which proposes to 
invite more than one foreign country to participate; and, which would 
exceed three weeks in duration. Any event under three weeks in duration 
is not considered an international exposition under BIE rules.

[40 FR 34107, Aug. 14, 1975. Redesignated and amended at 46 FR 57457, 
Nov. 24, 1981]



Sec. 310.3  Applications for Federal recognition.

    (a) Applications for Federal recognition of an exposition shall be 
filed with, and all official communications in connection therewith 
addressed to, the International Expositions Staff, International Trade 
Administration, Department of Commerce, Washington, DC 20230.
    (b) Every application, exhibit, or enclosure, except where 
specifically waived by the Director, shall be in quadruplicate, duly 
authenticated and referenced.
    (c) Every application shall be in letter form and shall contain the 
date, address, and official designation of the applicant and shall be 
signed by an authorized officer or individual.
    (d) Every application, except where specifically waived by the 
Director, shall be accompanied by the following exhibits:


[[Page 38]]


    1. Exhibit No. 1. A study setting forth in detail the purpose for 
the exposition, including any historical, geographic, or other 
significant event of the host city, State, or region related to the 
exposition.
    2. Exhibit No. 2. An exposition plan setting forth in detail (i) the 
theme of the exposition and the ``storyline'' around which the entire 
exposition is to be developed; (ii) whatever preliminary architectural 
and design plans are available on the physical layout of the site plus 
existing and projected structures; (iii) the type of participation 
proposed in the exposition (e.g., foreign and domestic exhibits); (iv) 
cultural, sports, and special events planned; (v) the proposed BIE 
category of the event and evidence of its conformity to the regulations 
of the BIE (a copy of these regulations can be obtained from the 
Director upon request); (vi) the proposed steps that will be taken to 
protect foreign exhibitors under the BIE model rules and regulations and 
(vii) in writing commit its organization to the completion of the 
exposition.
    3. Exhibit No. 3. Documentary evidence of State, regional and local 
support (e.g., letters to the applicant from business and civic 
leadership of the region, pledging assistance and/or financing; State 
and/or municipal resolutions, acts, or appropriations; referendums on 
bond issues, and others).
    4. Exhibit No. 4. An organization chart of the exposition management 
structure (actual or proposed) of the applicant, including description 
of the functions, duties and responsibilities of each official position 
along with bibliographic material, including any professional experience 
in the fields of architecture, industrial design, engineering, labor 
relations, concession management, interpretative theme planning, exhibit 
development, etc., on principal officers, if available. (The principal 
officials should also be prepared to submit subsequent individual 
statements under oath of their respective financial holdings and other 
interests.)
    5. Exhibit No. 5. A statement setting forth in detail (i) the 
availability of visitor services in existence or projected to 
accommodate tourists at the exposition (e.g., number of hotel and motel 
units, number and type of restaurants, health facilities, etc.); (ii) 
evidence of adequate transportation facilities and accessibility of the 
host city to large groups of national and international visitors (e.g., 
number and schedule of airlines, bus lines, railroads, and truck lines 
serving the host city); and (iii) plans to promote the exposition as a 
major national and international tourist destination.
    6. Exhibit No. 6. A statement setting forth in detail the 
applicant's plans for acquiring title to, or the right to occupy and use 
real property, other than that owned by the applicant or by the United 
States, essential for implementing the project or projects covered by 
the application. If the applicant, at the time of filing the 
application, has acquired title to the real property, he should submit a 
certified copy of the deed(s). If the applicant, at the time of filing 
the application, has by easement, lease, franchise, or otherwise 
acquired the right to occupy and use real property owned by others, he 
should submit a certified copy of the appropriate legal instrument(s) 
evidencing this right.
    7. Exhibit No. 7. A statement of the latest prevailing hourly wage 
rates for construction workers in the host city (e.g., carpenters, 
cement masons, sheet metal workers, etc.).
    8. Exhibit No. 8. Information on attitudes of labor leaders as to 
``no strike'' agreements during the development and operation of the 
exposition. Actual ``no strike'' pledges are desirable.
    9. Exhibit No. 9. A detailed study conducted and certified by a 
nationally recognized firm(s) in the field of economics, accounting, 
management, etc., setting forth (i) proposed capital investment cost; 
cash flow projections; and sources of financing available to meet these 
costs, including but not limited to funds from State and municipal 
financing, general obligation and/or general revenue bond issues, and 
other public or private sources of front-end capital; (ii) assurances 
that the ``guaranteed financing'' is or will be available in accordance 
with Section 2(a)(1)(b) of Pub. L. 91-269; (iii) the projected expenses 
for managing the exposition; (iv) projected operational revenues broken 
down to include admissions, space rental, concessions, service fees and 
miscellaneous income; and (v) cost-benefit projections. These should be 
accompanied by a statement of the firm that the needed cash flow, 
sources of funding, and revenue projections are realistic and 
attainable.
    10. Exhibit No. 10. A description of the exposition implementation 
time schedule and the management control system to be utilized to 
implement the time schedule (e.g., PERT, CPM, etc.).
    11. Exhibit No. 11. A statement setting forth in detail the public 
relations, publicity and other promotional plans of the applicant. For 
example, the statement could include: (i) an outline of the public 
relations/publicity program broken down by percentage allocations among 
the various media; (ii) a public relations/publicity program budget with 
the various calendar target dates for completion of phases prior to the 
opening, the opening and post-opening of the exposition; and (iii) 
protocol plans for U.S. and foreign dignitaries, as well as for special 
ceremonies and events and how these plans are to be financed.
    12. Exhibit No. 12. A study setting forth in detail the benefits to 
be derived from the exposition and residual use plans. For example, the 
study might include: (i) extent of immediate economic benefits for the 
city/region/

[[Page 39]]

nation in proportion to total investment in the exposition; (ii) extent 
of long range economic benefits for the city/region/nation in proportion 
to total investment in the exposition; and (iii) extent of intangible 
(social, psychological, ``good will'') benefits accruing to the city/
region/nation including the solution or amelioration of any national/
local problems.
    13. Exhibit No. 13. A statement committing the applicant to develop 
and complete an environmental impact statement which complies with 
section 102(2)(c) of the National Environmental Policy Act of 1969 (83 
Stat. 852; 42 U.S.C. 4331). Sample copies of environmental impact 
statements may be obtained from the Director. Prior to the Director's 
submitting a report to the Secretary containing his findings on the 
application for Federal recognition pursuant to Sec. 310.4, the 
applicant must have completed the required Environmental Impact 
Statement (EIS), in a form acceptable to the Department of Commerce.
    14. Exhibit No. 14. A detailed set of general and special rules and 
regulations governing the exposition and participation in it, which, if 
Federal recognition is obtained, can be used by the Federal Government 
in seeking BIE registration.
    15. Exhibit No. 15. A statement from the applicant agreeing to 
accept a U.S. Commissioner General, appointed by the President. He will 
be recognized as the senior Federal official and titular head of the 
exposition, final arbiter in disputes with exhibitors, and the official 
contact with foreign governments. The applicant should also agree to 
furnish the Commissioner General and his staff with suitable facilities 
in the host community during the development and operation of the 
exposition.

[40 FR 34107, Aug. 14, 1975. Redesignated and amended at 46 FR 57457, 
Nov. 24, 1981]



Sec. 310.4  Action on application.

    (a) Upon receipt of an application, the Director will analyze the 
application and all accompanying exhibits to insure compliance with the 
provisions of Sec. 310.3 and report his findings with respect thereto 
to the Secretary.
    (b) If more than one applicant applies for Federal recognition for 
expositions to be held within three years or less of each other, the 
applications will be reviewed concurrently by the Director. The 
following standards will be considered in determining which if any of 
the competing applicants will be recommended for Federal recognition:
    (1) The order of receipt of the applications by the Director, 
complete with all exhibits required by Sec. 310.3.
    (2) The financial plans of the applications. Primary consideration 
will be given to those applications which do not require Federal 
financing for exposition development. This does not extend to funding 
for a Federal pavilion, if one is desired.
    (3) The relative merit of the applications in terms of their 
qualifications as tourism destination sites, both with respect to 
existing facilities and those facilities planned for the proposed 
exposition. If necessary, to assist in making this determination, the 
Director will appoint a panel of travel industry experts representing 
tour developers, the transportation, entertainment and hotel/motel 
industries for the purpose of studying the competing applications and 
reporting to the Director its views as to which proposed site best meets 
the above criteria. If such a panel is deemed necessary, the provisions 
of the Federal Advisory Committee Act (86 Stat. 770, 5 U.S.C. App. I) 
will be applicable.
    (c) In analyzing the applications, the Director may hold public 
hearings with the objective of clarifying issues that might be raised by 
the application. If desired, the Director may utilize the services of an 
examiner.
    (d) If the Director, in his discretion, decides to hold a public 
hearing, notice of such hearing shall be published in the Federal 
Register, and a copy of the notice shall be furnished to local 
newspapers. The notice shall state the subject to be considered and when 
and where the hearing will be held, specifically designating the date, 
hour, and place.
    (e) The following general procedure shall govern the conduct of 
public hearings: (1) Stenographic minutes of the proceedings shall be 
made; (2) the names and addresses of all parties present or represented 
at the hearing shall be recorded; and (3) the Director or Examiner shall 
read aloud for the record and for the benefit of the public such parts 
of the Act and of these regulations as bear on the application. He shall 
also read aloud for the record and for the benefit of the public such 
other important papers, or extracts therefrom, as may be necessary for a 
full understanding of the issues which require

[[Page 40]]

clarification. The Director or Examiner shall impress upon the parties 
in attendance at the public hearing, and shall specifically state at the 
commencement of the hearing, that the hearing is not adversary in nature 
and that the sole objective thereof is to clarify issues that might have 
been raised by the application.
    (f) Statements of interested parties may be presented orally at the 
hearing, or submitted in writing for the record.
    (g) Within six months after receipt of a fully completed application 
and/or the adjournment of the public hearing, the Director shall submit 
his report containing his findings on the application to the Secretary.



Sec. 310.5  Report of the Secretary on Federal recognition.

    If the Director's report recommends Federal recognition, the 
Secretary, within a reasonable time, shall submit a report to the 
President.
    (a) The Secretary's report shall include: (1) An evaluation of the 
purposes and reasons for the exposition; and (2) a determination as to 
whether guaranteed financial and other support has been secured by the 
exposition from affected State and local governments and from business 
and civic leaders of the region and others in amounts sufficient to 
assure the successful development and progress of the exposition.
    (b) Based on information from, and coordination with the Department 
of Commerce the Secretary of State shall also file a report with the 
President that the exposition qualifies for recognition by the BIE.



Sec. 310.6  Recognition by the President.

    If the President concurs in the favorable reports from the 
Secretaries of State and Commerce, he may grant Federal recognition to 
the exposition by indicating his concurrence to the two Secretaries and 
authorizing them to seek BIE registration.



Sec. 310.7  Statement for Federal participation.

    If Federal participation in the exposition, as well as Federal 
recognition thereof is desired, the applicant shall in a statement to 
the Director outline the nature of the Federal participation envisioned, 
including whether construction of a Federal pavilion is contemplated. 
(It should be noted, however, that before Federal participation can be 
authorized by the Congress under the Act, the exposition must have (i) 
met the criteria for Federal recognition and be so recognized, and (ii) 
been registered by the BIE. Although applicants need not submit such a 
statement until these prerequisites are satisfied, they are encouraged 
to do so.) Where the desired Federal participation includes a request 
for construction of a Federal pavilion, the statement shall be 
accompanied by the following exhibits:

    1. Exhibit No. 1. A survey drawing of the proposed Federal pavilion 
site, showing its areas and boundaries, its grade elevations, and 
surface and subsoil conditions.
    2. Exhibit No. 2. Evidence of resolutions, statutes, opinions, etc., 
as to the applicant's ability to convey by deed the real property 
comprising the proposed Federal pavilion site in fee-simple and free of 
liens and encumbrances to the Federal Government. The only consideration 
on the part of the Government for the conveyance of the property shall 
be the Government's commitment to participate in the exposition.
    3. Exhibit No. 3. A certified copy of the building code which would 
be applicable should a pavilion be constructed.
    4. Exhibit No. 4. An engineering drawing showing the accessibility 
of the proposed pavilion site to utilities (e.g., sewerage, water, gas, 
electricity, etc.).
    5. Exhibit No. 5. A statement setting forth the security and 
maintenance and arrangements which the applicant would undertake (and an 
estimate of their cost) while a pavilion is under construction.
    6. Exhibit No. 6. A study pursuant to Executive Order 11296 of 
August 10, 1966, entitled ``Evaluation of flood hazard in locating 
Federally owned or financed buildings, roads and other facilities and in 
disposing of Federal land and properties.''



Sec. 310.8  Proposed plan for Federal participation.

    (a) Upon receipt of the statement, and the exhibits referred to in 
Sec. 310.7, the Director shall prepare a proposed plan in cooperation 
with other interested departments and agencies of the Federal Government 
for Federal participation in the exposition.
    (b) In preparing the proposed plan for Federal participation in the 
exposition, the Director shall conduct a feasibility

[[Page 41]]

study of Federal participation including cost estimates by utilizing the 
services within the Federal Government, professional consultants and 
private sources as required and in accordance with applicable laws and 
regulations.
    (c) The Director, in the proposed plan for Federal participation in 
the exposition, shall determine whether or not a Federal pavilion should 
be constructed and, if so, whether or not the Government would have need 
for a permanent structure in the area of the exposition or whether a 
temporary structure would be more appropriate.
    (d) The Director shall seek the advice of the Administrator of the 
General Services Administration to the extent necessary in carrying out 
the proposed plan for Federal participation in the exposition.
    (e) Upon completion of the proposed plan for Federal participation 
in the exposition, the Director shall submit the plan to the Secretary.



Sec. 310.9  Report of the Secretary on Federal participation.

    Upon receipt of the Director's proposed plan for Federal 
participation, the Secretary, within a reasonable time, shall submit a 
report to the President including: (a) Evidence that the exposition has 
met the criteria for Federal recognition and has been so recognized; (b) 
a statement that the exposition has been registered by the BIE; and (c) 
a proposed plan for the Federal participation referred to in Sec. 
310.8.



PART 315_DETERMINATION OF BONA FIDE MOTOR-VEHICLE MANUFACTURER--Table 
of Contents




Sec.
315.1 Scope and purpose.
315.2 Definitions.
315.3 Application.
315.4 Determination by the Under Secretary.
315.5 Maintenance and publication of a list of bona fide motor-vehicle 
          manufacturers.

    Authority: Headnote 2, subpart B, part 6, schedule 6, Tariff 
Schedules of the United States (19 U.S.C. 1202); sec. 501(2) of Title V, 
Automotive Products Trade Act of 1965 (19 U.S.C. 2031).

    Source: 45 FR 42214, June 23, 1980, unless otherwise noted. 
Redesignated at 53 FR 52115, Dec. 27, 1988.



Sec. 315.1  Scope and purpose.

    The purpose of this part is to set forth regulations implementing 
headnote 2 to subpart B, part 6, schedule 6 of the Tariff Schedules of 
the United States as proclaimed by Proclamation No. 3682 of October 21, 
1965 (3 CFR 140-65 Comp.). issued pursuant to the Automotive Products 
Trade Act of 1965 (19 U.S.C. 2031), by establishing a procedure under 
which a person may apply to be determined a bona fide motor-vehicle 
manufacturer. Under headnote 2 to subpart B, part 6, schedule 6 of the 
Tariff Schedules of the United States, whenever the Secretary of 
Commerce has determined a person to be a bona fide motor-vehicle 
manufacturer, such person is eligible to obtain duty-free importation of 
certain Canadian articles and to issue certain orders, contracts, or 
letters of intent under or pursuant to which other persons, not 
themselves bona fide motor-vehicle manufacturers, may obtain duty-free 
treatment for such Canadian articles. The responsibilities of Secretary 
of Commerce relating to the development, maintenance and publication of 
a list of bona fide motor-vehicle manufacturers and the authority to 
promulgate rules and regulations pertaining thereto have been delegated 
to Under Secretary for International Trade, Department of Commerce 
pursuant to Department of Commerce Organization Order 40-1, Amendment 9 
of January 22, 1984 (49 FR 4538).

[45 FR 42214, June 23, 1980. Redesignated and amended at 53 FR 52115, 
Dec. 27, 1988]



Sec. 315.2  Definitions.

    For the purpose of the regulations in this part and the forms issued 
to implement it:
    (a) Act means the Automotive Products Trade Act of 1965 (79 Stat. 
1016, 19 U.S.C. 2001 through 2033).
    (b) Under Secretary means Under Secretary for International Trade of 
the Department of Commerce, or such official as may be designated by the 
Under Secretary to act in his or her behalf.
    (c) Motor vehicle means a motor vehicle of a kind described in item 
692.05 or

[[Page 42]]

692.10 of subpart B, part 6, schedule 6, of the Tariff Schedules of the 
United States (excluding an electric trolley bus and a three-wheeled 
vehicle) or an automotive truck tractor.
    (d) Bona fide motor-vehicle manufacturer means a person who upon 
application to the Under Secretary is determined by the Under Secretary 
to have produced no fewer than 15 complete motor vehicles in the United 
States during the 12-month period preceding the date certified in the 
application, and to have had as of such date installed capacity in the 
United States to produce 10 or more complete motor vehicles per 40-hour 
week. A person shall only be regarded as having had the capacity to 
produce a complete motor vehicle if his operation included the assembly 
of two or more major components (e.g., the attachment of a body to a 
chassis) to create a new motor vehicle ready for use.
    (e) Person includes any individual, corporation, partnership, 
association, company, or any kind of organization.
    (f) United States includes only the States, the District of Columbia 
and Puerto Rico.

[45 FR 42214, June 23, 1980. Redesignated and amended at 53 FR 52115, 
Dec. 27, 1988]



Sec. 315.3  Application.

    Any person in the United States desiring to be determined a bona 
fide motor vehicle manufacturer shall apply to the Under Secretary by 
filing two copies of Form BIE-3 in accordance with the instructions set 
forth on the form and this part. Application forms may be obtained from 
the Under Secretary, District offices of the U.S. Department of 
Commerce, or from U.S. Collectors of Customs, and should be mailed or 
delivered to the:

U.S. Department of Commerce, International Trade Administration, Office 
of Automotive Industry Affairs--APTA, 14th and Constitution Avenue, NW., 
Room 4036, Washington, DC 20230.

[45 FR 42214, June 23, 1980. Redesignated and amended at 53 FR 52115, 
Dec. 27, 1988]



Sec. 315.4  Determination by the Under Secretary.

    (a) As soon as practicable after receipt of the application, the 
Under Secretary shall determine whether an applicant has produced no 
fewer than 15 complete motor vehicles in the United States during the 
12-month period preceding the date certified in the application and as 
of such date, had installed capacity in the United States to produce 10 
or more complete motor vehicles per 40 hour week. The Under Secretary 
may request such additional data from an applicant as he may deem 
appropriate to establish whether the applicant has satisfied the 
requirements of this part.
    (b) A determination by the Under Secretary under this part shall be 
effective for a 12-month period to begin on the date as of which the 
Under Secretary determines that the applicant qualified under this part. 
Within 60 days prior to the termination of such period, a bona fide 
motor vehicle manufacturer may apply for another determination under 
this part.
    (c) The Under Secretary will promptly notify each applicant in 
writing of the final action taken on his application.

[45 FR 42214, June 23, 1980. Redesignated and amended at 53 FR 52115, 
Dec. 27, 1988]



Sec. 315.5  Maintenance and publication of a list of bona fide 
motor-vehicle manufacturers.

    The Under Secretary shall maintain and publish from time to time in 
the Federal Register, a list of the names and addresses of bona fide 
motor vehicle manufacturers, and the effective dates from each 
determination.

[45 FR 42214, June 23, 1980. Redesignated and amended at 53 FR 52115, 
Dec. 27, 1988]



PART 325_EXPORT TRADE CERTIFICATES OF REVIEW--Table of Contents




Sec.
325.1 Scope.
325.2 Definitions.
325.3 Applying for a certificate of review.
325.4 Calculating time periods.
325.5 Issuing the certificate.
325.6 Publishing notices in the Federal Register.
325.7 Amending the certificate.
325.8 Expediting the certification process.
325.9 Reconsidering an application that has been denied.
325.10 Modifying or revoking a certificate.
325.11 Judicial review.
325.12 Returning the applicant's documents.

[[Page 43]]

325.13 Nonadmissibility in evidence.
325.14 Submitting reports.
325.15 Relinquishing a certificate.
325.16 Protecting confidentiality of information.
325.17 Waiver.

    Authority: Title III of the Export Trading Company Act, Pub. L. 97-
290 (96 Stat. 1240-1245, 15 U.S.C. 4011-4021).

    Source: 50 FR 1806, Jan. 11, 1985, unless otherwise noted.



Sec. 325.1  Scope.

    This part contains regulations for issuing export trade certificates 
of review under title III of the Export Trading Company Act, Pub. L. 97-
290. A holder of a certificate of review and the members named in the 
certificate will have specific protections from private treble damage 
actions and government criminal and civil suits under U.S. Federal and 
State antitrust laws for the export conduct specified in the certificate 
and carried out during its effective period in compliance with its terms 
and conditions.



Sec. 325.2  Definitions.

    As used in this part:
    (a) Act means title III of Pub. L. 97-290, Export Trade Certificates 
of Review.
    (b) Antitrust laws means the antitrust laws, as the term is defined 
in the first section of the Clayton Act (15 U.S.C. 12), section 5 of the 
Federal Trade Commission Act (15 U.S.C. 45) (to the extent that section 
5 prohibits unfair methods of competition), and any State antitrust or 
unfair competition law.
    (c) Applicant means the person or persons who submit an application 
for a certificate.
    (d) Application means an application for a certificate to be issued 
under the Act.
    (e) Attorney General means the Attorney General of the United States 
or his designee.
    (f) Certificate means a certificate of review issued pursuant to the 
Act.
    (g) Control means either (1) holding 50 percent or more of the 
outstanding voting securities of an issuer; or (2) having the 
contractual power presently to designate a majority of the directors of 
a corporation, or in the case of an unincorporated entity, a majority of 
the individuals who exercise similar functions.
    (h) Controlling entity means an entity which directly or indirectly 
controls a member or applicant, and is not controlled by any other 
entity.
    (i) Export conduct means specified export trade activities and 
methods of operation carried out in specified export trade and export 
markets.
    (j) Export trade means trade or commerce in goods, wares, 
merchandise, or services that are exported, or are in the course of 
being exported, from the United States or any territory of the United 
States to any foreign nation.
    (k) Export trade activities means activities or agreements in the 
course of export trade.
    (l) Member means an entity (U.S. or foreign) or a person which is 
seeking protection under the certificate with the applicant. A member 
may be a partner in a partnership or a joint venture; a shareholder of a 
corporation; or a participant in an association, cooperative, or other 
form of profit or nonprofit organization or relationship, by contract or 
other arrangement.
    (m) Method of operation means any method by which an applicant or 
member conducts or proposes to conduct export trade.
    (n) Person means an individual who is a resident of the United 
States; a partnership that is created under and exists pursuant to the 
laws of any State or of the United States; a State or local government 
entity; a corporation, whether it is organized as a profit or nonprofit 
corporation, that is created under and exists pursuant to the laws of 
any State or of the United States; or any association or combination, by 
contract or other arrangement, between or among such persons.
    (o) Secretary means the Secretary of Commerce or his designee.
    (p) Services means intangible economic output, including, but not 
limited to--
    (1) business, repair, and amusement services,
    (2) management, legal, engineering, architectural, and other 
professional services, and
    (3) financial, insurance, transportation, informational and any 
other

[[Page 44]]

data-based services, and communication services.
    (q) United States means the fifty States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana 
Islands, and the Trust Territory of the Pacific Islands.



Sec. 325.3  Applying for a certificate of review.

    (a) Place of filing. The applicant shall submit an original and two 
copies of a completed application form (ITA 4093-P, OMB control number 
0625-0125) by personal delivery during normal business hours or by first 
class mail to the Office of Export Trading Company Affairs, Room 5618, 
International Trade Administration, Department of Commerce, Washington, 
DC 20230. Although not required, the applicant should consider using 
registered mail or some other delivery method that provides evidence of 
receipt.
    (b) Contents of application. Any person may submit an application 
for certification. The application shall contain, where applicable, the 
information listed below. Some information, in particular the 
identification of goods or services that the applicant exports or 
proposes to export, is requested in a certain form (Standard Industrial 
Classification [SIC] numbers) if reasonably available. Where information 
does not exist in this form, the applicant may satisfy the request for 
information by providing it in some other convenient form. If the 
applicant is unable to provide any of the information requested or if 
the applicant believes that any of the information requested would be 
both burdensome to obtain and unnecessary for a determination on the 
application, the applicant should state that the information is not 
being provided or is being provided in lesser detail, and explain why.
    (1) Name and principal address of the applicant and of its 
controlling entity, if any. Include the name, title, address, telephone 
number, and relationship to the applicant of each individual to whom the 
Secretary should address correspondence.
    (2) The name and principal address of each member, and of each 
member's controlling entity, if any.
    (3) A copy of any legal instrument under which the applicant is 
organized or will operate. Include copies, as applicable, of its 
corporate charter, bylaws, partnership, joint venture, membership or 
other agreements or contracts under which the applicant is organized.
    (4) A copy of the applicant's most recent annual report, if any, and 
that of its controlling entity, if any. To the extent the information is 
not included in the annual report, or other documents submitted in 
connection with the application, a description of the applicant's 
domestic (including import) and export operations, including the nature 
of its business, the types of products or services in which it deals, 
and the places where it does business. This description may be 
supplemented by a chart or table.
    (5) A copy of each member's most recent annual report, if any, and 
that of its controlling entity, if any. To the extent the information is 
not included in the annual report, or other documents submitted in 
connection with the application, a description of each member's domestic 
(including import) and export operations, including the nature of its 
business, the types of products or services in which it deals, and the 
places where it does business. This description may be supplemented by a 
chart or table.
    (6) The names, titles, and responsibilities of the applicant's 
directors, officers, partners and managing officials, and their business 
affiliations with other members or other businesses that produce or sell 
any of the types of goods or services described in paragraph (b)(7) of 
this section.
    (7)(i) A description of the goods or services which the applicant 
exports or proposes to export under the certificate of review. This 
description should reflect the industry's customary definitions of the 
products and services.
    (ii) If it is reasonably available, an identification of the goods 
or services according to the Standard Industrial Classification (SIC) 
number. Goods should normally be identified according to the 7-digit 
level. Services should

[[Page 45]]

normally be identified at the most detailed SIC level available.
    (iii) The foreign geographic areas to which the applicant and each 
member export or intend to export their goods and services.
    (8) For each class of the goods, wares, merchandise or services 
described in paragraph (b)(7) of this section:
    (i) The principal geographic area or areas in the United States in 
which the applicant and each member sell their goods and services.
    (ii) For their previous two fiscal years, the dollar value of the 
applicant's and each member's (A) total domestic sales, if any; and (B) 
total export sales, if any. Include the value of the sales of any 
controlling entities and all entities under their control.
    (9) For each class of the goods, wares, merchandise or services 
described in paragraph (b)(7) of this section, the best information or 
estimate accessible to the applicant of the total value of sales in the 
United States by all companies for the last two years. Identify the 
source of the information or the basis of the estimate.
    (10) A description of the specific export conduct which the 
applicant seeks to have certified. Only the specific export conduct 
described in the application will be eligible for certification. For 
each item, the applicant should state the antitrust concern, if any, 
raised by that export conduct. (Examples of export conduct which 
applicants may seek to have certified include the manner in which goods 
and services will be obtained or provided; the manner in which prices or 
quantities will be set; exclusive agreements with U.S. suppliers or 
export intermediaries; territorial, quantity, or price agreements with 
U.S. suppliers or export intermediaries; and restrictions on membership 
or membership withdrawal. These examples are given only to illustrate 
the type of export conduct which might be of concern. The specific 
activities which the applicant may wish to have certified will depend on 
its particular circumstances or business plans.).
    (11) If the export trade, export trade activities, or methods of 
operation for which certification is sought will involve any agreement 
or any exchange of information among suppliers of the same or similar 
products or services with respect to domestic prices, production, sales, 
or other competitively sensitive business information, specify the 
nature of the agreement or exchange of information. Such information 
exchanges are not necessarily impermissible and may be eligible for 
certification. Whether or not certification is sought for such 
exchanges, this information is necessary to evaluate whether the conduct 
for which certification is sought meets the standards of the Act.
    (12) A statement of whether the applicant intends or reasonably 
expects that any exported goods or services covered by the proposed 
certificate will re-enter the United States, either in their original or 
modified form. If so, identify the goods or services and the manner in 
which they may re-enter the U.S.
    (13) The names and addresses of the suppliers of the goods and 
services to be exported (and the goods and services to be supplied by 
each) unless the goods and services to be exported are to be supplied by 
the applicant and/or its members.
    (14) A proposed non-confidential summary of the export conduct for 
which certification is sought. This summary may be used as the basis for 
publication in the Federal Register.
    (15) Any other information that the applicant believes will be 
necessary or helpful to a determination of whether to issue a 
certificate under the standards of the Act.
    (16) (Optional) A draft proposed certificate.
    (c) The applicant must sign the application and certify that (1) 
each member has authorized the applicant to submit the application, and 
(2) to the best of its belief the information in the application is 
true, correct, and fully responsive.
    (d) Conformity with regulations. No application shall be deemed 
submitted unless it complies with these regulations. Applicants are 
encouraged to seek guidance and assistance from the Department of 
Commerce in preparing and documenting their applications.
    (e) Review and acceptance. The Secretary will stamp the application 
on the day that it is received in the Office

[[Page 46]]

of Export Trading Company Affairs. From that date, the Secretary will 
have five working days to decide whether the application is complete and 
can be deemed submitted under the Act. On the date on which the 
application is deemed submitted, the Secretary will stamp it with that 
date and notify the applicant that the application has been accepted for 
review. If the application is not accepted for review, the Secretary 
shall advise the applicant that it may file the application again after 
correcting the deficiencies that the Secretary has specified. If the 
Secretary does not take action on the application within the five-day 
period, the application shall be deemed submitted as of the sixth day.
    (f) Withdrawal of application. The applicant may withdraw an 
application by written request at any time before the Secretary has 
determined whether to issue a certificate. An applicant who withdraws an 
application may submit a new application at any time.
    (g) Supplemental information. After an application has been deemed 
submitted, if the Secretary or the Attorney General finds that 
additional information is necessary to make a determination on the 
application, the Secretary will ask the applicant in writing to supply 
the supplemental information. The running of the time period for a 
determination on the application will be suspended from the date on 
which the request is sent until the supplemental information is received 
and is considered complete. The Secretary shall promptly decide whether 
the supplemental information is complete, and shall notify the applicant 
of his decision. If the information is being sought by the Attorney 
General, the supplemental information may be deemed complete only if the 
Attorney General concurs. If the applicant does not agree to provide the 
additional information, or supplies information which the Secretary or 
the Attorney General considers incomplete, the Secretary and the 
Attorney General will decide whether the information in their possession 
is sufficient to make a determination on the application. If either the 
Secretary or the Attorney General considers the information in their 
possession insufficient, the Secretary may make an additional request or 
shall deny the application. If they consider the information in their 
possession sufficient to make a determination on the application, the 
Secretary shall notify the applicant that the time period for a 
determination has resumed running.

(Information collection requirements in paragraph (a) approved by the 
Office of Management and Budget under control number 0625-0125)



Sec. 325.4  Calculating time periods.

    (a) When these regulations require action to be taken within a fixed 
time period, and the last day of the time period falls on a non-working 
day, the time period shall be extended to the next working day.
    (b) The day after an application is deemed submitted shall be deemed 
the first of the days within which the Secretary must make a 
determination on the application.



Sec. 325.5  Issuing the certificate.

    (a) Time period. The Secretary shall determine whether to issue a 
certificate within ninety days after the application is deemed submitted 
(excluding any suspension pursuant to Sec. 325.3(f) of the time period 
for making a determination). If the Secretary or the Attorney General 
considers it necessary, and the applicant agrees, the Secretary may take 
up to an additional thirty days to determine whether to issue a 
certificate.
    (b) Determination. The Secretary shall issue a certificate to the 
applicant if he determines, and the Attorney General concurs, that the 
proposed export trade, export trade activities and methods of operation 
will--
    (1) Result in neither a substantial lessening of competition or 
restraint of trade within the United States nor a substantial restraint 
of the export trade of any competitor of the applicant;
    (2) Not unreasonably enhance, stabilize, or depress prices within 
the United States of the class of the goods, wares, merchandise or 
services exported by the applicant;
    (3) Not constitute unfair methods of competition against competitors 
who are engaged in the export of goods,

[[Page 47]]

wares, merchandise or services of the class exported by the applicant; 
and
    (4) Not include any act that may reasonably be expected to result in 
the sale for consumption or resale within the United States of the 
goods, wares, merchandise, or services exported by the applicant.
    (c) Concurrence of the Attorney General. (1) Not later than seven 
days after an application is deemed submitted, the Secretary shall 
deliver to the Attorney General a copy of the application, any 
information submitted in connection with the application, and any other 
relevant information in his possession. The Secretary and the Attorney 
General shall make available to each other copies of other relevant 
information that was obtained in connection with the application, unless 
otherwise prohibited by law.
    (2) Not later than thirty days before the day a determination on the 
application is due, the Secretary shall deliver a proposed certificate 
to the Attorney General for discussion and comment. If the Attorney 
General does not agree that the proposed certificate may be issued, he 
shall, not later than ten days before the day a determination on the 
application is due, so advise the Secretary and state the reasons for 
the disagreement. The Secretary with the concurrence of the Attorney 
General, may modify or revise the proposed certificate to resolve the 
objections and problems raised by the Attorney General, or deny the 
application.
    (3) If the Attorney General receives the proposed certification by 
the date specified in the preceding paragraph and does not respond 
within the time period specified in that paragraph, he shall be deemed 
to concur in the proposed certificate.
    (d) Content of certificate. The certificate shall specify the export 
conduct and all persons or entities which are protected from liability 
under the antitrust laws. The Secretary may certify the proposed export 
conduct contained in the application, in whole or in part, with such 
changes, modifications, terms, or conditions as are appropriate. If the 
Secretary intends to issue a certificate different from a draft 
certificate submitted by the applicant, the Secretary shall first 
consult with the applicant.
    (e) Certificate obtained by fraud. A certificate shall be void ab 
initio with respect to any export conduct for which a certificate was 
obtained by fraud.
    (f) Minimum thirty-day period. The Secretary may not issue a 
certificate until thirty days after the summary of the application is 
published in the Federal Register.



Sec. 325.6  Publishing notices in the Federal Register.

    (a) Within ten days after an application is deemed submitted, the 
Secretary shall deliver to the Federal Register a notice summarizing the 
application. The notice shall identify the applicant and each member and 
shall include a summary of the export conduct for which certification is 
sought. If the Secretary does not intend to publish the summary proposed 
by the applicant, he shall notify the applicant. Within twenty days 
after the date the notice is published in the Federal Register, 
interested parties may submit written comments to the Secretary on the 
application. The Secretary shall provide a copy of such comments to the 
Attorney General.
    (b) If a certificate is issued, the Secretary shall publish a 
summary of the certification in the Federal Register. If an application 
is denied, the Secretary shall publish a notice of denial. Certificates 
will be available for inspection and copying in the International Trade 
Administration Freedom of Information Records Inspection Facility.
    (c) If the Secretary initiates proceedings to revoke or modify a 
certificate, he shall publish a notice of his final determination in the 
Federal Register.
    (d) If the applicant requests reconsideration of a determination to 
deny an application, in whole or in part, the Secretary shall publish 
notice of his final determination in the Federal Register.



Sec. 325.7  Amending the certificate.

    An application for an amendment to a certificate shall be treated in 
the

[[Page 48]]

same manner as an original application. The application for an amendment 
shall set forth the proposed amendment(s) and the reasons for them. It 
shall contain any information specified in Sec. 325.3(b) that is 
relevant to the determination on the application for an amendment. The 
effective date of an amendment will be the date on which the application 
for the amendment was deemed submitted.



Sec. 325.8  Expediting the certification process.

    (a) Request for expedited action. (1) An applicant may be granted 
expedited action on its application in the discretion of the Secretary 
and the Attorney General. The Secretary and the Attorney General will 
consider such requests in light of an applicant's showing that it has a 
special need for a prompt decision. A request for expedited action 
should include an explanation of why expedited action is needed, 
including a statement of all relevant facts and circumstances, such as 
bidding deadlines or other circumstances beyond the control of the 
applicant, that require the applicant to act in less than ninety days 
and that have a significant impact on the applicant's export trade.
    (2) The Secretary shall advise the applicant within ten days after 
the application is deemed submitted whether it will receive expedited 
action. The Secretary may grant the request in whole or in part and 
process the remainder of the application through the normal procedures. 
Expedited action may be granted only if the Attorney General concurs.
    (b) Time period. The Secretary shall determine whether to issue a 
certificate to the applicant within forty-five days after the Secretary 
granted the request for expedited action, or within a longer period if 
agreed to by the applicant (excluding any suspension pursuant to Sec. 
325.3(f) of the time period for making a determination). The Secretary 
may not issue a certificate until thirty days after the summary of the 
application is published in the Federal Register.
    (c) Concurrence of the Attorney General. (1) Not later than ten 
working days before the date on which a determination on the application 
is due, the Secretary shall deliver a proposed certificate to the 
Attorney General for discussion and comment. If the Attorney General 
does not agree that the proposed certificate may be issued, he shall, 
not later than five working days before the date on which a 
determination on the application is due, so advise the Secretary and 
state the reasons for the disagreement. The Secretary, with the 
concurrence of the Attorney General, may revise the proposed certificate 
to resolve the objections and problems raised by the Attorney General, 
or deny the application.
    (2) If the Attorney General receives the proposed certificate by the 
date specified in the preceding paragraph and does not respond within 
the time period specified in that paragraph, he shall be deemed to 
concur in the proposed certificate.

(Information collection requirements in paragraph (a)(1) approved by the 
Office of Management and Budget under control number 0625-0125)



Sec. 325.9  Reconsidering an application that has been denied.

    (a) If the Secretary determines to deny an application in whole or 
in part, he shall notify the applicant in writing of his decision and 
the reasons for his determination.
    (b) Within thirty days after receiving a notice of denial, the 
applicant may request the Secretary to reconsider his determination.
    (1) The request for reconsideration shall include a written 
statement setting forth the reasons why the applicant believes the 
decision should be reconsidered, and any additional information that the 
applicant considers relevant.
    (2) Upon the request of the applicant, the Secretary and the 
Attorney General will meet informally with the applicant and/or his 
representative to discuss the applicant's reasons why the determination 
on the application should be changed.
    (c) The Secretary shall consult with the Attorney General with 
regard to reconsidering an application. The Secretary may modify his 
original determination only if the Attorney General concurs.

[[Page 49]]

    (d) The Secretary shall notify the applicant in writing of his final 
determination after reconsideration and of his reasons for the 
determination within thirty days after the request for reconsideration 
has been received.



Sec. 325.10  Modifying or revoking a certificate.

    (a) Action subject to modification or revocation. The Secretary 
shall revoke a certificate, in whole or in part, or modify it, as the 
Secretary or the Attorney General considers necessary, if:
    (1) The export conduct of a person or entity protected by the 
certificate no longer complies with the requirements set forth in Sec. 
325.4(b);
    (2) A person or entity protected by the certificate fails to comply 
with a request for information under paragraph (b) of this section; or
    (3) The certificate holder fails to file a complete annual report.
    (b) Request for information. If the Secretary or the Attorney 
General has reason to believe that the export trade, export trade 
activities, or methods of operation of a person or entity protected by a 
certificate no longer comply with the requirements set forth in Sec. 
325.4(b), the Secretary shall request any information that he or the 
Attorney General considers to be necessary to resolve the matter.
    (c) Proceedings for the revocation or modification of a 
certificate--(1) Notification letter. If, after reviewing the relevant 
information in their possession, it appears to the Secretary or the 
Attorney General that a certificate should be revoked or modified for 
any of the reasons set forth in paragraph (a) above, the Secretary shall 
so notify the certificate holder in writing. The notification shall be 
sent by registered or certified mail to the address specified in the 
certificate. The notification shall include a detailed statement of the 
facts, conduct, or circumstances which may warrant the revocation or 
modification of the certificate.
    (2) Answer. The certificate holder shall respond to the notification 
letter within thirty days after receiving it, unless the Secretary, in 
his discretion, grants a thirty day extension for good cause shown. The 
certificate holder shall respond specifically to the statement included 
with the notification letter and state in detail why the facts, conduct 
or circumstances described in the notification letter are not true, or 
if they are true, why they do not warrant the revoking or modifying of 
the certificate. If the certificate holder does not respond within the 
specified period, it will be considered an admission of the statements 
contained in the notification letter.
    (3) Resolution of factual disputes. Where material facts are in 
dispute, the Secretary and the Attorney General shall, upon request, 
meet informally with the certificate holder. The Secretary or the 
Attorney General may require the certificate holder to provide any 
documents or information that are necessary to support its contentions. 
After reviewing the statements of the certificate holder and the 
documents or information that the certificate holder has submitted, and 
upon considering other relevant documents or information in his 
possession, the Secretary shall make proposed findings of the factual 
matters in dispute. The Attorney General is not bound by the proposed 
findings.
    (4) Final determination. The Secretary and the Attorney General 
shall review the notification letter and the certificate holder's answer 
to it, the proposed factual findings made under paragraph (c)(3) of this 
section, and any other relevant documents or information in their 
possession. If, after review, the Secretary or the Attorney General 
determines that the export conduct of a person or entity protected by 
the certificate no longer complies with the standards set forth in Sec. 
325.4(b), the Secretary shall revoke or modify the certificate as 
appropriate. If the Secretary or the Attorney General determines that 
the certificate holder has failed to comply with the request for 
information under paragraph (b) of this section, or has failed to file a 
complete annual report, and that the failure to comply or file should 
result in revocation of modification, the Secretary shall revoke or 
modify the certificate as appropriate. The determination will be final 
and will be issued to the certificate holder in writing. The notice to 
the certificate holder shall include a

[[Page 50]]

statement of the circumstances underlying and the reasons in support of 
the determination. If the Secretary determines to revoke or modify the 
certificate, the decision shall specify the effective date of the 
revocation or modification; this date must be at least thirty days but 
not more than ninety days after the Secretary notifies the certificate 
holder of his determination. The Secretary shall publish notice in the 
Federal Register of a revocation or modification or a decision not to 
revoke or modify.
    (d) Investigative information. In proceedings under this section, 
the Attorney General shall make available to the Secretary any 
information that has been obtained in response to Civil Investigative 
Demands issued under section 304(b)(3) of the Act. Unless prohibited by 
law, the Attorney General and the Secretary shall also make available to 
each other any other information which each is relying upon under these 
proceedings.



Sec. 325.11  Judicial review.

    (a) Review of certain determinations. (1) Any person aggrieved by a 
final determination of the Secretary under Sec. 325.5, Sec. 325.7, 
Sec. 325.9, or Sec. 325.10 of these regulations may, within thirty 
days of the determination, bring an action in an appropriate district 
court of the United States to set aside the determination on the ground 
that it is erroneous. If a certificate is denied, the applicant may 
bring suit within thirty days after the notice of denial is published in 
the Federal Register, or, if the applicant seeks reconsideration, within 
thirty days after the Secretary publishes in the Federal Register notice 
of his determination after reconsideration.
    (b) For purposes of judicial review, determinations of the Secretary 
are final when notice is published in the Federal Register.
    (c) Record for judicial review. For purposes of judicial review, the 
record shall include all information presented to or obtained by the 
Secretary which had a bearing on the determination, the determination 
itself, the supporting statement setting forth the reasons for the 
determination, and the Attorney General's response to the Secretary 
indicating concurrence or nonconcurrence.
    (d) Limitation of judicial review. Except as provided in paragraph 
(a) of this section, no agency action taken under the Act shall be 
subject to judicial review.



Sec. 325.12  Returning the applicant's documents.

    (a) Upon the denial or withdrawal of an application for a 
certificate in its entirety, the applicant may request the return of all 
copies of the documents submitted by the applicant in connection with 
the application to the Department of Commerce or the Department of 
Justice. The applicant shall submit this request in writing to both the 
Secretary and the Attorney General.
    (b) The Secretary and the Attorney General shall return the 
documents to the applicant within thirty days after they receive the 
applicant's request.



Sec. 325.13  Nonadmissibility in evidence.

    If the Secretary denies, in whole or in part, an application for a 
certificate or for an amendment to a certificate, or revokes or amends a 
certificate, neither the negative determination nor the statement of 
reasons therefor shall be admissible in evidence in any administrative 
or judicial proceeding in support of any claim under the antitrust laws.



Sec. 325.14  Submitting reports.

    (a) Not later than each anniversary of a certificate's effective 
date, the Secretary shall notify the certificate holder of the 
information to be included in the annual report. This report shall 
contain any changes relevant to the matters specified in the 
certificate, an update of the information contained in the application 
brought current to the anniversary date, and any other information the 
Secretary considers appropriate, after consultation with the Attorney 
General.
    (b) Not later than forty-five days after each anniversary of a 
certificate's effective date, a certificate holder shall submit its 
annual report to the Secretary. The Secretary shall deliver a

[[Page 51]]

copy of the annual report to the Attorney General.
    (c) Failure to submit a complete annual report may be the basis for 
modification or revocation of a certificate.



Sec. 325.15  Relinquishing a certificate.

    A certificate holder may relinquish a certificate at any time 
through written notice to the Secretary. The certificate will cease to 
be effective on the day the Secretary receives the notice.



Sec. 325.16  Protecting confidentiality of information.

    (a) Any information that is submitted by any person under the Act is 
exempt from disclosure under the Freedom of Information Act (5 U.S.C. 
552).
    (b)(1) Except as authorized under paragraph (b)(3) of this section, 
no officer or employee of the United States shall disclose commercial or 
financial information submitted under this Act if the information is 
privileged or confidential, and if disclosing the information would 
cause harm to the person who submitted it.
    (2) A person submitting information shall designate the documents or 
information which it considers privileged or confidential and the 
disclosure of which would cause harm to the person submitting it. The 
Secretary shall endeavor to notify these persons of any requests or 
demands before disclosing any of this information.
    (3) An officer or employee of the United States may disclose 
information covered under paragraph (b)(1) of this section only under 
the following circumstances--
    (i) Upon a request made by either House of Congress or a Committee 
of the Congress,
    (ii) In a judicial or administrative proceeding subject to issuance 
of an appropriate protective order,
    (iii) With the written consent of the person who submitted the 
information,
    (iv) When the Secretary considers disclosure of the information to 
be necessary for determining whether or not to issue, amend, or revoke a 
certificate, if--
    (A) The Secretary determines that a non-confidential summary of the 
information is inadequate; and
    (B) The person who submitted the information is informed of the 
intent to disclose the information, and has an opportunity to advise the 
Secretary of the potential harm which disclosure may cause,
    (v) In accordance with any requirement imposed by a statute of the 
United States.
    (c) In any judicial or administrative proceeding in which disclosure 
is sought from the Secretary or the Attorney General of any confidential 
or privileged documents or information submitted under this Act, the 
Secretary or Attorney General shall attempt to notify the party who 
submitted the information of the request or demand for disclosure. In 
appropriate circumstances the Secretary or Attorney General may seek or 
support an appropriate protective order on behalf of the party who 
submitted the documents or information.



Sec. 325.17  Waiver.

    The Secretary may waive any of the provisions of this part in 
writing for good cause shown, if the Attorney General concurs and if 
permitted by law.



PART 335_IMPORTS OF WORSTED WOOL FABRIC--Table of Contents




Sec.
335.1 Purpose.
335.2 Definitions.
335.3 Applications to receive allocation.
335.4 Allocation.
335.5 Licenses.
335.6 Surrender, reallocation and license utilization requirement.
335.7 Modifications of the limitation.

    Authority: Title V Pub. L. 106-200, 114 Stat. 299; Presidential 
Proclamation 7383 (December 1, 2000).

    Source: 66 FR 6461, Jan. 22, 2001, unless otherwise noted.



Sec. 335.1  Purpose.

    This part sets forth regulations regarding the issuance and effect 
of licenses for the allocation of Worsted Wool Fabric under the Tariff 
Rate Quotas established by Section 501 of the Act.

[[Page 52]]



Sec. 335.2  Definitions.

    For purposes of these regulations and the forms used to implement 
them:
    The Act means the Trade and Development Act of 2000 (Public Law No. 
106-200, 114 Stat 251).
    The Department means the United States Department of Commerce.
    HTS means the Harmonized Tariff Schedule of the United States.
    Imports subject to Tariff Rate Quotas are defined by date of 
presentation as defined in 19 CFR 132.1(d) and 19 CFR 132.11(a).
    Licensee means an applicant for an allocation of the Tariff Rate 
Quotas that receives an allocation and a license.
    Production means cutting and sewing garments in the United States.
    Tariff Rate Quota or Quotas means the temporary duty reduction 
provided under Section 501 of the Act for limited quantities of fabrics 
of worsted wool with average diameters greater than 18.5 micron, 
certified by the importer as suitable for use in making suits, suit-type 
jackets, or trousers (HTS heading 9902.51.11), and for limited 
quantities of fabrics of worsted wool with average diameters of 18.5 
microns or less, certified by the importer as suitable for use in making 
suits, suit-type jackets, or trousers (HTS heading 9902.51.12).
    Tariff Rate Quota Year means a calendar year for which the Tariff 
Rate Quotas are in effect.
    Worsted Wool Fabric means fabric containing at least 85 percent by 
weight worsted wool.
    Worsted Wool Suits means men's and boys' worsted wool suits, 
containing at least 85 percent by weight worsted wool fabric.
    Worsted Wool Suit-Type Jackets mean men's and boys' worsted wool 
suit-type jackets, containing at least 85 percent by weight worsted wool 
fabric.
    Worsted Wool Trousers means men's and boys' worsted wool trousers, 
containing at least 85 percent by weight worsted wool fabric.



Sec. 335.3  Applications to receive allocation.

    (a) In each year prior to a Tariff Rate Quota Year, the Department 
will cause to be published a Federal Register notice soliciting 
applications to receive an allocation of the Tariff Rate Quotas.
    (b) An application for a Tariff Rate Quota allocation must be 
received, or postmarked by the U.S. Postal Service, within 30 calendar 
days after the date of publication of the Federal Register notice 
soliciting applications.
    (c) During the calendar year of the date of the application, an 
applicant must have cut and sewed in the United States all three of the 
following apparel products: Worsted Wool Suits, Worsted Wool Suit-Type 
Jackets, and Worsted Wool Trousers. The applicant may either have cut 
and sewn these products on its own behalf or had another person cut and 
sew the products on the applicant's behalf, provided the applicant owned 
the fabric at the time it was cut and sewn. The application must contain 
a statement to this effect.
    (d) An applicant must provide the following information in the 
format set forth in the application form provided by the Department:
    (1) Identification. Applicant's name, address, telephone number, fax 
number, and federal tax identification number; name of person submitting 
the application, and title, or capacity in which the person is acting 
for the applicant.
    (2) Production. Name and address of each plant or location where 
Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool 
Trousers were cut and sewn by the applicant and the name and address of 
all plants or locations that cut and sewed such products on behalf of 
the applicant. Production data, including the following: the quantity 
and value of the Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and 
Worsted Wool Trousers cut and sewn in the United States by applicant, or 
on behalf of applicant, from fabric owned by applicant. This data must 
indicate actual production (not estimates) of Worsted Wool Suits, 
Worsted Wool Suit-Type Jackets and Worsted Wool Trousers containing at 
least 85 percent worsted wool fabric by weight with an average diameter 
of 18.5 microns or less. This data must also indicate actual production 
(not estimates) of Worsted Wool Suits, Worsted Wool Suit-Type Jackets 
and Worsted

[[Page 53]]

Wool Trousers containing at least 85 percent worsted wool fabric by 
weight with average diameter greater than 18.5 microns. Production data 
must be provided for the first six months of the year of the 
application. This data will be annualized for the purpose of making 
Tariff Rate Quota allocations.
    (3) 2000 Production Data. For applications for the 2001 Tariff Rate 
Quota Year, if production data is not available by micron count, the 
following method of estimating micron count will be accepted: To 
estimate production of Worsted Wool Suits, Worsted Wool Suit-Type 
Jackets and Worsted Wool Trousers made from worsted wool fabric with 
average diameter 18.5 microns or less, use a value of $8.50 per square 
meter (f.o.b. plant) or more for such garments made from domestic fabric 
and $12.50 per square meter (c.i.f. duty paid landed value) or more for 
such garments made from imported fabric. To estimate production of such 
garments made from worsted wool fabric with average diameter greater 
than 18.5 microns, use a value of less than $8.50 per square meter 
(f.o.b. plant) for such garments made from domestic fabric and less than 
$12.50 (c.i.f. duty paid landed value) per square meter for such 
garments made from imported fabric.
    (4) Worsted Wool Fabric. Data indicating the quantity and value of 
the Worsted Wool Fabric used in reported production.
    (5) Certification. A statement by the applicant (if a natural 
person), or on behalf of applicant, by an employee, officer or agent, 
with personal knowledge of the matters set out in the application, 
certifying that the information contained therein is complete and 
accurate, signed and sworn before a Notary Public, and acknowledging 
that false representations to a federal agency may result in criminal 
penalties under federal law.
    (e) Confidentiality. Any business confidential information provided 
pursuant to this section that is marked business confidential will be 
kept confidential and protected from disclosure to the full extent 
permitted by law.
    (f) Record Retention: The applicant shall retain records 
substantiating the information provided in Sec. 335.3(d)(2), (3), and 
(4) for a period of 3 years and the records must be made available upon 
request by an appropriate U.S. government official.



Sec. 335.4  Allocation.

    (a) Each Tariff Rate Quota (HTS 9902.51.11 and HTS 9902.51.12) will 
be allocated separately. Allocation will be based on an applicant's 
Worsted Wool Suit production, on a weighted average basis, and the 
proportion of imported Worsted Wool Fabric consumed in the production of 
Worsted Wool Suits.
    (b) For the purpose of calculating allocations, Worsted Wool Suit 
production will be increased by the percentage of imported fabric 
consumed in the production of Worsted Wool Suits to total fabric 
consumed in this production. For example, if an applicant uses 30 
percent imported fabric in the production of Worsted Wool Suits, that 
applicant's production level will be increased by 30 percent.
    (c) The Department will cause to be published in the Federal 
Register its determination to allocate the Tariff Rate Quotas and will 
notify applicants of their respective allocation as soon as possible. 
Promptly thereafter, the Department will issue licenses.



Sec. 335.5  Licenses.

    (a) Each Licensee will receive a license, which will include a 
unique control number. The license is subject to the surrender and 
reallocation provisions in Sec. 335.6.
    (b) A license may be exercised only for fabric entered for 
consumption, or withdrawn from warehouse for consumption, during the 
Tariff Rate Quota Year specified in the license. A license will be 
debited on the basis of date of entry for consumption or withdrawal from 
warehouse for consumption.
    (c) A Licensee may import fabric certified by the importer as 
suitable for use in making suits, suit-type jackets, or trousers under 
the appropriate Tariff Rate Quota as specified in the license (i.e., 
under the Tariff Rate Quota for fabric of worsted wool with average 
fiber diameters greater than 18.5 micron or the Tariff Rate Quota for 
fabric of worsted wool with average fiber diameters of 18.5 micron or 
less) up to the quantity specified in the license

[[Page 54]]

subject to the Tariff Rate Quota duty rate. Only a Licensee or an 
importer authorized by a Licensee will be permitted to import fabric 
under the Tariff Rate Quotas and to receive the Tariff Rate Quota duty 
rate.
    (d) The term of a license shall be the Tariff Rate Quota Year for 
which it is issued. Fabric may be entered or withdrawn from warehouse 
for consumption under a license only during the term of that license. 
The license cannot be used for fabric entered or withdrawn from 
warehouse for consumption after December 31 of the year of the term of 
the license.
    (e) The importer of record of fabric entered or withdrawn from 
warehouse for consumption under a license must be the Licensee or an 
importer authorized by the Licensee to act on its behalf. If the 
importer of record is the Licensee, the importer must possess the 
license at the time of filing the entry summary or warehouse withdrawal 
for consumption (Customs Form 7501).
    (f) A Licensee may only authorize an importer to import fabric under 
the license on its behalf by making such an authorization in writing or 
by electronic notice to the importer and providing a copy of such 
authorization to the Department. A Licensee may only withdraw 
authorization from an importer by notifying the importer, in writing or 
by electronic notice, and providing a copy to the Department.
    (g) The written authorization must include the unique number of the 
license, must specifically cover the type of fabric imported, and must 
be in the possession of the importer at the time of filing the entry 
summary or warehouse withdrawal for consumption (Customs Form 7501), or 
its electronic equivalent, in order for the importer to obtain the 
applicable Tariff Rate Quota duty rate.
    (h) It is the responsibility of the Licensee to safeguard the use of 
the license issued. The Department and the U.S. Customs Service will not 
be liable for any unauthorized or improper use of the license.



Sec. 335.6  Surrender, reallocation and license utilization requirement.

    (a) Not later than September 30 of each Tariff Rate Quota Year, a 
Licensee that will not import the full quantity granted in a license 
during the Tariff Rate Quota Year shall surrender the allocation that 
will not be used to the Department for purposes of reallocation through 
a written or electronic notice to the Department, including the license 
control number and the amount being surrendered. The surrender shall be 
final, and shall apply only to that Tariff Rate Quota Year.
    (b) For purposes of this section, ``unused allocation'' means the 
amount by which the quantity set forth in a license, including any 
additional amount received pursuant to paragraph (d) of this section, 
exceeds the quantity entered under the license, excluding any amount 
surrendered pursuant to paragraph (a) of this section.
    (c) The Department will notify Licensees of any amount surrendered 
and the application period for requests for reallocation. A Licensee 
that has imported, or intends to import, a quantity of Worsted Wool 
Fabric exceeding the quantity set forth in its license may apply to 
receive additional allocation from the amount to be reallocated. The 
application shall state the maximum amount of additional allocation the 
applicant will be able to use.
    (d) The amount surrendered will be reallocated to Licensees that 
have applied for reallocation. The entire amount surrendered will be 
reallocated pro-rata among applicants based on the applicant's share of 
the annual allocation, but will not exceed the amount set forth in the 
reallocation application as the maximum amount able to be used.
    (e) A Licensee whose unused allocation in a Tariff Rate Quota Year 
exceeds five percent of the quantity set forth in its license shall be 
subject to having its allocation reduced in the subsequent Tariff Rate 
Quota Year. The subsequent Tariff Rate Quota Year allocation will be 
reduced from the quantity such Licensee would otherwise have received by 
a quantity equal to 25 percent of its unused allocation from the prior 
year. A Licensee whose unused allocation in two consecutive Tariff Rate 
Quota Years exceeds five percent of the quantity set forth in its 
license shall have its allocation reduced in the subsequent Tariff Rate

[[Page 55]]

Quota Year by a quantity equal to 50 percent of its unused allocation 
from the prior year.
    (f) No penalty will be imposed under paragraph (e) of this section 
if the Licensee demonstrates to the satisfaction of the Department that 
the unused allocation resulted from breach by a carrier of its contract 
of carriage, breach by a supplier of its contract to supply the fabric, 
act of God, or force majeure.



Sec. 335.7  Modifications of the limitation.

    In the event the limitation on the quantity of imports of Worsted 
Wool Fabric under the Tariff Rate Quotas is increased, the increase will 
be allocated on the same basis as the rest of the Tariff Rate Quotas. 
Licenses will be issued or adjusted accordingly.



PART 340_MODIFICATION OF THE TARIFF RATE QUOTA LIMITATION ON WORSTED 
WOOL FABRIC IMPORTS--Table of Contents




Sec.
340.1 Purpose.
340.2 Definitions.
340.3 Requests for modification.
340.4 Comments regarding requested modification.
340.5 Requests for modification and comments.
340.6 Requests for additional information.
340.7 Determination.

    Authority: Pub. L. 106-200, 114 Stat. 299; Presidential Proclamation 
7383 (December 1, 2000).

    Source: 66 FR 6463, Jan. 22, 2001, unless otherwise noted.



Sec. 340.1  Purpose.

    This part sets forth regulations regarding the procedures for 
considering requests to modify the limitations on the quantity of 
imports of fabrics of worsted wool under the Tariff Rate Quotas 
established by Section 501 of the Act. Section 504 of the Act requires 
annual consideration of such requests made by U.S. manufacturers of 
certain apparel products made of Worsted Wool Fabrics and grants the 
authority to modify the limitations.



Sec. 340.2  Definitions.

    For purposes of these regulations and the forms used to implement 
them:
    The Act means the Trade and Development Act of 2000 (Public Law No. 
106-200, 114 Stat 251).
    The Department means the United States Department of Commerce.
    HTS means the Harmonized Tariff Schedule of the United States.
    Imports subject to Tariff Rate Quotas are defined by date of 
presentation as defined in 19 CFR 132.1(d) and 19 CFR 132.11(a).
    Production means cutting and sewing garments in the United States.
    Tariff Rate Quota or Quotas means the temporary duty reduction 
provided under Section 501 of the Act for limited quantities of fabrics 
of worsted wool with average diameters greater than 18.5 micron, 
certified by the importer as suitable for use in making suits, suit-type 
jackets, or trousers (HTS heading 9902.51.11), and for limited 
quantities of fabrics of worsted wool with average diameters of 18.5 
microns or less, certified by the importer as suitable for use in making 
suits, suit-type jackets, or trousers (HTS heading 9902.51.12).
    Tariff Rate Quota Year means a calendar year for which the Tariff 
Rate Quotas are in effect.
    Worsted Wool Fabric means fabric containing at least 85 percent by 
weight worsted wool.
    Worsted Wool Suits means men's and boys' worsted wool suits, 
containing at least 85 percent by weight worsted wool fabric.
    Worsted Wool Suit-Type Jackets mean men's and boys' worsted wool 
suit-type jackets, containing at least 85 percent by weight worsted wool 
fabric.
    Worsted Wool Trousers means men's and boys' worsted wool trousers, 
containing at least 85 percent by weight worsted wool fabric.



Sec. 340.3  Requests for modification.

    (a) On an annual basis, the Department will cause to be published a 
Federal Register notice soliciting requests from U.S. manufacturers of 
Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool 
Trousers to modify the limitations on the quantity of imports of fabrics 
of worsted wool under the Tariff Rate Quotas. Requests must be received, 
or postmarked, on a date no later than 15

[[Page 56]]

calendar days after the date of the Federal Register notice.
    (b) A request shall include:
    (1) The name, address, telephone number, fax number, and Internal 
Revenue Service number of the requester;
    (2) The relevant worsted wool apparel product(s) manufactured by the 
person(s), that is, Worsted Wool Suits, Worsted Wool Suit-Type Jackets, 
or Worsted Wool Trousers;
    (3) The modification requested, including the amount of the 
modification and the limitation that is the subject of the request (HTS 
heading 9902.51.11 and/or 9902.51.12); and
    (4) A statement of the basis for the request, including all relevant 
facts and circumstances.
    (c) A request should include the following information for each 
limitation that is the subject of the request, to the extent available:
    (1) A list of suppliers from which the requester purchased 
domestically produced Worsted Wool Fabric during the 12 months preceding 
the request, the dates of such purchases, the quantity purchased, the 
quantity of imported Worsted Wool Fabric purchased, the countries of 
origin of the imported Worsted Wool Fabric purchased, the average price 
paid per square meter of the domestically produced Worsted Wool Fabric 
purchased, and the average price paid per square meter of the imported 
Worsted Wool Fabric purchased;
    (2) A list of domestic Worsted Wool Fabric producers that declined, 
on request, to sell Worsted Wool Fabric to the requester during the 12 
months preceding the request, indicating the product requested, the date 
of the order, the price quoted, and the reason for the refusal;
    (3) The requester's domestic production and sales for the most 
recent six month period for which such data is available and the 
comparable six month period in the previous year, for each of the 
following products: Worsted Wool Suits, Worsted Wool Suit-Type Jackets, 
or Worsted Wool Trousers;
    (4) Evidence that the requester lost production or sales due to an 
inadequate supply of domestically-produced Worsted Wool Fabric on a cost 
competitive basis; and
    (5) Other evidence of the inability of domestic producers of Worsted 
Wool Fabric to supply domestically produced Worsted Wool Fabric to the 
requester.



Sec. 340.4  Comments regarding requested modification.

    (a) If the Department receives a request or requests from a U.S. 
manufacturer under Sec. 340.3, the Department will cause to be 
published in the Federal Register a notice summarizing the request or 
requests and soliciting comments from any interested person, including 
U.S. manufacturers of Worsted Wool Fabric, wool yarn, wool top and wool 
fiber, regarding the requested modification. Comments must be received, 
or postmarked, on a date not later than 20 calendar days after the date 
of the Federal Register notice.
    (b) If the person submitting comments is a domestic producer of 
Worsted Wool Fabric, comments should include, to the extent available, 
the following information for each limitation with respect to which 
comments are being made:
    (1) A list of domestic manufacturers of Worsted Wool Suits, Suit-
Type Jackets, or Trousers for whom orders were filled during the twelve 
months prior to the submission of the comments, the date of such orders, 
the total quantity ordered and supplied in square meters of domestically 
produced Worsted Wool Fabric and of imported Worsted Wool Fabric, and 
the average price received per square meter of domestically produced 
Worsted Wool Fabric and of imported Worsted Wool Fabric for such orders.
    (2) A list of all requests to purchase Worsted Wool Fabric during 
the twelve months prior to the submission of the comments that were 
rejected by the person submitting the comments, indicating the dates of 
the requests, the quantity requested, the price quoted, and the reasons 
why the request was rejected;
    (3) Data indicating increase and/or decrease in production and sales 
for the most recent six month period for which data is available and the 
comparable six month period in the previous year of domestically-
produced Worsted Wool

[[Page 57]]

Fabrics used in the production of Worsted Wool Suits, Suit-Type Jackets 
and Trousers.
    (4) Evidence of lost sales due to the temporary duty reductions on 
certain Worsted Wool Fabric under the Tariff Rate Quotas; and
    (5) Other evidence of the ability of domestic producers of Worsted 
Wool Fabric to meet the needs of the manufacturers of Worsted Wool 
Suits, Suit-Type Jackets and Trousers in terms of quantity, variety, and 
other relevant factors.



Sec. 340.5  Requests for modification and comments.

    (a) Requests for modification and comments must be accompanied by a 
statement by the person submitting the request or comments (if a natural 
person), or an employee, officer or agent of the legal entity submitting 
the request or comments, with personal knowledge of the matters set 
forth therein, certifying that the information contained therein is 
complete and accurate, signed and sworn before a Notary Public, and 
acknowledging that false representations to a federal agency may result 
in criminal penalties under federal law.
    (b) Any business confidential information provided pursuant to this 
section that is marked business confidential will be kept confidential 
and protected from disclosure to the full extent permitted by law. To 
the extent business confidential information is provided, a non-
confidential submission shall also be provided, in which business 
confidential information is summarized or, if necessary, deleted.



Sec. 340.6  Requests for additional information.

    The Department may request additional information from any 
manufacturer of Worsted Wool Suits, Suit-Type Jackets and Trousers, or 
manufacturer of Worsted Wool Fabric, wool yarn and wool top and fiber 
concerning information relevant to modifying the limitations.



Sec. 340.7  Determination.

    (a) Based on information obtained, including information on market 
conditions obtained pursuant to the monitoring required under Section 
504(a) of the Act, the Department shall consider the following United 
States market conditions as required by Section 504(b)(2) of the Act:
    (1) Increases or decreases in sales of the domestically-produced 
Worsted Wool Fabrics used in the manufacture of Worsted Wool Suits, 
Suit-Type Jackets and Trousers;
    (2) Increases or decreases in domestic production of such Worsted 
Wool Fabrics;
    (3) Increases or decreases in domestic production and consumption of 
Worsted Wool Suits, Suit-Type Jackets and Trousers;
    (4) The ability of domestic producers of Worsted Wool Fabrics to 
meet the needs of domestic manufacturers of Worsted Wool Suits, Suit-
Type Jackets and Trousers in terms of quantity and the ability to meet 
market demands for the apparel items;
    (5) Evidence that domestic manufacturers of Worsted Wool Fabrics 
used in the manufacture of Worsted Wool Suits, Suit-Type Jackets and 
Trousers have lost sales due to the temporary duty reductions on certain 
fabrics of worsted wool under the Tariff Rate Quota;
    (6) Evidence that domestic manufacturers of Worsted Wool Suits, 
Suit-Type Jackets and Trousers have lost sales due to the inability to 
purchase adequate supplies of worsted wool fabrics on a cost competitive 
basis; and
    (7) Price per square meter of imports and domestic sales of Worsted 
Wool Fabrics.
    (b) Not later than 30 calendar days after the end of the comment 
period provided for in Sec. 340.4(a), and on the basis of its 
consideration of the market conditions set forth in paragraph (a) of 
this section and other relevant factors, and using the facts available, 
the Department will determine whether the limitations on the quantity of 
imports under the Tariff Rate Quotas should be modified and recommend to 
the President that appropriate modifications be made. Consistent with 
section 504(b)(3)(B) of the Act, such modification shall not exceed 
1,000,000 square meter equivalents for each of the Tariff Rate Quotas.

[[Page 59]]



      CHAPTER IV--FOREIGN-TRADE ZONES BOARD, DEPARTMENT OF COMMERCE




  --------------------------------------------------------------------
Part                                                                Page
400             Regulations of the Foreign-Trade Zones Board          61

[[Page 61]]



PART 400_REGULATIONS OF THE FOREIGN-TRADE ZONES BOARD--Table of Contents




                     Subpart A_Scope and Definitions

Sec.
400.1 Scope.
400.2 Definitions.

                   Subpart B_Foreign-Trade Zones Board

400.11 Authority of the Board.
400.12 Responsibilities and authority of the Executive Secretary.
400.13 Board headquarters.

        Subpart C_Establishment and Modification of Zone Projects

400.21 Number and location of zones and subzones.
400.22 Eligible applicants.
400.23 Criteria for grants of authority for zones and subzones.
400.24 Application for zone.
400.25 Application for subzone.
400.26 Application for expansion or other modification to zone project.
400.27 Procedure for processing application.
400.28 Conditions, prohibitions and restrictions applicable to grants of 
          authority.
400.29 Application fees.

         Subpart D_Manufacturing and Processing Activity_Reviews

400.31 Manufacturing and processing activity; criteria.
400.32 Procedure for review of request for approval of manufacturing or 
          processing.
400.33 Restrictions on manufacturing and processing activity.

        Subpart E_Zone Operations and Administrative Requirements

400.41 Zone operations; general.
400.42 Requirements for commencement of operations in a zone project.
400.43 Restriction and prohibition of certain zone operations.
400.44 Zone-restricted merchandise.
400.45 Retail trade.
400.46 Accounts, records and reports.
400.47 Appeals to the Board from decisions of the Assistant Secretary 
          for Import Administration and the Executive Secretary.

           Subpart F_Notice, Hearings, Record and Information

400.51 Notice and hearings.
400.52 Official record; public access.
400.53 Information.

    Authority: Foreign-Trade Zones Act of June 18, 1934, as amended 
(Pub. L. 397, 73rd Congress, 48 Stat. 998-1003 (19 U.S.C. 81a-81u)).

    Source: 56 FR 50798, Oct. 8, 1991, unless otherwise noted.



                     Subpart A_Scope and Definitions



Sec. 400.1  Scope.

    (a) This part sets forth the regulations, including the rules of 
practice and procedure, of the Foreign-Trade Zones Board with regard to 
foreign-trade zones in the United States pursuant to the Foreign-Trade 
Zones Act of 1934, as amended (19 U.S.C. 81a-81u). It includes the 
substantive and procedural rules for the authorization of zones and the 
regulation of zone activity. The purpose of zones as stated in the Act 
is to ``expedite and encourage foreign commerce, and other purposes.'' 
The regulations provide the legal framework for accomplishing this 
purpose in the context of evolving U.S. economic and trade policy, and 
economic factors relating to international competition.
    (b) Part 146 of the regulations of the United States Customs Service 
(19 CFR part 146) governs zone operations, including the admission of 
merchandise into zones, zone activity involving such merchandise, and 
the transfer of merchandise from zones.
    (c) To the extent ``activated'' under Customs procedures in 19 CFR 
part 146, and only for the purposes specified in the Act (19 U.S.C. 
81c), zones are treated for purposes of the tariff laws and Customs 
entry procedures as being outside the Customs territory of the United 
States. Under zone procedures, foreign and domestic merchandise may be 
admitted into zones for operations such as storage, exhibition, 
assembly, manufacture and processing, without being subject to formal 
Customs entry procedures and payment of duties, unless and until the 
foreign merchandise enters Customs territory for domestic consumption. 
At that time, the importer ordinarily has a choice of paying duties 
either at the rate applicable to the foreign material in its condition 
as admitted into a zone, or if used in manufacturing or processing, to 
the emerging product. Quota restrictions do not normally apply to 
foreign goods in zones. The Board can deny or limit the

[[Page 62]]

use of zone procedures in specific cases on public interest grounds. 
Merchandise moved into zones for export (zone-restricted status) may be 
considered exported for purposes such as federal excise tax rebates and 
Customs drawback. Foreign merchandise (tangible personal property) 
admitted to a zone and domestic merchandise held in a zone for 
exportation are exempt from certain state and local ad valorem taxes (19 
U.S.C. 81o(e)). Articles admitted into zones for purposes not specified 
in the Act shall be subject to the tariff laws and regular entry 
procedures, including the payment of applicable duties, taxes, and fees.

[56 FR 50798, Oct. 8, 1991; 56 FR 56544, Nov. 5, 1991]



Sec. 400.2  Definitions.

    (a) Act means the Foreign-Trade Zones Act of 1934, as amended.
    (b) Board means the Foreign-Trade Zones Board, which consists of the 
Secretary of the Department of Commerce (chairman) and the Secretary of 
the Treasury, or their designated alternates.
    (c) Customs Service means the United States Customs Service of the 
Department of the Treasury.
    (d) Executive Secretary is the Executive Secretary of the Foreign-
Trade Zones Board.
    (e) Foreign-trade zone is a restricted-access site, in or adjacent 
to a Customs port of entry, operated pursuant to public utility 
principles under the sponsorship of a corporation granted authority by 
the Board and under supervision of the Customs Service.
    (f) Grant of authority is a document issued by the Board which 
authorizes a zone grantee to establish, operate and maintain a zone 
project or a subzone, subject to limitations and conditions specified in 
this part and in 19 CFR part 146. The authority to establish a zone 
includes the authority to operate and the responsibility to maintain it.
    (g) Manufacturing, as used in this part, means activity involving 
the substantial transformation of a foreign article resulting in a new 
and different article having a different name, character, and use.
    (h) Port Director is normally the director of Customs for the 
Customs jurisdictional area in which the zone is located.
    (i) Port of entry means a port of entry in the United States, as 
defined by part 101 of the regulations of the Customs Service (19 CFR 
part 101), or a user fee airport authorized under 19 U.S.C. 58b and 
listed in part 122 of the regulations of the Customs Service (19 CFR 
part 122).
    (j) Private corporation means any corporation, other than a public 
corporation, which is organized for the purpose of establishing a zone 
project and which is chartered for this purpose under a law of the state 
in which the zone is located.
    (k) Processing, when referring to zone activity, means any activity 
involving a change in condition of merchandise, other than 
manufacturing, which results in a change in the Customs classification 
of an article or in its eligibility for entry for consumption.
    (l) Public corporation means a state, a political subdivision 
(including a municipality) or public agency thereof, or a corporate 
municipal instrumentality of one or more states.
    (m) State includes any state of the United States, the District of 
Columbia, and Puerto Rico.
    (n) Subzone means a special-purpose zone established as an adjunct 
to a zone project for a limited purpose.
    (o) Zone means a foreign-trade zone established under the provisions 
of the Act and these regulations. Where used in this part, the term also 
includes subzones, unless the context indicates otherwise.
    (p) Zone grantee is the corporate recipient of a grant of authority 
for a zone project. Where used in this part, the term ``grantee'' means 
``zone grantee'' unless otherwise indicated.
    (q) Zone operator is a corporation, partnership, or person that 
operates a zone or subzone under the terms of an agreement with the zone 
grantee or an intermediary entity, with the concurrence of the Port 
Director.
    (r) Zone project means the zone plan, including all of the zone and 
subzone sites that the Board authorizes a single grantee to establish.
    (s) Zone site means the physical location of a zone or subzone.

[[Page 63]]

    (t) Zone user is a party using a zone under agreement with the zone 
grantee or operator.

[62 FR 53534, Oct. 15, 1997]



                   Subpart B_Foreign-Trade Zones Board



Sec. 400.11  Authority of the Board.

    (a) In general. In accordance with the Act and procedures of this 
part, the Board has authority to:
    (1) Prescribe rules and regulations concerning zones;
    (2) Issue grants of authority for zones and subzones, and approve 
modifications to the original zone project;
    (3) Approve manufacturing and processing activity in zones and 
subzones as described in subpart D of this part;
    (4) Make determinations on matters requiring Board decisions under 
this part;
    (5) Decide appeals in regard to certain decisions of the Commerce 
Department's Assistant Secretary for Import Administration or the 
Executive Secretary;
    (6) Inspect the premises, operations and accounts of zone grantees 
and operators;
    (7) Require zone grantees to report on zone operations;
    (8) Report annually to the Congress on zone operations;
    (9) Restrict or prohibit zone operations;
    (10) Impose fines for violations of the Act and this part;
    (11) Revoke grants of authority for cause; and
    (12) Determine, as appropriate, whether zone activity is or would be 
in the public interest or detrimental to the public interest.
    (b) Authority of the Chairman of the Board. The Chairman of the 
Board (Secretary of the Department of Commerce) has the authority to:
    (1) Appoint the Executive Secretary of the Board;
    (2) Call meetings of the Board, with reasonable notice given to each 
member; and
    (3) Submit to the Congress the Board's annual report as prepared by 
the Executive Secretary.
    (c) Alternates. Each member of the Board will designate an alternate 
with authority to act in an official capacity for that member.
    (d) Determinations of the Board. (1) The determination of the Board 
will be based on the unanimous vote of the members (or alternate 
members) of the Board.
    (2) All votes will be recorded.
    (3) The Board will issue its determination in proceedings under the 
regulations in the form of a Board order.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997



Sec. 400.12  Responsibilities and authority of the Executive Secretary.

    The Executive Secretary has the following responsibilities and 
authority:
    (a) Represent the Board in administrative, regulatory, operational, 
and public affairs matters;
    (b) Serve as director of the Commerce Department's Foreign-Trade 
Zones staff;
    (c) Execute and implement orders of the Board;
    (d) Arrange meetings and direct circulation of action documents for 
the Board;
    (e) Arrange with other sections of the Department of Commerce, Board 
agencies and other governmental agencies for studies and comments on 
zone issues and proposals;
    (f) Maintain custody of the seal, records, files and correspondence 
of the Board, with disposition subject to the regulations of the 
Department of Commerce;
    (g) Issue notices on zone matters for publication in the Federal 
Register;
    (h) Determine subzone sponsorship questions as provided in Sec. 
400.22(d);
    (i) Determine whether additional information is needed for 
evaluation of applications and other requests for decisions under this 
part, as provided for in various sections of this part, including 
Sec. Sec. 400.24, 400.25, and 400.26;
    (j) Issue guidelines on information required for subzone 
applications under Sec. 400.25(a)(6);
    (k) Determine whether proposed modifications involve major changes 
under Sec. 400.26(a)(2);

[[Page 64]]

    (l) Determine whether applications meet prefiling requirements under 
Sec. 400.27(b);
    (m) Direct processing of applications, including designation of 
examiners and scheduling of hearings under Sec. Sec. 400.27 and 400.32;
    (n) Authorize minor modifications to zone projects under Sec. 
400.27(f);
    (o) Review changes in sourcing under Sec. 400.28(a)(3);
    (p) Direct monitoring of zone activity under Sec. 400.31(d);
    (q) Direct reviews and make recommendations on requests for 
manufacturing/processing approvals under Sec. 400.32(b);
    (r) Determine questions of scope under Sec. 400.32(c);
    (s) Accept rate schedules and determine their sufficiency under 
Sec. 400.42(b)(3);
    (t) Review and decide zone rate complaints cases under Sec. 
400.42(b)(5);
    (u) Make recommendations in cases involving questions as to whether 
zone activity should be prohibited or restricted for public interest 
reasons, including reviews under Sec. 400.43;
    (v) Authorize under certain circumstances the return of ``zone-
restricted merchandise'' for entry into Customs territory under Sec. 
400.44;
    (w) Authorize certain duty-paid retail trade under Sec. 400.45;
    (x) Determine the format for the annual reports of zone grantees to 
the Board and direct preparation of an annual report to Congress from 
the Board under Sec. 400.46(d); and
    (y) Designate an acting Executive Secretary.



Sec. 400.13  Board headquarters.

    The headquarters of the Board is located within the U.S. Department 
of Commerce (Herbert C. Hoover Building), Pennsylvania Avenue and 14th 
Street, NW., Washington, DC 20230, as part of the office of the Foreign-
Trade Zones staff.



        Subpart C_Establishment and Modification of Zone Projects



Sec. 400.21  Number and location of zones and subzones.

    (a) Number of zone projects--port of entry entitlement. (1) Provided 
that the other requirements of this subpart are met:
    (i) Each port of entry is entitled to at least one zone project;
    (ii) If a port of entry is located in more than one state, each of 
the states in which the port of entry is located is entitled to a zone 
project; and
    (iii) If a port of entry is defined to include more than one city 
separated by a navigable waterway, each of the cities is entitled to a 
zone project.
    (2) Zone projects in addition to those approved under the 
entitlement provision of paragraph (a)(1) of this section may be 
authorized by the Board if it determines that existing project(s) will 
not adequately serve the public interest (convenience of commerce).
    (b) Location of zones and subzones--port of entry adjacency 
requirements. (1) The Act provides that the Board may approve ``zones in 
or adjacent to ports of entry'' (19 U.S.C. 81b).
    (2) The ``adjacency'' requirement is satisfied if:
    (i) A general-purpose zone is located within 60 statute miles or 90 
minutes' driving time from the outer limits of a port of entry;
    (ii) A subzone meets the following requirements relating to Customs 
supervision:
    (A) Proper Customs oversight can be accomplished with physical and 
electronic means; and
    (B) All electronically produced records are maintained in a format 
compatible with the requirements of the U.S. Customs Service for the 
duration of the record period; and
    (C) The grantee/operator agrees to present merchandise for 
examination at a Customs site selected by Customs when requested, and 
further agrees to present all necessary documents directly to the 
Customs oversight office.



Sec. 400.22  Eligible applicants.

    (a) In general. Subject to the other provisions of this section, 
public or private corporations may apply for a grant of authority to 
establish a zone project. The board will give preference to public 
corporations.
    (b) Public and non-profit corporations. The eligibility of public 
and non-profit

[[Page 65]]

corporations to apply for a grant of authority shall be supported by a 
enabling legislation of the legislature of the state in which the zone 
is to be located, indicating that the corporation, individually or as 
part of a class, is authorized to so apply.
    (c) Private for-profit corporations. The eligibility of private for-
profit corporations to apply for a grant of authority shall be supported 
by a special act of the state legislature naming the applicant 
corporation and by evidence indicating that the corporation is chartered 
for the purpose of establishing a zone.
    (d) Applicants for subzones--(1) Eligibility. The following entities 
are eligible to apply for a grant of authority to establish a subzone:
    (i) The zone grantee of the closest zone project in the same state;
    (ii) The zone grantee of another zone in the same state, which is a 
public corporation, if the Board, or the Executive Secretary, finds that 
such sponsorship better serves the public interest; or
    (iii) A state agency specifically authorized to submit such an 
application by an act of the state legislature.
    (2) Complaints. If an application is submitted under paragraph 
(d)(1) (ii) or (iii) of this section, the Executive Secretary will:
    (i) Notify, in writing, the grantee specified in paragraph (d)(1)(i) 
of this section, who may, within 30 days, object to such sponsorship, in 
writing, with supporting information as to why the public interest would 
be better served by its acting as sponsor;
    (ii) Review such objections prior to filing the application to 
determine whether the proposed sponsorship is in the public interest, 
taking into account:
    (A) The complaining zone's structure and operation;
    (B) The views of State and local public agencies; and
    (C) The views of the proposed subzone operator;
    (iii) Notify the applicant and complainants in writing of the 
Executive Secretary's determination;
    (iv) If the Executive Secretary determines that the proposed 
sponsorship is in the public interest, file the application (see Sec. 
400.47 regarding appeals to decisions of the Executive Secretary).



Sec. 400.23  Criteria for grants of authority for zones and subzones.

    (a) Zones. The Board will consider the following factors in 
determining whether to issue a grant of authority for a zone project:
    (1) The need for zone services in the port of entry area, taking 
into account existing as well as projected international trade related 
activities and employment impact;
    (2) The adequacy of the operational and financial plans and the 
suitability of the proposed sites and facilities, with justification for 
duplicative sites;
    (3) The extent of state and local government support, as indicated 
by the compatibility of the zone project with the community's master 
plan or stated goals for economic development and the views of State and 
local public officials involved in economic development. Such officials 
shall avoid commitments that anticipate outcome of Board decisions;
    (4) The views of persons and firms likely to be affected by proposed 
zone activity; and
    (5) If the proposal involves manufacturing or processing activity, 
the criteria in Sec. 400.31.
    (b) Subzones. In reviewing proposals for subzones the Board will 
also consider:
    (1) Whether the operation could be located in or otherwise 
accommodated by the multi-purpose facilities of the zone project serving 
the area;
    (2) The specific zone benefits sought and the significant public 
benefit(s) involved supported by evidence to meet the requirement in 
Sec. 400.31(c); and
    (3) Whether the proposed activity is in the public interest, taking 
into account the criteria in Sec. 400.31.



Sec. 400.24  Application for zone.

    (a) In general. An application for a grant of authority to establish 
a zone project shall consist of a transmittal letter, an executive 
summary and five exhibits.
    (b) Letter of transmittal. The transmittal letter shall be currently 
dated and signed by an authorized officer of

[[Page 66]]

the corporation and bear the corporate seal.
    (c) Executive summary. The executive summary shall describe:
    (1) The corporation's legal authority to apply;
    (2) The type of authority requested from the Board;
    (3) The proposed zone site and facilities and the larger project of 
which the zone is a part;
    (4) The project background, including surveys and studies;
    (5) The relationship of the project to the community's and state's 
overall economic development plans and objectives;
    (6) The plans for operating and financing the project; and
    (7) Any additional pertinent information needed for a complete 
summary description of the proposal.
    (d) Exhibits. (1) Exhibit One (Legal Authority for the Application) 
shall consist of:
    (i) A certified copy of the state enabling legislation described in 
Sec. 400.22;
    (ii) A copy of pertinent sections of the applicant's charter or 
organization papers; and
    (iii) A certified copy of the resolution of the governing body of 
the corporation authorizing the official signing the application.
    (2) Exhibit Two (Site Description) shall consist of:
    (i) A detailed description of the zone site, including size, 
location, address, and a legal description of the area proposed for 
approval; a table with site designations shall be included when more 
than one site is involved;
    (ii) A summary description of the larger project of which the zone 
is a part, including type, size, location and address;
    (iii) A statement as to whether the zone is within or adjacent to a 
customs port of entry;
    (iv) A description of zone facilities and services, including 
dimensions and types of existing and proposed structures;
    (v) A description of existing or proposed site qualifications 
including: land-use zoning, relationship to flood-plain, infrastructure, 
utilities, security, and access to transportation services;
    (vi) A description of current activities carried on in or contiguous 
to the project;
    (vii) If part of a port facility, a summary of port and 
transportation services and facilities; if not, a summary description of 
transportation systems indicating connections from local and regional 
points of arrival to the zone; and
    (viii) A statement as to the possibilities and plans for zone 
expansion.
    (3) Exhibit Three (Operation and Financing) shall consist of:
    (i) A statement as to site ownership (if not owned by the applicant 
or proposed operator, evidence as to their legal right to use the site);
    (ii) A discussion of the operational plan (if the zone or a portion 
thereof is to be operated by other than the grantee, a summary of the 
selection process used or to be used, the type of operation agreement 
and, if available, the name and qualifications of the proposed 
operator);
    (iii) A brief explanation of the plans for providing facilities, 
physical security, and for satisfying the requirements for Customs 
automated systems;
    (iv) A summary of the plans for financing capital and operating 
costs, including a statement as to the source and use of funds; and
    (v) The estimated time schedule for construction and activation.
    (4) Exhibit Four (Economic Justification) shall include:
    (i) A statement of the community's overall economic goals and 
strategies in relation to those of the region and state;
    (ii) A reference to the plan or plans on which the goals are based 
and how they relate to the zone project;
    (iii) An economic profile of the community including identification 
and discussion of dominant sectors in terms of percentage of employment 
or income, area resources and problems, economic imbalances, 
unemployment rates, area foreign trade statistics, and area port 
facilities and transportation networks;
    (iv) A statement as to the role and objective of the zone project, 
and a justification for each of the proposed sites;

[[Page 67]]

    (v) A discussion of the anticipated economic impact, direct and 
indirect, of the zone project, including references to public costs and 
benefits, employment, U.S. international trade, and environmental 
impact;
    (vi) A statement as to the need for zone services in the community, 
with information on surveys of business, and specific expressions of 
interest from proposed zone users, with letters of intent from those 
firms that are considered prime prospects; and
    (vii) A description of proposed manufacturing and processing 
operations, if applicable, with information covering the factors 
described in Sec. 400.31(b), including the nature and scope of the 
operation and production process, materials and components used, items 
to be foreign sourced with relevant tariff information, zone benefits 
anticipated and how they will affect the firm's plans, and the economic 
impact of the operation on the community and on related domestic 
industries.
    (5) Exhibit Five (Maps) shall consist of:
    (i) The following maps and drawings:
    (A) State and county maps showing the general location of the zone 
in terms of the area's transportation network;
    (B) A local community map showing in red the location of the 
proposed zone; and
    (C) A detailed blueprint of the zone or subzone area showing zone 
boundaries in red, with dimensions and metes and bounds, or other legal 
description, and showing existing and proposed structures.
    (ii) Proposals involving existing zones shall include a drawing 
showing existing zone sites and the proposed changes.
    (e) Additional information. The Board or the Executive Secretary may 
require additional information needed to adequately evaluate a proposal.
    (f) Amendment of application. The Board or the Executive Secretary 
may allow amendment of the application.
    (g) Drafts. Applicants may submit a draft application to the 
Executive Secretary for review.
    (h) Format and number of copies. Unless the Executive Secretary 
alters the requirements of this paragraph, submit an original and 8 
copies of the application on 8\1/2\ x 11 (216 x 
279 mm) paper. Exhibit Five of the original application shall contain 
full-sized maps, and copies shall contain letter-sized reductions.
    (i) Where to file. Address and mail the application to the Secretary 
of Commerce, Attention: Executive Secretary, Foreign-Trade Zones Board, 
U.S. Department of Commerce, Pennsylvania Avenue and 14th Street, NW., 
Washington, DC 20230.

(Approved by the Office of Management and Budget under control number 
0625-0139)

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.25  Application for subzone.

    (a) In general. An application to establish a subzone as part of a 
proposed or existing zone shall be submitted in accordance with the 
format in Sec. 400.24, except that the focus of the information 
provided in Exhibit Four shall be on the specific activity involved and 
its net economic effect. The information submitted in Exhibit Four shall 
include:
    (1) A summary as to the reasons for the subzone and an explanation 
of its anticipated economic effects;
    (2) Identity of the subzone user and its corporate affiliation;
    (3) Description of the proposed activity, including:
    (i) Products;
    (ii) Materials and Components;
    (iii) Sourcing plans (domestic/foreign);
    (iv) Tariff rates and other import requirements or restrictions;
    (v) Information to assist the Board in making a determination under 
Sec. Sec. 400.31(b)(1)(iii) and 400.31(b)(2);
    (vi) Benefits to subzone user;
    (vii) Information required in Sec. 400.24(d)(4)(vii);
    (viii) Information as to whether alternative procedures have been 
considered as a means of obtaining the benefits sought;
    (ix) Information on the industry involved and extent of 
international competition; and
    (x) Economic impact of the operation on the area;
    (4) Reason operation cannot be conducted within a general-purpose 
zone;

[[Page 68]]

    (5) Statement as to environmental impact; and
    (6) Any additional information requested by the Board or the 
Executive Secretary in order to conduct the review. The Executive 
Secretary may issue guidelines as to the kind of detailed information 
needed for various types of subzone cases.
    (b) Burden of proof. An applicant for a subzone must demonstrate to 
the Board that the proposed operation meets the criteria in Sec. 
400.23(b).

(Approved by the Office of Management and Budget under control number 
0625-0139)



Sec. 400.26  Application for expansion or other modification to zone 
project.

    (a) In general. (1) A grantee may apply to the Board for authority 
to expand or otherwise modify its zone project.
    (2) The Executive Secretary, in consultation with the Port Director, 
will determine whether the proposed modification involves a major change 
in the zone plan and is thus subject to paragraph (b) of this section, 
or is minor and subject to paragraph (c) of this section. In making this 
determination the Executive Secretary will consider the extent to which 
the proposed modification would:
    (i) Substantially modify the plan originally approved by the Board; 
or
    (ii) Expand the physical dimensions of the approved zone area as 
related to the scope of operations envisioned in the original plan.
    (b) Major modification to zone project. An application for a major 
modification to an approved zone project shall be submitted in 
accordance with the format in Sec. 400.24, except that:
    (1) Reference may be made to current information in an application 
from the same applicant on file with the Board; and
    (2) The content of Exhibit Four shall relate specifically to the 
proposed change.
    (c) Minor modification to zone project. Other applications or 
requests under this subpart, including those for minor revisions of zone 
boundaries, grant of authority transfers, or time extensions, shall be 
submitted in letter form with information and documentation necessary 
for analysis, as determined by the Executive Secretary, who shall 
determine whether the proposed change is a minor one subject to this 
paragraph (c) instead of paragraph (b) of this section (see, Sec. 
400.27(f)).
    (d) Applications for other revisions to grants of authority. 
Applications or requests for revisions to grants of authority, such as 
restriction modifications, shall be submitted in letter form with 
information and documentation necessary for analysis, as determined by 
the Executive Secretary. If the change involves removal or significant 
modification of a restriction included by the Board in a grant of 
authority, the review procedures of Sec. 400.32 shall apply. If not, 
the procedure set forth in Sec. 400.27(f) shall apply.

(Approved by the Office of Management and Budget under control number 
0625-0139)

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.27  Procedure for processing application.

    (a) In general. This section outlines the procedure followed in 
processing applications submitted under Sec. Sec. 400.24-400.26. In 
addition, it sets forth the time schedules which will normally be 
applied in processing applications. The schedules will provide guidance 
to applicants with respect to the time frames for each of the procedural 
steps involved in the Board's review. Under these schedules, 
applications involving manufacturing or processing activity would be 
processed within 1 year, and those not involving such activity, within 
10 months. While the schedules set forth a standard time frame, the 
Board may determine that it requires additional time based on special 
circumstances, such as when the public comment period must be reopened 
pursuant to paragraphs (d)(2)(v)(B) and (d)(3)(vi)(B) of this section.
    (b) Prefiling review. Applications subject to Sec. 400.29 shall be 
accompanied with a check in accordance with that section, and will be 
dated upon receipt at the headquarters of the Board. The Executive 
Secretary will determine whether the application satisfies the 
requirements of Sec. Sec. 400.22-400.24, 400.25, 400.26, 400.32, and 
other applicable provisions of this part.

[[Page 69]]

    (1) If the application is deficient, the Executive Secretary will 
notify the applicant within 20 days of receipt of the application, 
specifying the deficiencies. The applicant shall correct the 
deficiencies and submit the correct application within 30 days of 
notification. Otherwise, the application (original) will be returned.
    (2) If the application is sufficient, the Executive Secretary will 
within 45 days of receipt of the application:
    (i) Formally file the application, thereby initiating the proceeding 
or review;
    (ii) Assign a case docket number in cases requiring a Board order; 
and
    (iii) Notify the applicant.
    (c) Procedure--Executive Secretary responsibilities. After 
initiating a proceeding based on an application under Sec. Sec. 400.24-
400.25, or 400.26(b), the Executive Secretary will:
    (1) Designate an examiner to conduct a review and prepare a report 
with recommendations for the Board;
    (2) Publish in the Federal Register a notice of the formal filing of 
the application and initiation of the review which includes the name of 
the applicant, a description of the zone project, information as to any 
hearing scheduled at the outset, and an invitation for public comment, 
including a time period during which the public may submit evidence, 
factual information, and written arguments. Normally, the comment period 
will close 60 days after the date the notice appears, except that, if a 
hearing is held (see, Sec. 400.51), the period will not close prior to 
15 days after the date of the hearing. The closing date for general 
comment will ordinarily be followed by an additional 15-day period for 
rebuttal comments;
    (3) Send copies of the filing and initiation notice and the 
application to the Commissioner of Customs and the Port Director, or a 
designee;
    (4) Arrange for hearings, as appropriate;
    (5) Transmit the reports and recommendations of the examiner and of 
the officials identified in paragraph (c)(3) of this section to the 
Board for appropriate action; and
    (6) Notify the applicant in writing and publish notice in the 
Federal Register of the Board's determination.
    (d) Case reviews--procedure and time schedule--(1) Customs review. 
The Port Director, or a designee, in accordance with agency regulations 
and directives, will submit a technical report to the Executive 
Secretary within 45 days of the conclusion of the public comment period 
described in paragraph (c)(2) of this section.
    (2) Examiners reviews--non-manufacturing/processing. Examiners 
assigned to cases not involving manufacturing or processing activity 
shall conduct a review taking into account the factors enumerated in 
Sec. 400.23 and other appropriate sections of this part, which shall 
include:
    (i) Conducting or participating in necessary hearings scheduled by 
the Executive Secretary;
    (ii) Reviewing case records, including public comments;
    (iii) Requesting information and evidence from parties of record;
    (iv) Developing information and evidence necessary for evaluation 
and analysis of the application in accordance with the criteria of the 
Act and this part;
    (v) Preparing a report with recommendations to the Board and 
submitting it to the Executive Secretary within 120 days of the close of 
the period for public comment (see, paragraph (c)(2) of this section).
    (A) If the report is unfavorable to the applicant, it shall be 
considered a preliminary report and the applicant shall be notified 
within 5 days (in writing or by phone) and given 30 days from the date 
of notification in which to respond to the report and submit additional 
evidence.
    (B) If the response contains new evidence on which there has not 
been an opportunity for public comment, the Executive Secretary will 
publish notice in the Federal Register after completion of the review of 
the response. The new material will be made available for public 
inspection and the Federal Register notice will invite further public 
comment for 30 days, with an additional 15-day period for rebuttal 
comments.
    (C) The Customs adviser shall be notified when necessary for further 
comments, which shall be submitted within 45 days after notification.

[[Page 70]]

    (D) The examiners report in a situation under paragraph (d)(2)(v)(A) 
of this section shall be completed and submitted to the Executive 
Secretary within 30 days after receipt of additional evidence or notice 
from the applicant that there will be none; except that, if paragraph 
(d)(2)(v)(B) of this section applies, the report will be submitted 
within 30 days of the close of the period for public comment.
    (3) Examiners reviews--cases involving manufacturing or processing 
activity. Examiners shall conduct a review taking into account the 
factors enumerated in Sec. 400.23, Sec. 400.31, and other appropriate 
sections of this part, which shall include:
    (i) Conducting or participating in hearings scheduled by the 
Executive Secretary;
    (ii) Reviewing case records, including public comments;
    (iii) Requesting information and evidence from parties of record;
    (iv) Developing information and evidence necessary for analysis of 
the threshold factors and the economic factors enumerated in Sec. 
400.31;
    (v) Conducting an analysis to include:
    (A) An evaluation of policy considerations pursuant to Sec. Sec. 
400.31(b)(1)(i) and 400.31(b)(1)(ii);
    (B) An evaluation of the economic factors enumerated in Sec. Sec. 
400.31(b)(1)(iii) and 400.31(b)(2), which shall include an evaluation of 
the economic impact on domestic industry, considering both producers of 
like products and producers of components/materials used in the 
manufacture/processing or assembly of the products. The evaluation will 
take into account such factors as market conditions, price sensitivity, 
degree and nature of foreign competition, effect on exports and imports, 
and the net effect on U.S. employment;
    (vi) Conducting appropriate industry surveys when necessary; and
    (vii) Preparing a report with recommendations to the Board and 
submitting it to the Executive Secretary within 150 days of the close of 
the period for public comment:
    (A) If the report is unfavorable to the applicant, it shall be 
considered a preliminary report and the applicant shall be notified (in 
writing or by phone) and given 45 days from the date of notification in 
which to respond to the report and submit additional evidence pertinent 
to the factors considered in the report.
    (B) If the response contains new evidence on which there has not 
been an opportunity for public comment, the Executive Secretary will 
publish notice in the Federal Register after completion of the review of 
the response. The new material will be made available for public 
inspection and the Federal Register notice will invite further public 
comment for 30 days, with an additional 15-day period for rebuttal 
comments.
    (e) Procedure--Completion of review--(1) The Executive Secretary 
will circulate the examiners report with recommendations to Board 
members for their review and votes (by resolution).
    (2) The Treasury and Army Board members will return their votes to 
the Executive Secretary within 30 days, unless a formal meeting is 
requested (see, Sec. 400.11(d)).
    (3) The Commerce Department will complete the decision process 
within 15 days of receiving the votes of both other Board members, and 
the Executive Secretary will publish the Board decision.
    (f) Procedure--Application for minor modification of zone project. 
(1) The Executive Secretary, with the concurrence of the Port Director, 
will make a determination in cases under Sec. 400.26(c) involving minor 
changes to zone projects that do not require a Board order, such as 
boundary modifications, including certain relocations, and will notify 
the applicant in writing of the decision within 30 days of the 
determination that the application or request can be processed under 
Sec. 400.26(c).
    (2) The Port Director shall provide the decision as to concurrence 
within 20 days after being notified of the request or application.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.28  Conditions, prohibitions and restrictions applicable to 
grants of authority.

    (a) In general. Grants of authority issued by the Board for the 
establishment of zones or subzones, including

[[Page 71]]

those already issued, are subject to the Act and this part and the 
following general conditions or limitations:
    (1) Approvals from the grantee and the Port Director, pursuant to 19 
CFR part 146, are required prior to the activation of any portion of an 
approved zone project; and
    (2) Approval of the Board or the Commerce Department's Assistant 
Secretary for Import Administration pursuant to subpart D of this part 
is required prior to the commencement of manufacturing beyond the scope 
of that approved as part of the application or pursuant to reviews under 
this part (e.g., new end products, significant expansions of plant 
production capacity), and of similar changes in processing activity 
which involves foreign articles subject to quantitative import controls 
(quotas) or results in articles subject to a lower (actual or effective) 
duty rate (inverted tariff) than any of their foreign components.
    (3) Sourcing changes--(i) Notification requirement. The grantee or 
operator of a zone or subzone shall notify the Executive Secretary when 
there is a change in sourcing for authorized manufacturing or processing 
activity which involves the use of new foreign articles subject to 
quotas or inverted tariffs, unless--
    (A) Entries for consumption are not to be made at the lower duty 
rate; or
    (B) The product in which the foreign articles are to be incorporated 
is being produced for exportation.
    (ii) Notification procedure. Notification shall be given prior to 
the commencement of the activity, when possible, otherwise at the time 
the new foreign articles arrive in the zone or are withdrawn from 
inventory for use in production. Requests may be made to the Executive 
Secretary for authority to submit notification of sourcing changes on a 
quarterly federal fiscal year basis covering changes in the previous 
quarter.
    (iii) Reviews. (A) Upon notification of a sourcing change under 
paragraph (a)(3)(i) of this section, within 30 days, the Executive 
Secretary will conduct a preliminary review of the changes in relation 
to the approved activity to determine whether they could have 
significant adverse effects, taking into account the factors enumerated 
in Sec. 400.31(b), and will submit a report and recommendation to the 
Commerce Department's Assistant Secretary for Import Administration, who 
shall determine whether review is necessary. The procedures of Sec. 
400.32(b) shall be used in these situations when appropriate.
    (B) The Board or the Commerce Department's Assistant Secretary for 
Import Administration may, based on public interest grounds, prohibit or 
restrict the use of zone procedures in regard to the change in sourcing, 
including requiring that items be placed in privileged foreign status 
(19 CFR 146.41) upon admission to a zone or subzone.
    (C) The Executive Secretary shall direct reviews necessary to ensure 
that activity involved in these situations continues to be in the public 
interest.
    (4) Prior to activation of a zone, the zone grantee or operator 
shall obtain all necessary permits from federal, state and local 
authorities, and except as otherwise specified in the Act or this part, 
shall comply with the requirements of those authorities.
    (5) A grant of authority for a zone or a subzone shall lapse unless 
the zone project (in case of subzones, the subzone facility) is 
activated, pursuant to 19 CFR part 146, and in operation not later than 
five years from:
    (i) A Board order (authorizing the zone or subzone) issued after 
November 7, 1991; or
    (ii) November 7, 1991.
    (6) A grant of authority approved under this subpart includes 
authority for the grantee to permit the erection of buildings necessary 
to carry out the approved zone project subject to concurrence of the 
Port Director.
    (7) Zone grantees, operators, and users shall permit federal 
government officials acting in an official capacity to have access to 
the zone project and records during normal business hours and under 
other reasonable circumstances.
    (8) A grant of authority may not be sold, conveyed, transferred, set 
over, or assigned (FTZ Act, section 17; 19 U.S.C. 81q). Private 
ownership of zone land and facilities is permitted provided the zone 
grantee retains the control necessary to implement the approved zone

[[Page 72]]

project. Should title to land or facilities be transferred after a grant 
of authority is issued, the zone grantee must retain, by agreement with 
the new owner, a level of control which allows the grantee to carry out 
its responsibilities as grantee. The sale of a zone site or facility for 
more than its fair market value without zone status could, depending on 
the circumstances, be subject to section 17 of the Act.
    (9) A grant of authority will not be construed to make the zone 
grantee automatically liable for violations by operators, users, or 
other parties.
    (b) Additional conditions, prohibitions and restrictions. Other 
requirements, conditions or restrictions under Federal, State or local 
law may apply to the zone or subzone authorized by the grant of 
authority.
    (c) Revocation of grants of authority. (1) In general. As provided 
in this section, the Board can revoke in whole or in part a grant of 
authority for a zone or subzone whenever it determines that the zone 
grantee or, in the case of subzones, the subzone operator, has violated, 
repeatedly and willfully, the provisions of the Act.
    (2) Procedure. When the Board has reason to believe that the 
conditions for revocation, as described in paragraph (a) of this 
section, are met, the Board will:
    (i) Notify the zone or subzone grantee in writing stating the nature 
of the alleged violations, and provide the grantee an opportunity to 
request a hearing on the proposed revocation;
    (ii) Conduct a hearing, if requested or otherwise if appropriate;
    (iii) Make a determination on the record of the proceeding not 
earlier than 4 months after providing notice to the zone grantee under 
paragraph (b)(1) of this section; and
    (iv) If the Board's determination is affirmative, publish notice of 
revocation of the grant of authority in the Federal Register.
    (3) As provided in section 18 of the Act (19 U.S.C. 81r(c)), the 
zone or subzone grantee may appeal an order of the Board revoking the 
grant of authority.

[56 FR 50798, Oct. 8, 1991; 56 FR 65833, Dec. 19, 1991, as amended at 62 
FR 53535, Oct. 15, 1997]



Sec. 400.29  Application fees.

    (a) In general. This section sets forth a uniform system of charges 
in the form of fees to recover some costs incurred by the Foreign-Trade 
Zones staff of the Department of Commerce in processing the applications 
listed in paragraph (b) of this section. The legal authority for the 
fees is 31 U.S.C. 9701, which provides for the collection of user fees 
by agencies of the Federal Government.
    (b) Uniform system of user fee charges. The following graduated fee 
schedule establishes fees for certain types of applications and requests 
for authority based on their average processing time. Applications 
combining requests for more than one type of approval are subject to the 
fee for each category.

(1) Additional general-purpose zones (Sec. 400.24; Sec. $3,200
 400.21(a)(2)).................................................
(2) Special-purpose subzones (Sec. 400.25):
  (i) Non-manufacturing/processing or less than three products.    4,000
  (ii) Manufacturing/processing--three or more products........    6,500
(3) Expansions (Sec. 400.26(b))..............................    1,600
 

    (c) Applications submitted to the Board shall include a check drawn 
on a national or state bank or trust company of the United States or 
Puerto Rico in the amount called for in paragraph (b) of this section. 
Uncertified checks must be acceptable for deposit by a Federal Reserve 
bank or branch.
    (d) Applicants shall make their checks payable to the U.S. 
Department of Commerce ITA. The checks will be deposited by ITA into the 
Treasury receipts account. If applications are found deficient under 
Sec. 400.27(b)(1), or withdrawn by applicants prior to formal filing, 
refunds will be made.



         Subpart D_Manufacturing and Processing Activity_Reviews



Sec. 400.31  Manufacturing and processing activity; criteria.

    (a) In general. Pursuant to section 15(c) of the Act (19 U.S.C. 
81o(c)), the Board has authority to restrict or prohibit zone activity 
``that in its judgment is detrimental to the public interest.'' When 
evaluating zone and subzone manufacturing and processing activity, 
either as proposed in an application, in a request for manufacturing/

[[Page 73]]

processing approval, or as part of a review of an ongoing operation, the 
Board shall determine whether the activity is in the public interest by 
reviewing it in relation to the evaluation criteria contained in 
paragraph (b) of this section. With regard to processing activity, this 
section shall apply only when the activity involves foreign articles 
subject to quantitative import controls (quotas) or results in articles 
subject to a lower duty rate (inverted tariff) than any of their foreign 
components. Such a review involves consideration of whether the activity 
is consistent with trade policy and programs, and whether its net 
economic effect is positive.
    (b) Evaluation criteria--(1) Threshold factors. It is the policy of 
the Board to authorize zone activity only when it is consistent with 
public policy and, in regard to activity involving foreign merchandise 
subject to quotas or inverted tariffs, when zone procedures are not the 
sole determining cause of imports. Thus, without undertaking a review of 
the economic factors enumerated in Sec. 400.31(b)(2), the Board shall 
deny or restrict authority for proposed or ongoing activity if it 
determines that:
    (i) The activity is inconsistent with U.S. trade and tariff law, or 
policy which has been formally adopted by the Executive branch;
    (ii) Board approval of the activity under review would seriously 
prejudice U.S. tariff and trade negotiations or other initiatives; or
    (iii) The activity involves items subject to quantitative import 
controls or inverted tariffs, and the use of zone procedures would be 
the direct and sole cause of imports that, but for such procedures, 
would not likely otherwise have occurred, taking into account imports 
both as individual items and as components of imported products.
    (2) Economic factors. After its review of threshold factors, if 
there is a basis for further consideration, the Board shall consider the 
following factors in determiing the net economic effect of the activity 
or proposed activity:
    (i) Overall employment impact;
    (ii) Exports and reexports;
    (iii) Retention or creation of manufacturing or processing activity;
    (iv) Extent of value-added activity;
    (v) Overall effect on import levels of relevant products, including 
import displacement;
    (vi) Extent and nature of foreign competition in relevant products;
    (vii) Impact on related domestic industry, taking into account 
market conditions; and
    (viii) Other relevant information relating to public interest and 
net economic impact considerations, including technology transfers and 
investment effects.
    (c) Methodology and evidence--(1)(i) The first phase (Sec. 
400.31(b)) involves consideration of threshold factors. If an examiner 
or reviewer makes a negative finding on any of the factors in paragraph 
(b)(1) of this section in the course of a review, the applicant shall be 
informed pursuant to Sec. 400.27(d)(3)(vii)(A). When threshold factors 
are the basis for a negative recommendation in a review of ongoing 
activity, the zone grantee and directly affected party shall be notified 
and given an opportunity to submit evidence pursuant to Sec. 
400.27(d)(3)(vii)(A). If the Board determines in the negative any of the 
factors in paragraph (b)(1) of this section, it shall deny or restrict 
authority for the proposed or ongoing activity.
    (ii) The process for paragraph (b)(2) of this section involves 
consideration of the enumerated economic factors, taking into account 
their relative weight and significance under the circumstances. Previous 
evaluations in similar cases are considered. The net effect is arrived 
at by balancing the positive and negative factors and arriving at a net 
economic effect.
    (2) Contributory effect. In assessing the significance of the 
economic effect of the zone activity as part of the consideration of 
economic factors, and in consideration of whether there is a significant 
public benefit, the Board may consider the contributory effect zone 
savings have as an incremental part of cost effectiveness programs 
adopted by companies to improve their international competitiveness.
    (3) Burden of proof. Applicants for subzones shall have the burden 
of submitting evidence establishing that the

[[Page 74]]

activity does or would result in a significant public benefit, taking 
into account the factors in paragraph (b) of this section. Applicants 
for approval of manufacturing or processing in general-purpose zones 
shall submit evidence regarding the positive economic effects that would 
result from activity within the zone and may submit evidence and 
comments as to policy considerations. Both types of applicants are 
expected to submit information in response to evidence of adverse 
economic effects during the public comment period. Parties should submit 
evidence that is probative and substantial in addressing the matter in 
issue.
    (d) Monitoring and post-approval reviews--(1) Ongoing zone activity 
may be reviewed at anytime to determine whether it is in compliance with 
the Act and regulations, as well as the authority granted by the Board. 
Reviews may also be conducted to determine whether there are changed 
circumstances that raise questions as to whether the activity is 
detrimental to the public interest, taking into account the factors 
enumerated in Sec. 400.31. The Board may prescribe special monitoring 
requirements in its decisions when appropriate.
    (2) Reviews may be initiated by the Board, the Commerce Department's 
Assistant Secretary for Import Administration, or the Executive 
Secretary; or, they may be undertaken in response to requests from 
parties directly affected by the activity in question and showing good 
cause.
    (3) Upon review, if the Board finds that zone activity is no longer 
in the public interest, taking into account the provisions of Sec. 
400.31, it may restrict the activity in question. The appropriateness of 
a delayed effective date will be considered in such cases.

[56 FR 50798, Oct. 8, 1991; 56 FR 56544, Nov. 5, 1991]



Sec. 400.32  Procedure for review of request for approval of 
manufacturing or processing.

    (a) Request as part of application for grant of authority. A request 
for approval of proposed manufacturing or processing activity may be 
submitted as part of an application under Sec. Sec. 400.24-400.26(a). 
The Board will review the request taking into account the criteria in 
Sec. 400.31(b).
    (b) Request for manufacturing/processing in approved zone or 
subzone. Prior to the commencement of manufacturing in a zone or subzone 
involving activity beyond the scope of that which has been previously 
authorized at the facility (i.e., new end products, significant 
expansions of plant production capacity), and of similar changes in 
processing activity that involves foreign articles subject to quotas or 
inverted tariffs, zone grantees or operators shall request the 
determination referred to in Sec. 400.31(a) by submitting a request in 
writing to the Executive Secretary (Sec. 400.28(a)(2)). Such requests 
shall include the information required by Sec. Sec. 400.24(d)(4)(vii) 
and 400.25.
    (1) The Commerce Department's Assistant Secretary for Import 
Administration may make determinations in these cases based upon a 
review by the FTZ staff and the recommendation of the Executive 
Secretary, when:
    (i) The proposed activity is the same, in terms of products 
involved, to activity recently approved by the Board and similar in 
circumstances; or
    (ii) The activity is for export only; or
    (iii) The zone benefits sought do not involve the election of non-
privileged foreign status (19 CFR 146.42) on items involving inverted 
tariffs; or
    (iv) The Port Director determines that the activity could otherwise 
be conducted under Customs bonded procedures.
    (2) When the informal procedure in paragraph (b)(1) of this section 
is not appropriate--
    (i) The Executive Secretary will:
    (A) Assign a case docket number and give notice in the Federal 
Register inviting public comment;
    (B) Arrange a public hearing, if appropriate;
    (C) Appoint an examiner, if appropriate, to conduct a review and 
prepare a report with recommendations for the Board; and
    (D) Prepare and transmit a report with recommendations, or transmit 
the examiners report, to the Board for appropriate action; and

[[Page 75]]

    (ii) The Board will make a determination on the requests, and the 
Executive Secretary will notify the grantee in writing of the Board's 
determination, and will publish notice of the determination in the 
Federal Register.
    (c) Scope determinations. Determinations shall be made by the 
Executive Secretary as to whether changes in activity are within the 
scope of related activity already approved for the facility involved 
under this part. When warranted, the procedures of paragraph (b)(2) of 
this section will be followed.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.33  Restrictions on manufacturing and processing activity.

    (a) In general. In approving manufacturing or processing activity 
for a zone or subzone the Board may adopt restrictions to protect the 
public interest, health, or safety. The Commerce Department's Assistant 
Secretary for Import Administration may similarly adopt restrictions in 
exercising authority under Sec. 400.32(b)(1).
    (b) Restrictions on items subject to antidumping and countervailing 
duty actions--(1) Board policy. Zone procedures shall not be used to 
circumvent antidumping (AD) and countervailing duty (CVD) actions under 
19 CFR parts 353 and 355.
    (2) Admission of items subject to AD/CVD actions. Items subject to 
AD/CVD orders or items which would be otherwise subject to suspension of 
liquidation under AD/CVD procedures, if they entered U.S. Customs 
territory, shall be placed in privileged foreign status (19 CFR 146.41) 
upon admission to a zone or subzone. Upon entry for consumption, such 
items shall be subject to duties under AD/CVD orders or to suspension of 
liquidation, as appropriate, under 19 CFR parts 353 and 355.



        Subpart E_Zone Operations and Administrative Requirements



Sec. 400.41  Zone operations; general.

    Zones shall be operated by or under the contractual oversight of 
zone grantees, subject to the requirements of the Act and this part, as 
well as those of other federal, state and local agencies having 
jurisdiction over the site and operation. Zone grantees shall ensure 
that the reasonable zone needs of the business community are served by 
their zone projects. The Port Director represents the Board with regard 
to the zone projects in the district and is responsible for enforcement, 
including physical security and access requirements, as provided in 19 
CFR part 146.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.42  Requirements for commencement of operations in a zone project.

    (a) In general. The following actions are required before operations 
in a zone may commence:
    (1) Approval by the Port Director of an application for activation 
is required as provided in 19 CFR part 146; and
    (2) The Executive Secretary will review proposed manufacturing or 
processing, pursuant to Sec. 400.32, and a zone schedule as provided in 
this section.
    (b) Zone schedule. (1) The zone grantee shall submit to the 
Executive Secretary and to the Port Director a zone schedule which sets 
forth:
    (i) Internal rules and regulations for the zone; and
    (ii) A statement of the rates and charges (fees) applicable to zone 
users.
    (2) A zone schedule shall consist of typed, loose-leaf, numbered, 
letter-sized pages, enclosed in covers, and shall contain:
    (i) A title page, with information to include:
    (A) The name of the zone grantee and operator(s);
    (B) Schedule identification;
    (C) Site description;
    (D) Date of original schedule; and
    (E) Name of the preparer;
    (ii) A table of contents;
    (iii) Administrative information;
    (iv) A statement of zone operating policy, rules and regulations, 
including uniform procedures regarding the construction of buildings and 
facilities; and
    (v) A section listing rates and charges for zones and subzones with 
information sufficient for the Board or the Executive Secretary to 
determine

[[Page 76]]

whether the rates and charges are reasonable based on other like 
operations in the port of entry area, and whether there is uniform 
treatment under like circumstances among zone users.
    (3) The Executive Secretary will review the schedule to determine 
whether it contains sufficient information for users concerning the 
operation of the facility and a statement of rates and charges as 
provided in paragraph (b)(2) of this section. If the Executive Secretary 
determines that the schedule satisfies these requirements, the Executive 
Secretary will notify the zone grantee, unless there is a basis for 
review under paragraph (b)(5) of this section. A copy of the schedule 
shall be available for public inspection at the offices of the zone 
grantee and operator. The zone grantee shall send a copy to the Port 
Director, who may submit comments to the Executive Secretary.
    (4) Amendments to the schedule shall be prepared and submitted in 
the manner described in paragraphs (b)(1) through (b)(3) of this 
section, and listed in the concluding section of the schedule, with 
dates.
    (5) A zone user or prospective user showing good cause may object to 
the zone or subzone fee on the basis that it is not reasonable, fair and 
uniform, by submitting to the Executive Secretary a complaint in writing 
with supporting information. The Executive Secretary will review the 
complaint and issue a report and decision, which will be final unless 
appealed to the Board within 30 days. The Board or the Executive 
Secretary may otherwise initiate a review for cause. The factors 
considered in reviewing reasonableness and fairness, will include:
    (i) The going-rates and charges for like operations in the area and 
the extra costs of operating a zone, including return on investment; and
    (ii) In the case of subzones, the value of actual services rendered 
by the zone grantee or operator, and reasonable out-of-pocket expenses.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.43  Restriction and prohibition of certain zone operations.

    (a) In general. After review, the Board may restrict or prohibit any 
admission of merchandise into a zone project or operation in a zone 
project when it determines that such activity is detrimental to the 
public interest, health or safety.
    (b) Initiation of review. The Board may conduct a proceeding, or the 
Executive Secretary a review, to consider a restriction or prohibition 
under paragraph (a) of this section either self-initiated, or in 
response to a complaint made to the Board by a party directly affected 
by the activity in question and showing good cause.



Sec. 400.44  Zone-restricted merchandise.

    (a) In general. Merchandise which has been given export status by 
Customs officials (``zone-restricted merchandise''--19 CFR 146.44) may 
be returned to the Customs Territory of the United States only when the 
Board determines that the return would be in the public interest. Such 
returns are subject to the Customs laws and the payment of applicable 
duties and excise taxes (19 U.S.C. 81c, 4th proviso).
    (b) Criteria. In making the determination described in paragraph (a) 
of this section, the Board will consider:
    (1) The intent of the parties;
    (2) Why the goods cannot be exported;
    (3) The public benefit involved in allowing their return; and
    (4) The recommendation of the Port Director.
    (c) Procedure. (1) A request for authority to return ``zone-
restricted'' merchandise into Customs territory shall be made to the 
Executive Secretary in letter form by the zone grantee or operator of 
the zone in which the merchandise is located, with supporting 
information and documentation.
    (2) The Executive Secretary will investigate the request and prepare 
a report for the Board.
    (3) The Executive Secretary may act for the Board under this section 
in cases involving merchandise valued at 500,000 dollars or less, 
provided requests

[[Page 77]]

are accompanied with a letter of concurrence from the Port Director.

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.45  Retail trade.

    (a) In general. Retail trade is prohibited in zones, except that 
sales or other commercial activity involving domestic, duty-paid, and 
duty-free goods may be conducted within an activated zone project under 
permits issued by the zone grantee and approved by the Board, with the 
further exception that no permits shall be necessary for sales involving 
domestic, duty-paid or duty-free food and non-alcoholic beverage 
products sold within the zone or subzone for consumption on premises by 
persons working therein. The Port Director will determine whether an 
activity is retail trade, subject to review by the Board when the zone 
grantee requests such a review with a good cause.
    (b) Procedure. Requests for Board approval under this section shall 
be submitted in letter form, with supporting documentation, to the Port 
Director, who is authorized to act for the Board in these cases, subject 
to the concurrence of the Executive Secretary.
    (c) Criteria. In evaluating requests under this section, the Port 
Director and the Executive Secretary will consider:
    (1) Whether any public benefits would result from approval; and
    (2) The economic effect such activity would have on the retail trade 
outside the zone in the port of entry area.

[56 FR 50798, Oct. 8, 1991; 57 FR 2319, Jan. 21, 1992, as amended at 62 
FR 53535, Oct. 15, 1997]



Sec. 400.46  Accounts, records and reports.

    (a) Zone accounts. Zone accounts shall be maintained in accordance 
with generally accepted accounting principles, and in compliance with 
the requirements of Federal, State or local agencies having jurisdiction 
over the site or operation.
    (b) Records and forms. Zone records and forms shall be prepared and 
maintained in accordance with the requirements of the Customs Service 
and the Board, and the zone grantee shall retain copies of applications 
it submits to the Board.
    (c) Maps and drawings. Zone grantees or operators, and Port 
Directors, shall keep current layout drawings of approved sites as 
described in Sec. 400.24(d)(5), showing activated portions, and a file 
showing required approvals. The zone grantee shall furnish necessary 
maps to the Port Director.
    (d) Annual reports. (1) Zone grantees shall submit annual reports to 
the Board at the time and in the format prescribed by the Executive 
Secretary, for use by the Executive Secretary in the preparation of the 
Board's annual report to the Congress.
    (2) The Board shall submit an annual report to the Congress.

(Approved by the Office of Management and Budget under control number 
0625-0109)

[56 FR 50798, Oct. 8, 1991, as amended at 62 FR 53535, Oct. 15, 1997]



Sec. 400.47  Appeals to the Board from decisions of the Assistant 
Secretary for Import Administration and the Executive Secretary.

    (a) In general. Decisions of the Assistant Secretary for Import 
Administration and the Executive Secretary made pursuant to Sec. Sec. 
400.22(d)(2)(ii), 400.32(b)(1), 400.44(c)(3), and 400.45(b)(2) may be 
appealed to the Board by adversely affected parties showing good cause.
    (b) Procedures. Parties appealing a decision under paragraph (a) of 
this section shall submit a request for review to the Board in writing, 
stating the basis for the request, and attaching a copy of the decision 
in question, as well as supporting information and documentation. After 
a review, the Board will notify the complaining party of its decision in 
writing.



           Subpart F_Notice, Hearings, Record and Information



Sec. 400.51  Notice and hearings.

    (a) In general. The Executive Secretary will publish notice in the 
Federal Register inviting public comment on applications docketed for 
Board action (see, Sec. 400.27(c)), and with regard to other reviews or 
matters considered under this part when public comment is necessary. 
Applicants shall

[[Page 78]]

give appropriate notice of their proposals in local newspapers. The 
Board, the Secretary, the Commerce Department's Assistant Secretary for 
Import Administration, or the Executive Secretary, as appropriate, may 
schedule and/or hold hearings during any proceedings or reviews 
conducted under this part whenever necessary or appropriate.
    (b) Requests for hearings--(1) A directly affected party showing 
good cause may request a hearing during a proceeding or review.
    (2) The request must be made within 30 days of the beginning of the 
period for public comment (see, Sec. 400.27) and must be accompanied by 
information establishing the need for the hearing and the basis for the 
requesting party's interest in the matter.
    (3) A determination as to the need for the hearing will be made by 
the Commerce Department's Assistant Secretary for Import Administration 
within 15 days after the receipt of such a request.
    (c) Procedure for public hearings. The Board will publish notice in 
the Federal Register of the date, time and location of a hearing. All 
participants shall have the opportunity to make a presentation. 
Applicants and their witnesses shall ordinarily appear first. The 
presiding officer may adopt time limits for individual presentations.



Sec. 400.52  Official record; public access.

    (a) Content. The Executive Secretary will maintain at the location 
stated in Sec. 400.53(d) an official record of each proceeding within 
the Board's jurisdiction. The Executive Secretary will include in the 
official record all factual information, written argument, and other 
material developed by, presented to, or obtained by the Board in 
connection with the proceeding. The official record will contain 
material that is public, business proprietary, privileged, and 
classified. While there is no requirement that a verbatim record shall 
be kept of public hearings, the proceedings of such hearings shall 
ordinarily be recorded and transcribed when significant opposition is 
involved.
    (b) Opening and closing of official record. The official record 
opens on the date the Executive Secretary files an application or 
receives a request that satisfies the applicable requirements of this 
part and closes on the date of the final determination in the proceeding 
or review, as applicable.
    (c) Protection of the official record. Unless otherwise ordered in a 
particular case by the Executive Secretary, the official record will not 
be removed from the Department of Commerce. A certified copy of the 
record will be made available to any court before which any aspect of a 
proceeding is under review, with appropriate safeguards to prevent 
disclosure of proprietary or privileged information.



Sec. 400.53  Information.

    (a) Request for information. The Board may request submission of any 
information, including business proprietary information, and written 
argument necessary or appropriate to the proceeding.
    (b) Public information. Except as provided in paragraph (c) of this 
section, the Board will consider all information submitted in a 
proceeding to be public information. If the person submitting the 
information does not agree to its public disclosure, the Board will 
return the information and not consider it in the proceeding.
    (c) Business proprietary information. Persons submitting business 
proprietary information and requesting protection from public disclosure 
shall mark the cover page ``business proprietary,'' as well as the top 
of each page on which such information appears.
    (d) Disclosure of information. Disclosure of public information will 
be governed by 15 CFR part 4. Public information in the official record 
will be available for inspection and copying at the Office of the 
Executive Secretary, Foreign-Trade Zones Board, U.S. Department of 
Commerce Building, Pennsylvania Avenue and 14th Street, NW., Washington, 
DC 20230.

[[Page 79]]



  CHAPTER VII--BUREAU OF INDUSTRY AND SECURITY, DEPARTMENT OF COMMERCE




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter VII appear at 67 FR 
20632, Apr. 26, 2002 and 69 FR 60546 and 60547, Oct. 12, 2004.

       SUBCHAPTER A--NATIONAL SECURITY INDUSTRIAL BASE REGULATIONS
Part                                                                Page
700             Defense priorities and allocations system...          81
701             Reporting of offsets agreements in sales of 
                    weapon systems or defense-related items 
                    to foreign countries or foreign firms...         106
702-704         [Reserved]
705             Effect of imported articles on the national 
                    security................................         108
706-709         [Reserved]

          SUBCHAPTER B--CHEMICAL WEAPONS CONVENTION REGULATIONS
710             General information and overview of the 
                    Chemical Weapons Convention Regulations 
                    (CWCR)..................................         113
711             General information regarding declaration, 
                    reporting and notification requirements.         119
712             Activities involving Schedule 1 chemicals...         123
713             Activities involving Schedule 2 chemicals...         129
714             Activities involving Schedule 3 chemicals...         137
715             Activities involving Unscheduled Discrete 
                    Organic Chemicals (UDOCs)...............         142
716             Initial and routine inspections of declared 
                    facilities..............................         144
717             Clarification of possible non-compliance 
                    with the Convention; challenge 
                    inspection procedures...................         177
718             Confidential business information...........         179
719             Enforcement.................................         182
720             Denial of export privileges.................         191
721             Inspection of records and recordkeeping.....         193
722             Interpretations [Reserved]

[[Page 80]]

723-729         [Reserved]

             SUBCHAPTER C--EXPORT ADMINISTRATION REGULATIONS
730             General information.........................         195
732             Steps for using the EAR.....................         204
734             Scope of the Export Administration 
                    regulations.............................         219
736             General prohibitions........................         235
738             Commerce Control List overview and the 
                    country chart...........................         241
740             License exceptions..........................         251
742             Control policy--CCL based controls..........         293
743             Special Reporting...........................         340
744             Control policy: end-user and end-use based..         342
745             Chemical Weapons Convention requirements....         362
746             Embargoes and other special controls........         367
747             Special Iraq reconstruction license.........         374
748             Applications (classification, advisory, and 
                    license) and documentation..............         376
750             Application processing, issuance, and denial         410
752             Special comprehensive license...............         422
754             Short supply controls.......................         438
756             Appeals.....................................         450
758             Export clearance requirements...............         452
760             Restrictive trade practices or boycotts.....         461
762             Recordkeeping...............................         527
764             Enforcement and protective measures.........         531
766             Administrative enforcement proceedings......         539
768             Foreign availability determination 
                    procedures and criteria.................         557
770             Interpretations.............................         566
772             Definitions of terms........................         574
774             The Commerce Control List...................         600
775-799         [Reserved]

[[Page 81]]



       SUBCHAPTER A_NATIONAL SECURITY INDUSTRIAL BASE REGULATIONS





PART 700_DEFENSE PRIORITIES AND ALLOCATIONS SYSTEM--Table of Contents




                            Subpart A_Purpose

Sec.
700.1 Purpose of this regulation.

                           Subpart B_Overview

700.2 Introduction.
700.3 Priority ratings and rated orders.
700.4 Priorities and allocations in a national emergency.
700.5 Special priorities assistance.
700.6 Official actions.
700.7 Compliance.

                          Subpart C_Definitions

700.8 Definitions.

                     Subpart D_Industrial Priorities

700.10 Delegation of authority.
700.11 Priority ratings.
700.12 Elements of a rated order.
700.13 Acceptance and rejection of rated orders.
700.14 Preferential scheduling.
700.15 Extension of priority ratings.
700.16 Changes or cancellations of priority ratings and rated orders.
700.17 Use of rated orders.
700.18 Limitations on placing rated orders.

           Subpart E_Industrial Priorities for Energy Programs

700.20 Use of priority ratings.
700.21 Application for priority rating authority.

      Subpart F_National emergency Preparedness and Critical Items

700.30 Priorities and allocations in a national emergency.
700.31 Metalworking machines.

Subpart G [Reserved]

                 Subpart H_Special Priorities Assistance

700.50 General provisions.
700.51 Requests for priority rating authority.
700.52 Examples of assistance.
700.53 Criteria for assistance.
700.54 Instances where assistance may not be provided.
700.55 Assistance programs with Canada and other nations.

                       Subpart I_Official Actions

700.60 General provisions.
700.61 Rating Authorizations.
700.62 Directives.
700.63 Letters of Understanding.

                          Subpart J_Compliance

700.70 General provisions.
700.71 Audits and investigations.
700.72 Compulsory process.
700.73 Notification of failure to comply.
700.74 Violations, penalties, and remedies.
700.75 Compliance conflicts.

             Subpart K_Adjustments, Exceptions, and Appeals

700.80 Adjustments or exceptions.
700.81 Appeals.

                   Subpart L_Miscellaneous Provisions

700.90 Protection against claims.
700.91 Records and reports.
700.92 Applicability of this regulation and official actions.
700.93 Communications.

Schedule I to Part 700--Approved Programs and Delegate Agencies
Appendix I to Part 700--Form BIS-999-Request for Special Priorities 
          Assistance

    Authority: Titles I and VII of the Defense Production Act of 1950, 
as amended (50 U.S.C. app. 2061 et seq.), Title VI of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5195 et 
seq.), and Executive Order 12919, 59 FR 29525, 3 CFR, 1994 Comp., p. 
901; Section 18 of the Selective Service Act of 1948 (50 U.S.C. App. 
468), 10 U.S.C. 2538, 50 U.S.C. 82, and Executive Order 12742, 56 FR 
1079, 3 CFR, 1991 Comp., p. 309; and Executive Order 12656, 53 FR 226, 3 
CFR, 1988 Comp., p. 585.

    Source: 49 FR 30414, July 30, 1984, unless otherwise noted. 
Redesignated at 54 FR 601, Jan. 9, 1989.



                            Subpart A_Purpose



Sec. 700.1  Purpose of this regulation.

    (a) Title I of the Defense Production Act of 1950, as amended (50 
U.S.C. App. 2061, et seq.) (Defense Production Act), authorizes the 
President: to require the

[[Page 82]]

priority performance of contracts and orders necessary or appropriate to 
promote the national defense over other contracts or orders; to allocate 
materials, services, and facilities as necessary or appropriate to 
promote the national defense; and to require the allocation of, or the 
priority performance under contracts or orders relating to, supplies of 
materials, equipment, and services in order to assure domestic energy 
supplies for national defense needs.
    (b) Section 18 of the Selective Service Act of 1948 (50 U.S.C. app. 
468) (Selective Service Act) authorizes the President to place an order 
with a supplier for any articles or materials required for the exclusive 
use of the U.S. armed forces whenever the President determines that in 
the interest of national security, prompt delivery of the articles and 
materials is required. The supplier must give precedence to the order so 
as to deliver the articles or materials in a required time period. 10 
U.S.C. 2538, and 50 U.S.C. 82, provide similar authority specifically 
for Department of Defense procurement, but only in time of war or when 
war is imminent.
    (c) Section 602(b) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5195a(b)) provides that the terms 
``national defense'' and ``defense'' as used in the Defense Production 
Act includes ``emergency preparedness activities'' conducted pursuant to 
Title VI of the Stafford Act. The definition of ``national defense'' in 
Section 702(13) of the Defense Production Act provides that this term 
includes ``emergency preparedness activities'' conducted pursuant to 
Title VI of the Stafford Act.
    (d) The Defense Priorities and Allocations System (DPAS) regulation 
implements the priorities and allocations authority of the Defense 
Production Act and as this authority pertains to Title VI of the 
Stafford Act, and the priorities authority of the Selective Service Act 
and related statutes, all with respect to industrial resources. The DPAS 
ensures the timely availability of industrial resources for approved 
programs and provides an operating system to support rapid industrial 
response to a national emergency.
    (e) To aid in understanding and using the DPAS, an overview of its 
major provisions is incorporated into this regulation as subpart B--
Overview. The full text of the DPAS is found in subparts D through L.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31921, June 11, 1998]



                           Subpart B_Overview



Sec. 700.2  Introduction.

    (a) Certain national defense and energy programs (including 
emergency preparedness activities) are approved for priorities and 
allocations support. For example, military aircraft production, 
ammunition, and certain programs which maximize domestic energy supplies 
are ``approved programs.'' A complete list of currently approved 
programs is provided at Schedule 1 to this part.
    (b) The Department of Commerce administers the DPAS to ensure the 
timely delivery of industrial items to meet approved program 
requirements.
    (c) Commerce has delegated authority to place priority ratings on 
contracts or orders necessary or appropriate to promote the national 
defense to the government agencies that issue such contracts or orders. 
Schedule I includes a list of agencies delegated this authority. Copies 
of the Delegations of Authority are provided at Appendix II. They set 
forth the authorities delegated and those retained by Commerce.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31921, June 11, 1998]



Sec. 700.3  Priority ratings and rated orders.

    (a) Rated orders are identified by a priority rating consisting of 
the rating--either DX or DO--and a program identification symbol. Rated 
orders take preference over all unrated orders as necessary to meet 
required delivery dates. Among rated orders, DX rated orders take 
preference over DO rated orders. Program identification symbols

[[Page 83]]

indicate which approved program is involved with the rated order. For 
example, A1 identifies defense aircraft programs and A7 signifies 
defense electronic programs. The program identification symbols, in 
themselves, do not connote any priority.
    (b) Persons receiving rated orders must give them preferential 
treatment as required by this regulation. This means a person must 
accept and fill a rated order for items that the person normally 
supplies. The existence of previously accepted unrated or lower rated 
orders is not sufficient reason for rejecting a rated order. Persons are 
required to reschedule unrated orders if they conflict with performance 
against a rated order. Similarly, persons must reschedule DO rated 
orders if they conflict with performance against a DX rated order.
    (c) All rated orders must be scheduled to the extent possible to 
ensure delivery by the required delivery date.
    (d) Persons who receive rated orders must in turn place rated orders 
with their suppliers for the items they need to fill the orders. This 
provision ensures that suppliers will give priority treatment to rated 
orders from contractor to subcontractor to suppliers throughout the 
procurement chain.
    (e) Persons may place a priority rating on orders only when they are 
in receipt of a rated order, have been explicitly authorized to do so by 
the Department of Commerce or a Delegate Agency, or are otherwise 
permitted to do so by this regulation.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31921, June 11, 1998]



Sec. 700.4  Priorities and allocations in a national emergency.

    (a) In the event of a national emergency, special rules may be 
established as needed to supplement this part, thus ensuring rapid 
industrial response and the timely availability of critical industrial 
items and facilities to meet the urgent national defense requirements, 
including domestic emergency preparedness requirements, of approved 
programs.
    (b) The special rules established in response to the emergency may 
include provisions for the taking of certain emergency official actions 
and the allocation of critical and scarce materials and facilities.

[63 FR 31921, June 11, 1998]



Sec. 700.5  Special priorities assistance.

    (a) The DPAS is designed to be largely self-executing. However, from 
time-to-time production or delivery problems will arise. In this event, 
special priorities assistance is available from Commerce and from the 
Delegate Agencies.
    (b) Special priorities assistance is available for any reason 
consistent with this regulation. Generally, special priorities 
assistance is provided to expedite deliveries, resolve delivery 
conflicts, place rated orders, locate suppliers, or to verify 
information supplied by customers and vendors. Special priorities 
assistance may also be used to request rating authority for items not 
automatically ratable.



Sec. 700.6  Official actions.

    When necessary, Commerce takes specific official actions to 
implement or enforce the provisions of this regulation and to provide 
special priorities assistance. Such actions may include the issuance of: 
Rating Authorizations, Directives, Letters of Understanding, Set-asides, 
and compliance documents (Administrative Subpoenas, Demands for 
Information, and Inspection Authorizations).



Sec. 700.7  Compliance.

    (a) Compliance with the provisions of this regulation and official 
actions is required by the Defense Production Act and the Selective 
Service Act and related statutes. Violators are subject to criminal 
penalties.
    (b) Any person who places or receives a rated order should be 
thoroughly familiar with, and must comply with, the provisions of this 
regulation.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31921, June 11, 1998]

[[Page 84]]



                          Subpart C_Definitions



Sec. 700.8  Definitions.

    In addition to the definitions provided in Section 702 of the 
Defense Production Act (excepting the definition of ``industrial 
resources'') and Section 602(a) of the Stafford Act, the following 
definitions pertain to all sections of this part:
    Approved program--a program determined as necessary or appropriate 
for priorities and allocations support to promote the national defense 
by the Secretary of Defense, the Secretary of Energy, or the Director, 
Federal Emergency Management Agency, under the authority of the Defense 
Production Act, the Stafford Act, and Executive Order 12919, or the 
Selective Service Act and related statutes and Executive Order 12742.
    Construction. The erection, addition, extension, or alteration of 
any building, structure, or project, using materials or products which 
are to be an integral and permanent part of the building, structure, or 
project. Construction does not include maintenance and repair.
    Delegate Agency. A government agency authorized by delegation from 
the Department of Commerce to place priority ratings on contracts or 
orders needed to support approved programs.
    Defense Production Act. the Defense Production Act of 1950, as 
amended (50 U.S.C. App. 2061, et seq.).
    Industrial resources--all materials, services, and facilities, 
including construction materials, the authority for which has not been 
delegated to other agencies under Executive Order 12919. This term also 
includes the term ``item'' as defined and used in this part.
    Item. Any raw, in process, or manufactured material, article, 
commodity, supply, equipment, component, accessory, part, assembly, or 
product of any kind, technical information, process, or service.
    Maintenance and repair and operating supplies (MRO):
    (a) Maintenance is the upkeep necessary to continue any plant, 
facility, or equipment in working condition.
    (b) Repair is the restoration of any plant, facility, or equipment 
to working condition when it has been rendered unsafe or unfit for 
service by wear and tear, damage, or failure of parts.
    (c) Operating supplies are any items carried as operating supplies 
according to a person's established accounting practice. Operating 
supplies may include hand tools and expendable tools, jigs, dies, 
fixtures used on production equipment, lubricants, cleaners, chemicals 
and other expendable items.
    (d) MRO does not include items produced or obtained for sale to 
other persons or for installation upon or attachment to the property of 
another person, or items required for the production of such items; 
items needed for the replacement of any plant, facility, or equipment; 
or items for the improvement of any plant, facility, or equipment by 
replacing items which are still in working condition with items of a new 
or different kind, quality, or design.
    Official action. An action taken by Commerce under the authority of 
the Defense Production Act, the Selective Service Act and related 
statutes, and this regulation. Such actions include the issuance of Set-
asides, Rating Authorizations, Directives, Letters of Understanding, 
Demands for Information, Inspection Authorizations, and Administrative 
Subpoenas.
    Person--any individual, corporation, partnership, association, or 
any other organized group of persons, or legal successor or 
representative thereof; or any authorized State or local government or 
agency thereof; and for purposes of administration of this part, 
includes the United States Government and any authorized foreign 
government or agency thereof, delegated authority as provided in this 
part.
    Production equipment. Any item of capital equipment used in 
producing materials or furnishing services that has a unit acquisition 
cost of $2,500 or more, an anticipated service life in excess of one 
year, and the potential for maintaining its integrity as a capital item.
    Rated order. A prime contract, a subcontract, or a purchase order in 
support of an approved program issued in accordance with the provisions 
of this regulation.

[[Page 85]]

    Selective Service Act and related statutes--Section 18 of the 
Selective Service Act of 1948 (50 U.S.C. app. 468), 10 U.S.C. 2538, and 
50 U.S.C. 82.
    Set-aside. The amount of an item for which a supplier must reserve 
order book space in anticipation of the receipt of rated orders.
    Stafford Act--Title VI (Emergency Preparedness) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act, as amended (42 
U.S.C. 5195 et seq.).

[49 FR 30414, July 30, 1984; 49 FR 50172, Dec. 27, 1984. Redesignated at 
54 FR 601, Jan. 9, 1989, as amended at 63 FR 31921, June 11, 1998]



                     Subpart D_Industrial Priorities



Sec. 700.10  Delegation of authority.

    (a) The priorities and allocations authorities of the President 
under Title I of the Defense Production Act with respect to industrial 
resources have been delegated to the Secretary of Commerce under 
Executive Order 12919 of June 3, 1994 (59 FR 29525). The priorities 
authorities of the President under the Selective Service Act and related 
statutes with respect to industrial resources have also been delegated 
to the Secretary of Commerce under Executive Order 12742 of January 8, 
1991 (56 FR 1079).
    (b) Within the Department of Commerce, these responsibilities have 
been assigned to the Office of Strategic Industries and Economic 
Security. The Department of Commerce has authorized the Delegate 
Agencies to assign priority ratings to orders for items needed for 
approved programs. Copies of these Delegations of Authority are provided 
at Appendix II. They set forth the authorities delegated and those 
retained by Commerce.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31922, June 11, 1998]



Sec. 700.11  Priority ratings.

    (a) Levels of priority. (1) There are two levels of priority 
established by this regulation, identified by the rating symbols ``DO'' 
and ``DX''.
    (2) All DO rated orders have equal priority with each other and take 
preference over unrated orders. All DX rated orders have equal priority 
with each other and take preference over DO rated orders and unrated 
orders. (For resolution of conflicts among rated orders of equal 
priority, see Sec. 700.14(c).)
    (3) In addition, a Directive issued by Commerce takes preference 
over any DX rated order, DO rated order, or unrated order, as stipulated 
in the Directive. (For a full discussion of Directives, see Sec. 
700.62.)
    (b) Program identification symbols. Program identification symbols 
indicate which approved program is being supported by a rated order. The 
list of approved programs and their identification symbols are listed in 
Schedule I. For example, A1 identifies defense aircraft programs and A7 
signifies defense electronic programs. Program identification symbols, 
in themselves, do not connote any priority.
    (c) Priority ratings. A priority rating consists of the rating 
symbol--DO and DX--and the program identification symbol, such as A1, 
B2, or H6. Thus, a contract for the production of an aircraft will 
contain a DO-A1 or DX-A1 priority rating. A contract for a radar set 
will contain a DO-A7 or DX-A7 priority rating.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31922, June 11, 1998]



Sec. 700.12  Elements of a rated order.

    Each rated order must include:
    (a) The appropriate priority rating (e.g. DO-A1, DX-A4, DO-H1);
    (b) A required delivery date or dates. The words ``immediately'' or 
``as soon as possible'' do not constitute a delivery date. A 
``requirements contract'', ``basic ordering agreement'', ``prime vendor 
contract'', or similar procurement document bearing a priority rating 
may contain no specific delivery date or dates and may provide for the 
furnishing of items from time-to-time or within a stated period against 
specific purchase orders, such as ``calls'', ``requisitions'', and 
``delivery orders''. These purchase orders must specify a required 
delivery date or dates and are to be considered as rated as of the date 
of their receipt by the supplier and not as of the date of the original 
procurement document;

[[Page 86]]

    (c) The written signature on a manually placed order, or the digital 
signature or name on an electronically placed order, of an individual 
authorized to sign rated orders for the person placing the order. The 
signature or use of the name certifies that the rated order is 
authorized under this part and that the requirements of this part are 
being followed; and
    (d) A statement that reads in substance:

    This is a rated order certified for national defense use, and you 
are required to follow all the provisions of the Defense Priorities and 
Allocations System regulation (15 CFR part 700).

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31922, June 11, 1998]



Sec. 700.13  Acceptance and rejection of rated orders.

    (a) Mandatory acceptance. (1) Except as otherwise specified in this 
section, a person shall accept every rated order received and must fill 
such orders regardless of any other rated or unrated orders that have 
been accepted.
    (2) A person shall not discriminate against rated orders in any 
manner such as by charging higher prices or by imposing different terms 
and conditions than for comparable unrated orders.
    (b) Mandatory rejection. Unless otherwise directed by Commerce:
    (1) A person shall not accept a rated order for delivery on a 
specific date if unable to fill the order by that date. However, the 
person must inform the customer of the earliest date on which delivery 
can be made and offer to accept the order on the basis of that date. 
Scheduling conflicts with previously accepted lower rated or unrated 
orders are not sufficient reason for rejection under this section.
    (2) A person shall not accept a DO rated order for delivery on a 
date which would interfere with delivery of any previously accepted DO 
or DX rated orders. However, the person must offer to accept the order 
based on the earliest delivery date otherwise possible.
    (3) A person shall not accept a DX rated order for delivery on a 
date which would interfere with delivery of any previously accepted DX 
rated orders, but must offer to accept the order based on the earliest 
delivery date otherwise possible.
    (4) If a person is unable to fill all the rated orders of equal 
priority status received on the same day, the person must accept, based 
upon the earliest delivery dates, only those orders which can be filled, 
and reject the other orders. For example, a person must accept order A 
requiring delivery on December 15 before accepting order B requiring 
delivery on December 31. However, the person must offer to accept the 
rejected orders based on the earliest delivery dates otherwise possible.
    (c) Optional rejection. Unless otherwise directed by Commerce, rated 
orders may be rejected in any of the following cases as long as a 
supplier does not discriminate among customers:
    (1) If the person placing the order is unwilling or unable to meet 
regularly established terms of sale or payment;
    (2) If the order is for an item not supplied or for a service not 
performed;
    (3) If the order is for an item produced, acquired, or provided only 
for the supplier's own use for which no orders have been filled for two 
years prior to the date of receipt of the rated order. If, however, a 
supplier has sold some of these items, the supplier is obligated to 
accept rated orders up to that quantity or portion of production, 
whichever is greater, sold within the past two years;
    (4) If the person placing the rated order, other than the U.S. 
Government, makes the item or performs the service being ordered;
    (5) If acceptance of a rated order or performance against a rated 
order would violate any other regulation, official action, or order of 
the Department of Commerce issued under the authority of the Defense 
Production Act or the Selective Service Act and related statutes [See 
Sec. 700.75].
    (d) Customer notification requirements. (1) A person must accept or 
reject a rated order in writing or electronically within fifteen (15) 
working days after receipt of a DO rated order and within ten (10) 
working days after receipt of a DX rated order. If the order is 
rejected, the person must give reasons in writing (not electronically) 
for the rejection.

[[Page 87]]

    (2) If a person has accepted a rated order and subsequently finds 
that shipment or performance will be delayed, the person must notify the 
customer immediately, give the reasons for the delay, and advise of a 
new shipment or performance date. If notification is given verbally, 
written or electronic confirmation must be provided within five (5) 
working days.

(The information collection requirements in paragraphs (d)(1) and (d)(2) 
are approved by the Office of Management and Budget under OMB control 
number 0694-0053.)

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31922, June 11, 1998]



Sec. 700.14  Preferential scheduling.

    (a) A person must schedule operations, including the acquisition of 
all needed production items, in a timely manner to satisfy the delivery 
requirements of each rated order. Modifying production or delivery 
schedules is necessary only when required delivery dates for rated 
orders cannot otherwise be met.
    (b) DO rated orders must be given production preference over unrated 
orders, if necessary to meet required delivery dates, even if this 
requires the diversion of items being processed or ready for delivery 
against unrated orders. Similarly, DX rated orders must be given 
preference over DO rated orders and unrated orders.

    Examples: If a person receives a DO rated order with a delivery date 
of June 3 and if meeting that date would mean delaying production or 
delivery of an item for an unrated order, the unrated order must be 
delayed. If a DX rated order is received calling for delivery on July 15 
and a person has a DO rated order requiring delivery on June 2 and 
operations can be scheduled to meet both deliveries, there is no need to 
alter production schedules to give any additional preference to the DX 
rated order.

    (c) Conflicting rated orders. (1) If a person finds that delivery or 
performance against any accepted rated orders conflicts with the 
delivery or performance against other accepted rated orders of equal 
priority status, the person shall give preference to the conflicting 
orders in the sequence in which they are to be delivered or performed 
(not to the receipt dates). If the conflicting rated orders are 
scheduled to be delivered or performed on the same day, the person shall 
give preference to those orders which have the earliest receipt dates.
    (2) If a person is unable to resolve rated order delivery or 
performance conflicts under this section, the person should promptly 
seek special priorities assistance as provided in Sec. Sec. 700.50 
through 700.54. If the person's customer objects to the rescheduling of 
delivery or performance of a rated order, the customer should promptly 
seek special priorities assistance as provided in Sec. Sec. 700.50 
through 700.54. For any rated order against which delivery or 
performance will be delayed, the person must notify the customer as 
provided in Sec. 700.13(d)(2).
    (d) If a person is unable to purchase needed production items in 
time to fill a rated order by its required delivery date, the person 
must fill the rated order by using inventoried production items. A 
person who uses inventoried items to fill a rated order may replace 
those items with the use of a rated order as provided in Sec. 
700.17(b).

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31922, June 11, 1998]



Sec. 700.15  Extension of priority ratings.

    (a) A person must use rated orders with suppliers to obtain items 
needed to fill a rated order. The person must use the priority rating 
indicated on the customer's rated order, except as otherwise provided in 
this regulation or as directed by the Department of Commerce.

    For example, if a person is in receipt of a DO-A3 rated order for a 
navigation system and needs to purchase semiconductors for its 
manufacture, that person must use a DO-A3 rated order to obtain the 
needed semiconductors.

    (b) The priority rating must be included on each successive order 
placed to obtain items needed to fill a customer's rated order. This 
continues from contractor to subcontractor to supplier throughout the 
entire procurement chain.



Sec. 700.16  Changes or cancellations of priority ratings and rated orders.

    (a) The priority rating on a rated order may be changed or cancelled 
by:

[[Page 88]]

    (1) An official action of the Department of Commerce; or
    (2) Written notification from the person who placed the rated order 
(including a Delegate Agency).
    (b) If an unrated order is amended so as to make it a rated order, 
or a DO, rating is changed to a DX rating, the supplier must give the 
appropriate preferential treatment to the order as of the date the 
change is received by the supplier.
    (c) An amendment to a rated order that significantly alters a 
supplier's original production or delivery schedule shall constitute a 
new rated order as of the date of its receipt. The supplier must accept 
or reject the amended order according to the provisions of Sec. 700.13.
    (d) The following amendments do not constitute a new rated order: a 
change in shipping destination; a reduction in the total amount of the 
order; an increase in the total amount of the order which has negligible 
impact upon deliveries; a minor variation in size or design; or a change 
which is agreed upon between the supplier and the customer.
    (e) If a person no longer needs items to fill a rated order, any 
rated orders placed with suppliers for the items, or the priority rating 
on those orders, must be cancelled.
    (f) When a priority rating is added to an unrated order, or is 
changed or cancelled, all suppliers must be promptly notified in 
writing.



Sec. 700.17  Use of rated orders.

    (a) A person must use rated orders to obtain:
    (1) Items which will be physically incorporated into other items to 
fill rated orders, including that portion of such items normally 
consumed, or converted into scrap or by-products, in the course of 
processing;
    (2) Containers or other packaging materials required to make 
delivery of the finished items against rated orders;
    (3) Services, other than contracts of employment, needed to fill 
rated orders; and
    (4) MRO needed to produce the finished items to fill rated orders. 
However, for MRO, the priority rating used must contain the program 
identification symbol H7 along with the rating symbol contained on the 
customer's rated order. For example, a person in receipt of a DO-A3 
rated order, who needs MRO, would place a DO-H7 rated order with the 
person's supplier.
    (b) A person may use a rated order to replace inventoried items 
(including finished items) if such items were used to fill rated orders, 
as follows:
    (1) The order must be placed within 90 days of the date of use of 
the inventory.
    (2) A DO rating symbol and the program identification symbol 
indicated on the customer's rated order must be used on the order. A DX 
rating symbol may not be used even if the inventory was used to fill a 
DX rated order.
    (3) If the priority ratings on rated orders from one customer or 
several customers contain different program identification symbols, the 
rated orders may be combined. In this case, the program identification 
symbol H1 must be used (i.e., DO-H1).
    (c) A person may combine DX and DO rated orders from one customer or 
several customers if the items covered by each level of priority are 
identified separately and clearly. If different program identification 
symbols are indicated on those rated orders of equal priority, the 
person must use the program identification symbol H1 (i.e., DO-H1 or DX-
H1).
    (d) Combining rated and unrated orders. (1) A person may combine 
rated and unrated order quantities on one purchase order provided that:
    (i) The rated quantities are separately and clearly identified; and
    (ii) The four elements of a rated order, as required by Sec. 
700.12, are included on the order with the statement required in Sec. 
700.12(d) modified to read in substance:

    This purchase order contains rated order quantities certified for 
national defense use, and you are required to follow all the provisions 
of the Defense Priorities and Allocations System regulation (15 CFR part 
700) only as it pertains to the rated quantities.

    (2) A supplier must accept or reject the rated portion of the 
purchase order as provided in Sec. 700.13 and give preferential 
treatment only to the rated quantities as required by this part.

[[Page 89]]

This part may not be used to give preferential treatment to the unrated 
portion of the order.
    (3) Any supplier who believes that rated and unrated orders are 
being combined in a manner contrary to the intent of this regulation or 
in a fashion that causes undue or exceptional hardship may submit a 
request for adjustment or exception under Sec. 700.80.
    (e) A person may place a rated order for the minimum commercially 
procurable quantity even if the quantity needed to fill a rated order is 
less than that minimum. However, a person must combine rated orders as 
provided in paragraph (c) of this section, if possible, to obtain 
minimum procurable quantities.
    (f) A person is not required to place a priority rating on an order 
for less than $50,000, or one half of the Federal Acquisition Regulation 
(FAR) Simplified Acquisition Threshold (see FAR 2.101), whichever amount 
is larger, provided that delivery can be obtained in a timely fashion 
without the use of the priority rating.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31923, June 11, 1998]



Sec. 700.18  Limitations on placing rated orders.

    (a) General limitations. (1) A person may not place a DO or DX rated 
order unless entitled to do so under this regulation.
    (2) Rated orders may not be used to obtain:
    (i) Delivery on a date earlier than needed;
    (ii) A greater quantity of the item than needed, except to obtain a 
minimum procurable quantity. Separate rated orders may not be placed 
solely for the purpose of obtaining minimum procurable quantities on 
each order;
    (iii) Items in advance of the receipt of a rated order, except as 
specifically authorized by Commerce (see Sec. 700.51(c) for information 
on obtaining authorization for a priority rating in advance of a rated 
order); or
    (iv) Any of the following items unless specific priority rating 
authority has been obtained from a Delegate Agency or Commerce:
    (A) Items for plant improvement, expansion or construction, unless 
they will be physically incorporated into a construction project covered 
by a rated order; and
    (B) Production or construction equipment or items to be used for the 
manufacture of production equipment. [For information on requesting 
priority rating authority, see Sec. 700.53.]
    (v) Any items related to the development of chemical or biological 
warfare capabilities or the production of chemical or biological 
weapons, unless such development or production has been authorized by 
the President or the Secretary of Defense.
    (b) Jurisdictional limitations. (1) The priorities and allocations 
authority for certain items has been delegated under Executive Orders 
12919 and 12742, other executive order, or Interagency Memoranda of 
Understanding to other agencies. Unless otherwise agreed to by the 
concerned agencies, the provisions of this part are not applicable to 
these items which include:
    (i) Food resources, food resource facilities, and the domestic 
distribution of farm equipment and commercial fertilizer (Department of 
Agriculture--see Attachment A to DPAS Delegation 1 in Appendix II to 
part 700 concerning combat rations);
    (ii) All forms of energy, including radioisotopes, stable isotopes, 
source material, and special nuclear material produced in Government-
owned plants or facilities operated by or for the Department of Energy 
(Department of Energy);
    (iii) Health resources (Department of Health and Human Services);
    (iv) All forms of civil transportation (Department of 
Transportation);
    (v) Water resources (Department of Defense/U.S. Army Corps of 
Engineers);
    (vi) Communications services (National Communications System under 
Executive Order 12472 of April 3, 1984); and
    (vii) Mineral resources and mineral processing facilities 
(Department of the Interior/U.S. Geological Survey--see Memorandum of 
Understanding Between Interior and Commerce in DPAS Appendix III to part 
700).

[[Page 90]]

    (2) The jurisdiction of the Department of Commerce and the 
Departments of Energy, Agriculture, and the Interior over certain 
specific items included in the categories listed above has been 
clarified by Interagency Memoranda of Understanding. Copies of these 
Memoranda are provided for information at appendix III.
    (3) The following items under the jurisdiction of Commerce are 
currently excluded from the rating provisions of this regulation; 
however, these items are subject to Commerce Directives. These excluded 
items are:

Copper raw materials
Crushed stone
Gravel
Sand
Scrap
Slag
Steam heat, central
Waste paper

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31923, June 11, 1998]



           Subpart E_Industrial Priorities for Energy Programs



Sec. 700.20  Use of priority ratings.

    (a) Section 101(c) of the Defense Production Act authorizes the use 
of priority ratings for projects which maximize domestic energy 
supplies.
    (b) Projects which maximize domestic energy supplies include those 
which maintain or further domestic energy exploration, production, 
refining, and transportation; maintain or further the conservation of 
energy; or are involved in the construction or maintenance of energy 
facilities.



Sec. 700.21  Application for priority rating authority.

    (a) For projects believed to maximize domestic energy supplies, a 
person may request priority rating authority for scarce, critical, and 
essential supplies of materials, equipment, and services (related to the 
production of materials or equipment, or the installation, repair, or 
maintenance of equipment) by submitting DOE Form PR 437 to the 
Department of Energy. Blank applications and further information may be 
obtained from the U.S. Department of Energy, Office of Clearance and 
Support, Field/Headquarters Support Division, Forrestal Building, 1000 
Independence Avenue, S.W., Washington, D.C. 20585; Attn.: PR-132.
    (b) On receipt of the application, the Department of Energy will:
    (1) Determine if the project maximizes domestic energy supplies; and
    (2) Find whether the materials, equipment, or services involved in 
the application are critical and essential to the project.
    (c) If the Department of Energy notifies Commerce that the project 
maximizes domestic energy supplies and that the materials, equipment, or 
services are critical and essential, Commerce must find whether the 
items in question are scarce and whether there is a need to use the 
priorities and allocations authorities.
    (1) Scarcity implies an unusual difficulty in obtaining the 
materials, equipment, or services in a timeframe consistent with the 
timely completion of the energy project. Among the factors to be used in 
making the scarcity finding will be the following:
    (i) Value and volume of material or equipment shipments;
    (ii) Consumption of material and equipment;
    (iii) Volume and market trends of imports and exports;
    (iv) Domestic and foreign sources of supply;
    (v) Normal levels of inventories;
    (vi) Rates of capacity utilization;
    (vii) Volume of new orders; and
    (viii) Lead times for new orders.
    (2) In finding whether there is a need to use the priorities and 
allocations authorities, Commerce will consider alternative supply 
solutions and other measures.
    (d) If Commerce does not find that the items of materials, 
equipment, or services are scarce, it will not proceed to analyze the 
need to use the priorities and allocations authorities.
    (e) Commerce will inform the Department of Energy of the results of 
its analysis. If Commerce has made the two required findings, it will 
authorize the Department of Energy to grant the use of a priority rating 
to the applicant.

[[Page 91]]

    (f) Schedule I includes a list of approved programs to support the 
maximization of domestic energy supplies. A Department of Energy 
regulation setting forth the procedures and criteria used by the 
Department of Energy in making its determination and findings is 
published in 10 CFR part 216.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31923, June 11, 1998]



      Subpart F_National Emergency Preparedness and Critical Items

    Source: 63 FR 31923, June 11, 1998, unless otherwise noted.



Sec. 700.30  Priorities and allocations in a national emergency.

    (a) In the event of a national emergency, special rules may be 
established as needed to supplement this part, thus ensuring rapid 
industrial response and the timely availability of critical industrial 
items and facilities to meet the urgent national defense requirements, 
including domestic emergency preparedness requirements, of approved 
programs.
    (1) Emergency official actions. (i) As needed, this part may be 
supplemented to include additional definitions to cover civilian 
emergency preparedness industrial items, support for essential civilian 
programs, and provisions for the taking of certain emergency official 
actions under sections Sec. Sec. 700.60 through 700.63.
    (ii) Emergency official actions may include:
    (A) Controlling inventories of critical and scarce defense and/or 
emergency preparedness items;
    (B) Restricting the purchase, use, or distribution of critical and 
scarce defense and/or emergency preparedness items, or the use of 
production or distribution facilities, for non-essential purposes; and
    (C) Converting the production or distribution of non-essential items 
to the production or distribution of critical and scarce defense and/or 
emergency preparedness items.
    (2) Allocation of critical and scarce items and facilities. (i) As 
needed, this part may be supplemented to establish special rules for the 
allocation of scarce and critical items and facilities to ensure the 
timely availability of these items and facilities for approved programs, 
and to provide for an equitable and orderly distribution of requirements 
for such items among all suppliers of the items. These rules may provide 
for the allocation of individual items or they may be broad enough to 
direct general industrial activity as required in support of emergency 
requirements.
    (ii) Allocation rules (i.e., controlled materials programs) were 
established in response to previous periods of national security 
emergency such as World War II and the Korean Conflict. The basic 
elements of the controlled materials programs were the set-aside (the 
amount of an item for which a producer or supplier must reserve order 
book space in anticipation of the receipt of rated orders), the 
production directive (requires a producer to supply a specific quantity, 
size, shape, and type of an item within a specific time period), and the 
allotment (the maximum quantity of an item authorized for use in a 
specific program or application). These elements can be used to assure 
the availability of any scarce and critical item for approved programs. 
Currently, a set-aside applies only to metalworking machines (see Sec. 
700.31).
    (3) In the event that certain critical items become scarce, and 
approved program requirements for these items cannot be met without 
creating a significant dislocation in the civilian market place so as to 
create appreciable hardship, Commerce may establish special rules under 
section 101(b) of the Defense Production Act to control the general 
distribution of such items in the civilian market.
    (b) Regional Emergency Coordinators. (1) If due to a catastrophic 
national security emergency event, communications with Commerce 
headquarters in Washington, D.C. are severed, DPAS Emergency Delegation 
1 will provide authority to the Regional Emergency Coordinators (REC) 
located in the Standard Federal Region Council cities (Boston, New York, 
Philadelphia, Atlanta, Dallas, Kansas City, Chicago, Denver, San 
Francisco, and Seattle) to represent the Secretary of Commerce,

[[Page 92]]

and as necessary, act for the Secretary to carry out the emergency 
industrial production and distribution control functions of Commerce as 
set forth in this part, in any supplement thereto, or other applicable 
authority. See DPAS Emergency Delegation 1 for further information about 
the authority and duties of the RECs, and the effective date of the 
Delegation.
    (2) If DPAS Emergency Delegation 1 is implemented due to a 
catastrophic national security emergency event, requests for special 
priorities assistance under Sec. Sec. 700.50 through 700.55 should be 
filed with the nearest Regional Emergency Coordinator located in one of 
the Standard Federal Region Council cities as provided in DPAS 
Delegation 1.



Sec. 700.31  Metalworking machines.

    (a) ``Metalworking machines'' include power driven, manual or 
automatic, metal cutting and metal forming machines and complete 
machines not supported in the hands of an operator when in use. Basic 
machines with a list price of $2,500 or less are not covered by this 
section.
    (b) Metalworking machines covered by this section include:

Bending and forming machines
Boring machines
Broaching machines
Drilling and tapping machines
Electrical discharge, ultrasonic and chemical erosion machines
Forging machinery and hammers
Gear cutting and finishing machines
Grinding machines
Hydraulic and pneumatic presses, power driven
Machining centers and way-type machines
Manual presses
Mechanical presses, power driven
Milling machines
Miscellaneous machine tools
Miscellaneous secondary metal forming and cutting machines
Planers and shapers
Polishing, lapping, boring, and finishing machines
Punching and shearing machines
Riveting machines
Saws and filing machines
Turning machines, lathes, including automatic
Wire and metal ribbon forming machines

    (c) A metalworking machine producer is not required to accept DO 
rated orders calling for delivery in any month of a total quantity of 
any size of machine in excess of 60 percent of scheduled production of 
that size of machine for that month, or any DO rated orders received 
less than three months prior to the beginning of the month for which 
delivery is requested. However, DX rated orders must be accepted without 
regard to a set-aside or the lead time, if delivery can be made by the 
required date.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989. 
Further redesignated at 63 FR 31924, June 11, 1998]

Subpart G [Reserved]



                 Subpart H_Special Priorities Assistance



Sec. 700.50  General provisions.

    (a) The DPAS is designed to be largely self-executing. However, it 
is anticipated that from time-to-time problems will occur. In this 
event, a person should immediately contact the appropriate contract 
administration officer for guidance or assistance. If additional formal 
aid is needed, special priorities assistance should be sought from the 
Delegate Agency through the contract administration officer. If the 
Delegate Agency is unable to resolve the problem or to authorize the use 
of a priority rating and believes additional assistance is warranted, 
the Delegate Agency may forward the request to the Department of 
Commerce for action. Special priorities assistance is a service provided 
to alleviate problems that do arise.
    (b) Special priorities assistance can be provided for any reason in 
support of this regulation, such as assisting in obtaining timely 
deliveries of items needed to satisfy rated orders or authorizing the 
use of priority ratings on orders to obtain items not automatically 
ratable under this regulation.
    (c) A request for special priorities assistance or priority rating 
authority must be submitted on Form BIS-999 (OMB control number 0694-
0057) to the local contract administration representative. Form BIS-999 
may be obtained from the Delegate Agency representative or from the 
Department of

[[Page 93]]

Commerce. A sample Form BIS-999 is attached at Appendix I.

[49 FR 30414, July 30, 1984; 49 FR 50171, Dec. 27, 1984. Redesignated at 
54 FR 601, Jan. 9, 1989, as amended at 63 FR 31924, June 11, 1998]



Sec. 700.51  Requests for priority rating authority.

    (a) If a rated order is likely to be delayed because a person is 
unable to obtain items not normally rated under this regulation, the 
person may request the authority to use a priority rating in ordering 
the needed items. Examples of items for which priority ratings can be 
authorized include:
    (1) Production or construction equipment;
    (2) Computers when not used as production items; and
    (3) Expansion, rebuilding or replacing plant facilities.
    (b) Rating authority for production or construction equipment. (1) A 
request for priority rating authority for production or construction 
equipment must be submitted to the appropriate Delegate Agency. The 
Delegate Agency may establish particular forms to be used for these 
requests (e.g., Department of Defense Form DD 691.)
    (2) When the use of a priority rating is authorized for the 
procurement of production or construction equipment, a rated order may 
be used either to purchase or to lease such equipment. However, in the 
latter case, the equipment may be leased only from a person engaged in 
the business of leasing such equipment or from a person willing to lease 
rather than sell.
    (c) Rating authority in advance of a rated prime contract. (1) In 
certain cases and upon specific request, Commerce, in order to promote 
the national defense, may authorize a person to place a priority rating 
on an order to a supplier in advance of the issuance of a rated prime 
contract. In these instances, the person requesting advance rating 
authority must obtain sponsorship of the request from the appropriate 
Delegate Agency. The person shall also assume any business risk 
associated with the placing of rated orders if these orders have to be 
cancelled in the event the rated prime contract is not issued.
    (2) The person must state the following in the request:

    It is understood that the authorization of a priority rating in 
advance of our receiving a rated prime contract from a Delegate Agency 
and our use of that priority rating with our suppliers in no way commits 
the Delegate Agency, the Department of Commerce or any other government 
agency to enter into a contract or order or to expend funds. Further, we 
understand that the Federal Government shall not be liable for any 
cancellation charges, termination costs, or other damages that may 
accrue if a rated prime contract is not eventually placed and, as a 
result, we must subsequently cancel orders placed with the use of the 
priority rating authorized as a result of this request.

    (3) In reviewing requests for rating authority in advance of a rated 
prime contract, Commerce will consider, among other things, the 
following criteria:
    (i) The probability that the prime contract will be awarded;
    (ii) The impact of the resulting rated orders on suppliers and on 
other authorized programs;
    (iii) Whether the contractor is the sole source;
    (iv) Whether the item being produced has a long lead time;
    (v) The political sensitivity of the project; and
    (vi) The time period for which the rating is being requested.
    (4) Commerce may require periodic reports on the use of the rating 
authority granted under paragraph (c) of this section.
    (5) If a rated prime contract is not issued, the person shall 
promptly notify all suppliers who have received rated orders pursuant to 
the advanced rating authority that the priority rating on those orders 
is cancelled.



Sec. 700.52  Examples of assistance.

    (a) While special priorities assistance may be provided for any 
reason in support of this regulation, it is usually provided in 
situations where:
    (1) A person is experiencing difficulty in obtaining delivery 
against a rated order by the required delivery date; or
    (2) A person cannot locate a supplier for an item needed to fill a 
rated order.
    (b) Other examples of special priorities assistance include:

[[Page 94]]

    (1) Ensuring that rated orders receive preferential treatment by 
suppliers;
    (2) Resolving production or delivery conflicts between various rated 
orders;
    (3) Assisting in placing rated orders with suppliers;
    (4) Verifying the urgency of rated orders; and
    (5) Determining the validity of rated orders.



Sec. 700.53  Criteria for assistance.

    Requests for special priorities assistance should be timely, i.e., 
the request has been submitted promptly and enough time exists for the 
Delegate Agency or Commerce to effect a meaningful resolution to the 
problem, and must establish that:
    (a) There is an urgent need for the item; and
    (b) The applicant has made a reasonable effort to resolve the 
problem.



Sec. 700.54  Instances where assistance will not be provided.

    Special priorities assistance is provided at the discretion of the 
Delegate Agencies and Commerce when it is determined that such 
assistance is warranted to meet the objectives of this regulation. 
Examples where assistance may not be provided include situations when a 
person is attempting to:
    (a) Secure a price advantage;
    (b) Obtain delivery prior to the time required to fill a rated 
order;
    (c) Gain competitive advantage;
    (d) Disrupt an industry apportionment program in a manner designed 
to provide a person with an unwarranted share of scarce items; or
    (e) Overcome a supplier's regularly established terms of sale or 
conditions of doing business.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



Sec. 700.55  Assistance programs with Canada and other nations.

    (a) To promote military assistance to foreign nations, this section 
provides for authorizing priority ratings to persons in Canada and in 
other foreign nations to obtain items in the United States in support of 
approved programs. Although priority ratings have no legal authority 
outside of the United States, this section also provides information on 
how persons in the United States may obtain informal assistance in 
Canada.
    (b) Canada. (1) The joint U.S.-Canadian military arrangements for 
the defense of North America and the integrated nature of their defense 
industries as set forth in the U.S.-Canadian Statement of Principles for 
Economic Cooperation (October 26, 1950) require close coordination and 
the establishment of a means to provide mutual assistance to the defense 
industries located in both countries.
    (2) The Department of Commerce coordinates with the Canadian Public 
Works and Government Services Canada on all matters of mutual concern 
relating to the administration of this regulation. A copy of the 
Memorandum of Understanding between the two departments is provided at 
appendix IV.
    (3) Any person in the United States ordering defense items in Canada 
should inform the Canadian supplier that the items being ordered are to 
be used to fill a rated order. The Canadian supplier should be informed 
that if production materials are needed from the United States by the 
supplier or the supplier's vendor to fill the order, they should contact 
the Canadian Public Works and Government Services Canada for authority 
to place rated orders in the United States.
    (4) Any person in Canada producing defense items for the Canadian 
government may also obtain priority rating authority for items to be 
purchased in the United States by applying to the Canadian Public Works 
and Government Services Canada in accordance with procedures specified 
by that Department.
    (5) Persons in Canada needing special priorities assistance in 
obtaining defense items in the United States may apply for such 
assistance to the Canadian Public Works and Government Services Canada. 
Public Works and Government Services Canada will forward appropriate 
requests to Commerce.
    (6) Any person in the United States requiring assistance in 
obtaining items in Canada must submit a request through the Delegate 
Agency to Commerce on Form BIS-999. Commerce will

[[Page 95]]

forward appropriate requests to the Canadian Public Works and Government 
Services Canada.
    (c) Foreign nations. (1) Any person in a foreign nation other than 
Canada requiring assistance in obtaining defense items in the United 
States or priority rating authority for defense items to be purchased in 
the United States, should apply for such assistance or rating authority 
to the U.S. Department of Defense. The request must be sponsored by the 
government of the foreign nation prior to its submission.
    (2) If the Department of Defense endorses the request, it will be 
forwarded to Commerce for appropriate action.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



                       Subpart I_Official Actions



Sec. 700.60  General provisions.

    (a) Commerce may, from time-to-time, take specific official actions 
to implement or enforce the provisions of this regulation.
    (b) Several of these official actions (Rating Authorizations, 
Directives, and Letters of Understanding) are discussed in this subpart. 
Other official actions which pertain to compliance (Administrative 
Subpoenas, Demands for Information, and Inspection Authorizations) are 
discussed in Sec. 700.71(b).



Sec. 700.61  Rating Authorizations.

    (a) A Rating Authorization is an official action granting specific 
priority rating authority that:
    (1) Permits a person to place a priority rating on an order for an 
item not normally ratable under this regulation; or
    (2) Authorizes a person to modify a priority rating on a specific 
order or series of contracts or orders.
    (b) To request priority rating authority, see Sec. 700.51.



Sec. 700.62  Directives.

    (a) A Directive is an official action which requires a person to 
take or refrain from taking certain actions in accordance with its 
provisions.
    (b) A person must comply with each Directive issued. However, a 
person may not use or extend a Directive to obtain any items from a 
supplier, unless expressly authorized to do so in the Directive.
    (c) Directives take precedence over all DX rated orders, DO rated 
orders, and unrated orders previously or subsequently received, unless a 
contrary instruction appears in the Directive.



Sec. 700.63  Letters of Understanding.

    (a) A Letter of Understanding is an official action which may be 
issued in resolving special priorities assistance cases to reflect an 
agreement reached by all parties (Commerce, the Delegate Agency, the 
supplier, and the customer).
    (b) A Letter of Understanding is not used to alter scheduling 
between rated orders, to authorize the use of priority ratings, to 
impose restrictions under this regulation, or to take other official 
actions. Rather, Letters of Understanding are used to confirm production 
or shipping schedules which do not require modifications to other rated 
orders.



                          Subpart J_Compliance



Sec. 700.70  General provisions.

    (a) Compliance actions may be taken for any reason necessary or 
appropriate to the enforcement or the administration of the Defense 
Production Act, the Selective Service Act and related statutes, this 
regulation, or an official action. Such actions include audits, 
investigations, or other inquiries.
    (b) Any person who places or receives a rated order should be 
thoroughly familiar with, and must comply with, the provisions of this 
regulation.
    (c) Willful violation of any of the provisions of Title I or section 
705 of the Defense Production Act, this regulation, or an official 
action of the Department of Commerce, is a criminal act, punishable as 
provided in the Defense Production Act and as set forth in Sec. 700.74 
of this regulation.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]

[[Page 96]]



Sec. 700.71  Audits and investigations.

    (a) Audits and investigations are official examinations of books, 
records, documents, other writings and information to ensure that the 
provisions of the Defense Production Act, the Selective Service Act and 
related statutes, this regulation, and official actions have been 
properly followed. An audit or investigation may also include interviews 
and a systems evaluation to detect problems or failures in the 
implementation of this regulation.
    (b) When undertaking an audit, investigation, or other inquiry, the 
Department of Commerce shall:
    (1) Define the scope and purpose in the official action given to the 
person under investigation, and
    (2) Have ascertained that the information sought or other adequate 
and authoritative data are not available from any Federal or other 
responsible agency.
    (c) In administering this regulation, Commerce may issue the 
following documents which constitute official actions:
    (1) Administrative Subpoenas. An Administrative Subpoena requires a 
person to appear as a witness before an official designated by the 
Department of Commerce to testify under oath on matters of which that 
person has knowledge relating to the enforcement or the administration 
of the Defense Production Act, the Selective Service Act and related 
statutes, this regulation, or official actions. An Administrative 
Subpoena may also require the production of books, papers, records, 
documents and physical objects or property.
    (2) Demand for Information. A Demand for Information requires a 
person to furnish to a duly authorized representative of the Department 
of Commerce any information necessary or appropriate to the enforcement 
or the administration of the Defense Production Act, the Selective 
Service Act and related statutes, this regulation, or official actions.
    (3) Inspection Authorizations. An Inspection Authorization requires 
a person to permit a duly authorized representative of Commerce to 
interview the person's employees or agents, to inspect books, records, 
documents, other writings and information in the person's possession or 
control at the place where that person usually keeps them, and to 
inspect a person's property when such interviews and inspections are 
necessary or appropriate to the enforcement or the administration of the 
Defense Production Act, the Selective Service Act and related statutes, 
this regulation, or official actions.
    (d) The production of books, records, documents, other writings and 
information will not be required at any place other than where they are 
usually kept if, prior to the return date specified in the 
Administrative Subpoena or Demand for Information, a duly authorized 
official of Commerce is furnished with copies of such material that are 
certified under oath to be true copies. As an alternative, a person may 
enter into a stipulation with a duly authorized official of Commerce as 
to the content of the material.
    (e) An Administrative Subpoena, Demand for Information, or 
Inspection Authorization, shall include the name, title or official 
position of the person to be served, the evidence sought to be adduced, 
and its general relevance to the scope and purpose of the audit, 
investigation, or other inquiry. If employees or agents are to be 
interviewed; if books, records, documents, other writings, or 
information are to be produced; or if property is to be inspected; the 
Administrative Subpoena, Demand for Information, or Inspection 
Authorization will describe them with particularity.
    (f) Service of documents shall be made in the following manner:
    (1) Service of a Demand for Information or Inspection Authorization 
shall be made personally, or by Certified Mail--Return Receipt Requested 
at the person's last known address. Service of an Administrative 
Subpoena shall be made personally. Personal service may also be made by 
leaving a copy of the document with someone of suitable age and 
discretion at the person's last known dwelling or place of business.
    (2) Service upon other than an individual may be made by serving a 
partner, corporate officer, or a managing or general agent authorized by 
appointment or by law to accept service of process. If an agent is 
served, a copy of

[[Page 97]]

the document shall be mailed to the person named in the document.
    (3) Any individual 18 years of age or over may serve an 
Administrative Subpoena, Demand for Information, or Inspection 
Authorization. When personal service is made, the individual making the 
service shall prepare an affidavit as to the manner in which service was 
made and the identity of the person served, and return the affidavit, 
and in the case of subpoenas, the original document, to the issuing 
officer. In case of failure to make service, the reasons for the failure 
shall be stated on the original document.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



Sec. 700.72  Compulsory process.

    (a) If a person refuses to permit a duly authorized representative 
of Commerce to have access to any premises or source of information 
necessary to the administration or the enforcement of the Defense 
Production Act, the Selective Service Act and related statutes, this 
regulation, or official actions, the Commerce representative may seek 
compulsory process. Compulsory process means the institution of 
appropriate legal action, including ex parte application for an 
inspection warrant or its equivalent, in any forum of appropriate 
jurisdiction.
    (b) Compulsory process may be sought in advance of an audit, 
investigation, or other inquiry, if, in the judgment of the Director of 
the Office of Industrial Resource Administration, U.S. Department of 
Commerce, in consultation with the Chief Counsel for Industry and 
Security, U.S. Department of Commerce, there is reason to believe that a 
person will refuse to permit an audit, investigation, or other inquiry, 
or that other circumstances exist which make such process desirable or 
necessary.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998; 67 FR 45633, July 10, 2002]



Sec. 700.73  Notification of failure to comply.

    (a) At the conclusion of an audit, investigation, or other inquiry, 
or at any other time, Commerce may inform the person in writing where 
compliance with the requirements of the Defense Production Act, the 
Selective Service Act and related statutes, this regulation, or an 
official action were not met.
    (b) In cases where Commerce determines that failure to comply with 
the provisions of the Defense Production Act, the Selective Service Act 
and related statutes, this regulation, or an official action was 
inadvertent, the person may be informed in writing of the particulars 
involved and the corrective action to be taken. Failure to take 
corrective action may then be construed as a willfull violation of the 
Defense Production Act, this regulation, or an official action.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



Sec. 700.74  Violations, penalties, and remedies.

    (a) Willful violation of the provisions of Title I or Sections 705 
or 707 of the Defense Production Act, the priorities provisions of the 
Selective Service Act and related statutes, this part, or an official 
action, is a crime and upon conviction, a person may be punished by fine 
or imprisonment, or both. The maximum penalty provided by the Defense 
Production Act is a $10,000 fine, or one year in prison, or both. The 
maximum penalty provided by the Selective Service Act and related 
statutes is a $50,000 fine, or three years in prison, or both.
    (b) The government may also seek an injunction from a court of 
appropriate jurisdiction to prohibit the continuance of any violation 
of, or to enforce compliance with, the Defense Production Act, this 
regulation, or an official action.
    (c) In order to secure the effective enforcement of the Defense 
Production Act, this regulation, and official actions, the following are 
prohibited (see section 704 of the Defense Production Act; see also, for 
example, sections 2 and 371 of Title 18, United States Code):
    (1) No person may solicit, influence or permit another person to 
perform any act prohibited by, or to omit any act required by, the 
Defense Production Act, this regulation, or an official action.

[[Page 98]]

    (2) No person may conspire or act in concert with any other person 
to perform any act prohibited by, or to omit any act required by, the 
Defense Production Act, this regulation, or an official action.
    (3) No person shall deliver any item if the person knows or has 
reason to believe that the item will be accepted, redelivered, held, or 
used in violation of the Defense Production Act, this regulation, or an 
official action. In such instances, the person must immediately notify 
the Department of Commerce that, in accordance with this provision, 
delivery has not been made.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



Sec. 700.75  Compliance conflicts.

    If compliance with any provision of the Defense Production Act, the 
Selective Service Act and related statutes, this regulation, or an 
official action would prevent a person from filling a rated order or 
from complying with another provision of the Defense Production Act, 
this regulation, or an official action, the person must immediately 
notify the Department of Commerce for resolution of the conflict.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, June 11, 1998]



             Subpart K_Adjustments, Exceptions, and Appeals



Sec. 700.80  Adjustments or exceptions.

    (a) A person may submit a request to the Office of Strategic 
Industries and Economic Security, U.S. Department of Commerce, for an 
adjustment or exception on the ground that:
    (1) A provision of this regulation or an official action results in 
an undue or exceptional hardship on that person not suffered generally 
by others in similar situations and circumstances; or
    (2) The consequence of following a provision of this regulation or 
an official action is contrary to the intent of the Defense Production 
Act, the Selective Service Act and related statutes, or this regulation.
    (b) Each request for adjustment or exception must be in writing and 
contain a complete statement of all the facts and circumstances related 
to the provision of this regulation or official action from which 
adjustment is sought and a full and precise statement of the reasons why 
relief should be provided.
    (c) The submission of a request for adjustment or exception shall 
not relieve any person from the obligation of complying with the 
provision of this regulation or official action in question while the 
request is being considered unless such interim relief is granted in 
writing by the Office of Strategic Industries and Economic Security.
    (d) A decision of the Office of Strategic Industries and Economic 
Security under this section may be appealed to the Assistant Secretary 
for Export Administration, U.S. Department of Commerce. (For information 
on the appeal procedure, see Sec. 700.81.)

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, 31925, June 11, 1998]



Sec. 700.81  Appeals.

    (a) Any person who has had a request for adjustment or exception 
denied by the Office of Strategic Industries and Economic Security under 
Sec. 700.80, may appeal to the Assistant Secretary for Export 
Administration, U.S. Department of Commerce, who shall review and 
reconsider the denial.
    (b) An appeal must be received by the Office of the Assistant 
Secretary for Export Administration, Bureau of Industry and Security, 
U.S. Department of Commerce, Washington, D. C. 20230, Ref: DPAS, no 
later than 45 days after receipt of a written notice of denial from the 
Office of Strategic Industries and Economic Security. After this 45-day 
period, an appeal may be accepted at the discretion of the Assistant 
Secretary for Trade Administration for good cause shown.
    (c) Each appeal must be in writing and contain a complete statement 
of all the facts and circumstances related to the action appealed from 
and a full and precise statement of the reasons the decision should be 
modified or reversed.

[[Page 99]]

    (d) In addition to the written materials submitted in support of an 
appeal, an appellant may request, in writing, an opportunity for an 
informal hearing. This request may be granted or denied at the 
discretion of the Assistant Secretary for Export Administration.
    (e) When a hearing is granted, the Assistant Secretary for Export 
Administration may designate an employee of the Department of Commerce 
to conduct the hearing and to prepare a report. The hearing officer 
shall determine all procedural questions and impose such time or other 
limitations deemed reasonable. In the event that the hearing officer 
decides that a printed transcript is necessary, all expenses shall be 
borne by the appellant.
    (f) When determining an appeal, the Assistant Secretary for Export 
Administration may consider all information submitted during the appeal 
as well as any recommendations, reports, or other relevant information 
and documents available to the Department of Commerce, or consult with 
any other persons or groups.
    (g) The submission of an appeal under this section shall not relieve 
any person from the obligation of complying with the provision of this 
regulation or official action in question while the appeal is being 
considered unless such relief is granted in writing by the Assistant 
Secretary for Export Administration.
    (h) The decision of the Assistant Secretary for Export 
Administration shall be made within a reasonable time after receipt of 
the appeal and shall be the final administrative action. It shall be 
issued to the appellant in writing with a statement of the reasons for 
the decision.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31925, June 11, 1998]



                   Subpart L_Miscellaneous Provisions



Sec. 700.90  Protection against claims.

    A person shall not be held liable for damages or penalties for any 
act or failure to act resulting directly or indirectly from compliance 
with any provision of this regulation, or an official action, 
notwithstanding that such provision or action shall subsequently be 
declared invalid by judicial or other competent authority.



Sec. 700.91  Records and reports.

    (a) Persons are required to make and preserve for at least three 
years, accurate and complete records of any transaction covered by this 
regulation (OMB control number 0694-0053) or an official action.
    (b) Records must be maintained in sufficient detail to permit the 
determination, upon examination, of whether each transaction complies 
with the provisions of this regulation or any official action. However, 
this regulation does not specify any particular method or system to be 
used.
    (c) Records required to be maintained by this regulation must be 
made available for examination on demand by duly authorized 
representatives of Commerce as provided in Sec. 700.71.
    (d) In addition, persons must develop, maintain, and submit any 
other records and reports to Commerce that may be required for the 
administration of the Defense Production Act, the Selective Service Act 
and related statutes, and this regulation.
    (e) Section 705(e) of the Defense Production Act provides that 
information obtained under this section which the President deems 
confidential, or with reference to which a request for confidential 
treatment is made by the person furnishing such information, shall not 
be published or disclosed unless the President determines that the 
withholding of this information is contrary to the interest of the 
national defense. Information required to be submitted to Commerce in 
connection with the enforcement or administration of the Act, this 
regulation, or an official action, is deemed to be confidential under 
section 705(e) of the Act and shall not be published or disclosed except 
as required by law.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31924, 31925, June 11, 1998]



Sec. 700.92  Applicability of this regulation and official actions.

    (a) This regulation and all official actions, unless specifically 
stated otherwise, apply to transactions in any

[[Page 100]]

state, territory, or possession of the United States and the District of 
Columbia.
    (b) This regulation and all official actions apply not only to 
deliveries to other persons but also include deliveries to affiliates 
and subsidiaries of a person and deliveries from one branch, division, 
or section of a single entity to another branch, division, or section 
under common ownership or control.
    (c) This regulation and its schedules shall not be construed to 
affect any administrative actions taken by Commerce, or any outstanding 
contracts or orders placed pursuant to any of the regulations, orders, 
schedules or delegations of authority under the Defense Materials System 
and Defense Priorities System previously issued by Commerce. Such 
actions, contracts, or orders shall continue in full force and effect 
under this regulation unless modified or terminated by proper authority.
    (d) The repeal of the regulations, orders, schedules and delegations 
of authority of the Defense Materials System (DMS) and Defense 
Priorities System (DPS) shall not have the effect to release or 
extinguish any penalty or liability incurred under the DMS/DPS. The DMS/
DPS shall be treated as still remaining in force for the purpose of 
sustaining any action for the enforcement of such penalty or liability.



Sec. 700.93  Communications.

    All communications concerning this regulation, including requests 
for copies of the regulation and explanatory information, requests for 
guidance or clarification, and requests for adjustment or exception 
shall be addressed to the Office of Industrial Resource Administration, 
Room 3876, U.S. Department of Commerce, Washington, DC 20230, Ref: DPAS; 
telephone: (202) 482-3634 or FAX: (202) 482-5650.

[49 FR 30414, July 30, 1984. Redesignated at 54 FR 601, Jan. 9, 1989, as 
amended at 63 FR 31925, June 11, 1998]

     Schedule I to Part 700--Approved Programs and Delegate Agencies

    The programs listed in this schedule have been approved for 
priorities and allocations support under this part. They have equal 
preferential status. The Department of Commerce has authorized the 
Delegate Agencies to use this part in support of those programs assigned 
to them, as indicated below.

----------------------------------------------------------------------------------------------------------------
       Program identification symbol            Approved program                    Delegate agency
----------------------------------------------------------------------------------------------------------------
Defense programs:
    A1....................................  Aircraft................  Department of Defense.\1\
    A2....................................  Missiles................   Do.
    A3....................................  Ships...................   Do.
    A4....................................  Tank--Automotive........   Do.
    A5....................................  Weapons.................   Do.
    A6....................................  Ammunition..............   Do.
    A7....................................  Electronic and             Do.
                                             communications
                                             equipment.
    B1....................................  Military building          Do.
                                             supplies.
    B8....................................  Production equipment       Do.
                                             (for defense
                                             contractor's account).
    B9....................................  Production equipment       Do.
                                             (Government owned).
    C1....................................  Food resources (combat     Do.
                                             rations).
    C2....................................  Department of Defense      Do.
                                             construction.
    C3....................................  Maintenance, repair, and   Do.
                                             operating supplies
                                             (MRO) for Department of
                                             Defense facilities.
    C9....................................  Miscellaneous...........   Do.
International defense programs:
    Canada:
        D1................................  Canadian military         Department of Commerce.
                                             programs.
        D2................................  Canadian production and    Do.
                                             construction.
        D3................................  Canadian atomic energy     Do.
                                             program.
    Other Foreign Nations:
        G1................................  Certain munitions items   Department of Commerce.
                                             purchased by foreign
                                             governments through
                                             domestic commercial
                                             channels for export.
        G2................................  Certain direct defense     Do.
                                             needs of foreign
                                             governments other than
                                             Canada.

[[Page 101]]

 
        G3................................  Foreign nations (other     Do.
                                             than Canada) production
                                             and construction.
    Co-Production:
        J1................................  F-16 Co-Production        Departments of Commerce and Defense.
                                             Program.
Atomic energy programs:
    E1....................................  Construction............  Department of Energy.
    E2....................................  Operations--including      Do.
                                             maintenance, repair,
                                             and operating supplies
                                             (MRO).
    E3....................................  Privately owned            Do.
                                             facilities.
Domestic energy programs:
    F1....................................  Exploration, production,  Department of Energy.
                                             refining, and
                                             transportation.
    F2....................................  Conservation............   Do.
    F3....................................  Construction, repair,      Do.
                                             and maintenance.
Other defense, energy, and related
 programs:
    H1....................................  Certain combined orders   Department of Commerce.
                                             (see section 700.17(c)).
    H5....................................  Private domestic           Do.
                                             production.
    H6....................................  Private domestic           Do.
                                             construction.
    H7....................................  Maintenance, repair, and   Do.
                                             operating supplies
                                             (MRO).
    H8....................................  Designated Programs.....   Do.
    K1....................................  Federal supply items....  General Services Administration.
    N1....................................  Emergency preparedness    Federal Emergency Management
                                             activities.               Agency.TNOTE\1\ Department of
                                                                       Defense includes: Armed Services--Army,
                                                                       Navy (including Marines and Coast Guard),
                                                                       and Air Force; Component Agencies,
                                                                       including Defense Logistics Agency,
                                                                       National Security Agency, Defense
                                                                       Advanced Research Projects Agency,
                                                                       Defense Information Systems Agency,
                                                                       Defense Nuclear Agency, Defense Mapping
                                                                       Agency, and On-Site Inspection Agency;
                                                                       and Associated Agencies, including
                                                                       Central Intelligence Agency and National
                                                                       Aeronautics and Space Administration.
----------------------------------------------------------------------------------------------------------------


[63 FR 31925, June 11, 1998]

[[Page 102]]

  Appendix I to Part 700--Form BIS-999--Request for Special Priorities 
                               Assistance
[GRAPHIC] [TIFF OMITTED] TR11JN98.008


[[Page 103]]


[GRAPHIC] [TIFF OMITTED] TR11JN98.009


[[Page 104]]


[GRAPHIC] [TIFF OMITTED] TR11JN98.010


[[Page 105]]


[GRAPHIC] [TIFF OMITTED] TR11JN98.011


[63 FR 31926, June 11, 1998]

[[Page 106]]



PART 701_REPORTING OF OFFSETS AGREEMENTS IN SALES OF WEAPON SYSTEMS 

OR DEFENSE-RELATED ITEMS TO FOREIGN COUNTRIES OR FOREIGN FIRMS
--Table of Contents




Sec.
701.1 Purpose.
701.2 Definitions.
701.3 Applicability and scope.
701.4 Procedures.
701.5 Confidentiality.

    Authority: Title I, sec. 124, Pub. L 102-558, 106 Stat. 4207 (50 
U.S.C App. 2099).

    Source: 59 FR 61796, Dec. 2, 1994, unless otherwise noted.



Sec. 701.1  Purpose.

    The Defense Production Act Amendments of 1992 require the Secretary 
of Commerce to promulgate regulations for U.S. firms entering into 
contracts for the sale of defense articles or defense services to 
foreign countries or foreign firms that are subject to offset agreements 
exceeding $5,000,000 in value to furnish information regarding such 
agreements. The Secretary of Commerce has designated the Bureau of 
Industry and Security as the organization responsible for implementing 
this provision. The information provided by U.S. firms will be 
aggregated and used to determine the impact of offset transactions on 
the defense preparedness, industrial competitiveness, employment, and 
trade of the United States. Summary reports will be submitted annually 
to the Congress pursuant Section 309 of the Defense Production Act of 
1950, as amended.



Sec. 701.2  Definitions.

    (a) Offsets--Compensation practices required as a condition of 
purchase in either government-to-government or commercial sales of 
defense articles and/or defense services as defined by the Arms Export 
Control Act and the International Traffic in Arms Regulations.
    (b) Military Export Sales--Exports that are either Foreign Military 
Sales (FMS) or commercial (direct) sales of defense articles and/or 
defense services as defined by the Arms Export Control Act and 
International Traffic in Arms Regulations.
    (c) Prime Contractor--A firm that has a sales contract with a 
foreign entity or with the U.S. Government for military export sales.
    (d) United States--Includes the 50 states, the District of Columbia, 
Puerto Rico, and U.S. territories.
    (e) Offset Agreement--Any offset as defined above that the U.S. firm 
agrees to in order to conclude a military export sales contract. This 
includes all offsets, whether they are ``best effort'' agreements or are 
subject to penalty clauses.
    (f) Offset Transaction--Any activity for which the U.S. firm claims 
credit for full or partial fulfillment of the offset agreement. 
Activities to implement offset agreements may include, but are not 
limited to, coproduction, licensed production, subcontractor production, 
overseas investment, technology transfer countertrade, barter, 
counterpurchase, and buy back.
    (g) Direct Offset--Contractual arrangements that involve defense 
articles and services referenced in the sales agreement for military 
exports.
    (h) Indirect Offset--Contractual arrangements that involve defense 
goods and services unrelated to the exports referenced in the sales 
agreement.



Sec. 701.3  Applicability and scope.

    (a) This rule applies to U.S. firms entering contracts for the sale 
of defense articles or defense services (as defined in the Arms Export 
Control Act and International Traffic in Arms Regulations) to a foreign 
country or foreign firm for which the contract is subject to an offset 
agreement exceeding $5,000,000 in value.
    (b) This rule applies to all offset transactions completed in 
performance of existing offset commitments since January 1, 1993 for 
which offset credit of $250,000 or more has been claimed from the 
foreign representative, and new offset agreements entered into since 
that time.



Sec. 701.4  Procedures.

    (a) To avoid double counting, firms should report only offset 
transactions for which they are directly responsible for reporting to 
the foreign customer (i.e., prime contractors should report

[[Page 107]]

for their subcontractors if the subcontractors are not a direct party to 
the offset agreement).
    (b) Reports should be delivered to the Offsets Program Manager, U.S. 
Department of Commerce, Office of Strategic Industries and Economic 
Security, Bureau of Industry and Security, Room 3878, 14th Street and 
Pennsylvania Avenue, N.W., Washington DC 20230. The first industry 
reports should be submitted to the Bureau of Industry and Security not 
later than March 15, 1995 and should cover offset transactions completed 
during the calendar year 1993, as well as information regarding 
unfulfilled offset agreements. After this initial submission, companies 
should provide information once yearly not later than June 15 covering 
the preceding calendar year. All submissions should include a point of 
contact (name and telephone number) and should be by a company official 
authorized to provide such information.
    (c) Companies may submit this information in computerized 
spreadsheet/database format (e.g., Lotus 1-2-3, Quattro Pro, dbase IV) 
using a 3.5 inch 1.44 megabyte diskette, accompanied by a printed copy.
    (d) Offset Transaction Reporting. (1) Reports should include an 
itemized list of offset transactions completed during the reporting 
period, including the following data elements (Estimates are acceptable 
when actual figures are unavailable; estimated figures should be 
followed by the letter ``E''):
    (i) Name of Country--Country of entity purchasing the weapon system, 
defense item or service subject to offset.
    (ii) Name or Description of Weapon system, Defense Item, or Service 
Subject to Offset.
    (iii) Name of Offset Fulfilling Entity--Entity fulfilling offset 
transaction (including first tier subcontractors).
    (iv) Name of Offset Receiving Entity--Entity receiving benefits from 
offset transaction.
    (v) Offset Credit Value--Dollar value credits claimed by fulfilling 
entity including any intangible factors/multipliers.
    (vi) Actual Offset Value--Dollar value of the offset transaction 
without multipliers/intangible factors.
    (vii) Description of Offset Product/Service--Short description of 
the type of offset (e.g., coproduction, technology transfer, subcontract 
activity, training, purchase, cash payment, etc.).
    (viii) Broad Industry Category--Broad classification of the industry 
in which the offset transaction was fulfilled (e.g., aerospace, 
electronics, chemicals, industrial machinery, textiles, etc.). Firms may 
request a list of the Standard Industry Classification (SIC) codes to 
assist in identifying an appropriate industry category. Forward such 
requests to the Offsets Program Manager, U.S. Department of Commerce, 
Office of Strategic Industries and Economic Security, Bureau of Industry 
and Security, Room 3878, 14th Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20230 or Fax 202-482-5650.
    (ix) Direct or Indirect Offset--Specify whether the offset 
transaction was direct or indirect offset.
    (x) Name of Country in Which Offset was Fulfilled--United States, 
purchasing country, or third country.
    (2) Offset transactions of the same type (same fulfilling entity, 
receiving entity, and offset product/service) completed during the same 
reporting period may be combined.
    (3) Any necessary comments or explanations relating to the above 
information should be footnoted and supplied on separate sheets attached 
to the report.
    (e) Reporting on Offset Agreements Entered Into. (1) In addition to 
the itemized list of offset transactions completed during the year as 
specified above, U.S. firms should provide information regarding new 
offset agreements entered into during the year, including the following 
elements:
    (i) Name of Country--Country of entity purchasing the weapon system, 
defense item, or service subject to offset;
    (ii) Name or Description of Weapon System, Defense Item, or Service 
Subject to Offset;
    (iii) Names/Titles of Signatories to the Offset Agreement;
    (iv) Value of Export Sale Subject to Offset (approximate);
    (v) Total Value of the Offset Agreement;

[[Page 108]]

    (vi) Term of Offset Agreement (months);
    (vii) Description of Performance Measures--(e.g., ``Best Efforts,'' 
Liquidated Damages, (describe)).
    (2) [Reserved]



Sec. 701.5  Confidentiality.

    (a) As provided by Sec. 309(c) of the Defense Production Act of 
1950, as amended, BIS shall not publicly disclose the information it 
receives pursuant to this part, unless the firm furnishing the 
information subsequently specifically authorizes public disclosure.
    (b) Public disclosure must be authorized in writing by an official 
of the firm competent to make such an authorization.
    (c) Nothing in this provision shall prevent the use of data 
aggregated from information provided pursuant to this part in the 
summary report to the Congress described in Sec. 701.1.

                        PARTS 702-704 [RESERVED]



PART 705_EFFECT OF IMPORTED ARTICLES ON THE NATIONAL SECURITY--Table 
of Contents




Sec.
705.1 Definitions.
705.2 Purpose.
705.3 Commencing an investigation.
705.4 Criteria for determining effect of imports on the national 
          security.
705.5 Request or application for an investigation.
705.6 Confidential information.
705.7 Conduct of an investigation.
705.8 Public hearings.
705.9 Emergency action.
705.10 Report of an investigation and recommendation.
705.11 Determination by the President and adjustment of imports.
705.12 Disposition of an investigation and report to the Congress.

    Authority: Sec. 232, Trade Expansion Act of 1962, as amended (19 
U.S.C. 1862).

    Source: 47 FR 14693, Apr. 6, 1982, unless otherwise noted. 
Redesignated at 54 FR 601, Jan. 9, 1989.



Sec. 705.1  Definitions.

    As used in this part:
    Department means the United States Department of Commerce and 
includes the Secretary of Commerce and the Secretary's designees.
    Secretary means the Secretary of Commerce or the Secretary's 
designees.
    Applicant means the person or entity submitting a request or 
application for an investigation pursuant to this part.



Sec. 705.2  Purpose.

    These regulations set forth the procedures by which the Department 
shall commence and conduct an investigation to determine the effect on 
the national security of the imports of any article. Based on this 
investigation, the Secretary shall make a report and recommendation to 
the President for action or inaction regarding an adjustment of the 
imports of the article.



Sec. 705.3  Commencing an investigation.

    (a) Upon request of the head of any government department or agency, 
upon application of an interested party, or upon motion of the 
Secretary, the Department shall immediately conduct an investigation to 
determine the effect on the national security of the imports of any 
article.
    (b) The Secretary shall immediately provide notice to the Secretary 
of Defense of any investigation initiated under this part.

[47 FR 14693, Apr. 6, 1982. Redesignated at 54 FR 601, Jan. 9, 1989, and 
amended at 63 FR 31623, June 10, 1998]



Sec. 705.4  Criteria for determining effect of imports on the 
national security.

    (a) To determine the effect on the national security of the imports 
of the article under investigation, the Department shall consider the 
quantity of the article in question or other circumstances related to 
its import. With regard for the requirements of national security, the 
Department shall also consider the following:
    (1) Domestic production needed for projected national defense 
requirements;
    (2) The capacity of domestic industries to meet projected national 
defense requirements;
    (3) The existing and anticipated availabilities of human resources, 
products, raw materials, production equipment and facilities, and other

[[Page 109]]

supplies and services essential to the national defense;
    (4) The growth requirements of domestic industries to meet national 
defense requirements and the supplies and services including the 
investment, exploration and development necessary to assure such growth; 
and
    (5) Any other relevant factors.
    (b) In recognition of the close relation between the strength of our 
national economy and the capacity of the United States to meet national 
security requirements, the Department shall also, with regard for the 
quantity, availability, character and uses of the imported article under 
investigation, consider the following:
    (1) The impact of foreign competition on the economic welfare of any 
domestic industry essential to our national security;
    (2) The displacement of any domestic products causing substantial 
unemployment, decrease in the revenues of government, loss of investment 
or specialized skills and productive capacity, or other serious effects; 
and
    (3) Any other relevant factors that are causing or will cause a 
weakening of our national economy.



Sec. 705.5  Request or application for an investigation.

    (a) A request or application for an investigation shall be in 
writing. The original and 1 copy shall be filed with the Director, 
Office of Strategic Industries and Economic Security, Room 3876, U.S. 
Department of Commerce, Washington, DC 20230.
    (b) When a request, application or motion is under investigation, or 
when an investigation has been completed pursuant to Sec. 705.10 of 
this part, any subsequently filed request or application concerning 
imports of the same or related article that does not raise new or 
different issues may be either consolidated with the investigation in 
progress as provided in Sec. 705.7(e) of this part, or rejected. In 
either event, an explanation for taking such action shall be promptly 
given to the applicant. If the request or application is rejected, it 
will not be returned unless requested by the applicant.
    (c) Requests or applications shall describe how the quantity, 
availability, character, and uses of a particular imported article, or 
other circumstances related to its import, affect the national security, 
and shall contain the following information to the fullest extent 
possible:
    (1) Identification of the applicant;
    (2) A precise description of the article;
    (3) Description of the domestic industry affected, including 
pertinent information regarding companies and their plants, locations, 
capacity and current output of the industry;
    (4) Pertinent statistics on imports and domestic production showing 
the quantities and values of the article;
    (5) Nature, sources, and degree of the competition created by 
imports of the article;
    (6) The effect that imports of the article may have upon the 
restoration of domestic production capacity in the event of national 
emergency;
    (7) Employment and special skills involved in the domestic 
production of the article;
    (8) Extent to which the national economy, employment, investment, 
specialized skills, and productive capacity is or will be adversely 
affected;
    (9) Revenues of Federal, State, or local Governments which are or 
may be adversely affected;
    (10) National security supporting uses of the article including data 
on applicable contracts or sub-contracts, both past and current; and
    (11) Any other information or advice relevant and material to the 
subject matter of the investigation.
    (d) Statistical material presented should be, if possible, on a 
calendar-year basis for sufficient periods of time to indicate trends. 
Monthly or quarterly data for the latest complete years should be 
included as well as any other breakdowns which may be pertinent to show 
seasonal or short-term factors.

[47 FR 14693, Apr. 6, 1982. Redesignated at 54 FR 601, Jan. 9, 1989, and 
amended at 63 FR 31623, June 10, 1998; 65 FR 62600, Oct. 19, 2000]



Sec. 705.6  Confidential information.

    (a) Any information or material which the applicant or any other 
party desires to submit in confidence at any stage of the investigation 
that would

[[Page 110]]

disclose national security classified information or business 
confidential information (trade secrets, commercial or financial 
information, or any other information considered senstitive or 
privileged), shall be submitted on separate sheets with the clear legend 
``National Security Classified'' or ``Business Confidential,'' as 
appropriate, marked at the top of each sheet. Any information or 
material submitted that is identified as national security classified 
must be accompanied at the time of filing by a statement indicating the 
degree of classification, the authority for the classification, and the 
identity of the classifying entity. By submitting information or 
material identified as business confidential, the applicant or other 
party represents that the information is exempted from public 
disclosure, either by the Freedom of Information Act (5 U.S.C. 552 et 
seq.) or by some other specific statutory exemption. Any request for 
business confidential treatment must be accompanied at the time of 
filing by a statement justifying non-disclosure and referring to the 
specific legal authority claimed.
    (b) The Department may refuse to accept as business confidential any 
information or material it considers not intended to be protected under 
the legal authority claimed by the applicant, or under other applicable 
legal authority. Any such information or material so refused shall be 
promptly returned to the submitter and will not be considered. However, 
such information or material may be resubmitted as non-confidential in 
which case it will be made part of the public record.



Sec. 705.7  Conduct of an investigation.

    (a) If the Department determines that it is appropriate to afford 
interested parties an opportunity to present information and advice 
relevant and material to an investigation, a public notice shall be 
published in the Federal Register soliciting from any interested party 
written comments, opinions, data, information or advice relative to the 
investigation. This material shall be submitted as directed within a 
reasonable time period to be specified in the notice. All material shall 
be submitted with 6 copies. In addition, public hearings may be held 
pursuant to Sec. 705.8 of this part.
    (b) All requests and applications filed and all material submitted 
by interested parties, except information on material that is classified 
or determined to be confidential as provided in Sec. 705.6 of this 
part, will be available for public inspection and copying in the Bureau 
of Industry and SecurityFreedom of Information Records Inspection 
Facility, Room H-4525, U.S. Department of Commerce, Washington, DC 
20230, in accordance with regulations published in part 4 of title 15, 
Code of Federal Regulations.
    (c) Further information may be requested by the Department from 
other sources through the use of questionnaires, correspondence, or 
other appropriate means.
    (d) The Department shall, as part of an investigation, seek 
information and advice from, and consult with, appropriate officers of 
the United States or their designees, as shall be determined. The 
Department shall also consult with the Secretary of Defense regarding 
the methodological and policy questions raised in the investigation. 
Upon the request of the Secretary, the Secretary of Defense shall 
provide the Secretary with an assessment of the defense requirements of 
the article in question. Communications received from agencies of the 
U.S. government or foreign governments will not be made available for 
public inspection.
    (e) Any request or application that is filed while an investigation 
is in progress, concerning imports of the same or related article and 
raising similar issues, may be consolidated with the request, 
application or motion that initiated the investigation.

[47 FR 14693, Apr. 6, 1982. Redesignated at 54 FR 601, Jan. 9, 1989 and 
amended at 54 FR 19355, May 5, 1989; 63 FR 31623, June 10, 1998]



Sec. 705.8  Public hearings.

    (a) If it is deemed appropriate by the Department, public hearings 
may be held to elicit further information.
    (1) A notice of hearing shall be published in the Federal Register 
describing the date, time, place, the subject matter of each hearing and 
any

[[Page 111]]

other information relevant to the conduct of the hearing. The name of a 
person to contact for additional information or to request time to speak 
at the hearing shall also be included. Public hearings may be held in 
more than one location.
    (2) Hearings shall be open to the public unless national security 
classified information will be presented. In that event the presiding 
officer at the hearing shall close the hearing, as necessary, to all 
persons not having appropriate security clearances or not otherwise 
authorized to have access to such information. If it is known in 
sufficient time prior to the hearing that national security classified 
information will be presented the notice of hearing published in the 
Federal Register shall state that national security classified 
information will be presented and that the hearing will be open only to 
those persons having appropriate security clearances or otherwise 
specifically authorized to have access to such information.
    (b) Hearings shall be conducted as follows:
    (1) The Department shall appoint the presiding officer;
    (2) The presiding officer shall determine all procedural matters 
during the hearing;
    (3) Interested parties may appear, either in person or by 
representation, and produce oral or written information relevant and 
material to the subject matter of the investigation;
    (4) Hearings will be fact-finding proceedings without formal 
pleadings or adverse parties. Formal rules of evidence will not apply;
    (5) After a witness has testified, the presiding officer may 
question the witness. Questions submitted to the presiding officer in 
writing by any interested party may, at the discretion of the presiding 
officer, be posed to the witness. No cross examination of any witness by 
a party shall be allowed.
    (6) Each hearing will be stenographically reported. Transcripts of 
the hearing, excluding any national security classified information, may 
be purchased from the Department at actual cost of duplication, and will 
be available for public inspection in the Bureau of Industry and 
Security Freedom of Information Records Inspection Facility, Room H-
4525, U.S. Department of Commerce, Washington, DC 20230.

[47 FR 14693, Apr. 6, 1982. Redesignated at 54 FR 601, Jan. 9, 1989 and 
amended at 54 FR 19355, May 5, 1989; 63 FR 31623, June 10, 1998]



Sec. 705.9  Emergency action.

    In emergency situations, or when in the judgment of the Department, 
national security interests require it, the Department may vary or 
dispense with any or all of the procedures set forth in Sec. 705.7 of 
this part.



Sec. 705.10  Report of an investigation and recommendation.

    (a) When an investigation conducted pursuant to this part is 
completed, a report of the investigation shall be promptly prepared.
    (b) The Secretary shall report to the President the findings of the 
investigation and a recommendation for action or inaction within 270 
days after beginning an investigation under this part.
    (c) An Executive Summary of the Secretary's report to the President 
of an investigation, excluding any classified or proprietary 
information, shall be published in the Federal Register. Copies of the 
full report, excluding any classified or proprietary information, will 
be available for public inspection and copying in the Bureau of Industry 
and Security Freedom of Information Records Inspection Facility, Room H-
4525, U.S. Department of Commerce, 14th Street, N.W., Washington, D.C. 
20230; tel. (202) 482-5653.

[63 FR 31623, June 10, 1998]



Sec. 705.11  Determination by the President and adjustment of imports.

    (a) Upon the submission of a report to the President by the 
Secretary under Sec. 705.10(b) of this part, in which the Department 
has found that an article is being imported into the United States in 
such quantities or under such circumstances as to threaten to impair the 
national security, the President is required by Section 232(c) of the 
Trade Expansion Act of 1962, as amended (19 U.S.C. 1862(c)) to take the 
following action

[[Page 112]]

    (1) Within 90 days after receiving the report from the Secretary, 
the President shall determine:
    (i) Whether the President concurs with the Department's finding; and
    (ii) If the President concurs, the nature and duration of the action 
that must be taken to adjust the imports of the article and its 
derivatives so that the such imports will not threaten to impair the 
national security.
    (2) If the President determines to take action under this section, 
such action must be taken no later than fifteen (15) days after making 
the determination.
    (3) By no later than thirty (30) days after making the 
determinations under paragraph (a)(1) of this section, the President 
shall submit to the Congress a written statement of the reasons why the 
President has decided to take action, or refused to take action.
    (b) If the action taken by the President under this section is the 
negotiation of an agreement to limit or restrict the importation into 
the United States of the article in question, and either no such 
agreement is entered into within 180 days after making the determination 
to take action, or an executed agreement is not being carried out or is 
ineffective in eliminating the threat to the national security, the 
President shall either:
    (1) Take such other action as deemed necessary to adjust the imports 
of the article so that such imports will not threaten to impair the 
national security. Notice of any such additional action taken shall be 
published in the Federal Register; or
    (2) Not take any additional action. This determination and the 
reasons on which it is based, shall be published in the Federal 
Register.

[63 FR 31623, June 10, 1998]



Sec. 705.12  Disposition of an investigation and report to the Congress.

    (a) Upon the disposition of each request, application, or motion 
made under this part, a report of such disposition shall be submitted by 
the Secretary to the Congress and published in the Federal Register.
    (b) As required by Section 232(e) of the Trade Expansion Act of 
1962, as amended (19 U.S.C. 1862(c)), the President shall submit to the 
Congress an annual report on the operation of this part.

[63 FR 31623, June 10, 1998]

                        PARTS 706-709 [RESERVED]

[[Page 113]]



          SUBCHAPTER B_CHEMICAL WEAPONS CONVENTION REGULATIONS





PART 710_GENERAL INFORMATION AND OVERVIEW OF THE CHEMICAL WEAPONS 
CONVENTION REGULATIONS (CWCR)--Table of Contents




Sec.
710.1 Definitions of terms used in the Chemical Weapons Convention 
          Regulations (CWCR).
710.2 Scope of the CWCR.
710.3 Purposes of the Convention and CWCR.
710.4 Overview of scheduled chemicals and examples of affected 
          industries.
710.5 Authority.
710.6 Relationship between the Chemical Weapons Convention Regulations 
          and the Export Administration Regulations.

Supplement No. 1 to Part 710--States Parties to the Convention on the 
          Prohibition of the Development, production, Stockpiling and 
          Use of Chemical Weapons and on Their Destruction

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73764, Dec. 30, 1999, unless otherwise noted.



Sec. 710.1  Definitions of terms used in the Chemical Weapons Convention 
Regulations (CWCR).

    The following are definitions of terms used in the CWCR (parts 710 
through 722 of this subchapter, unless otherwise noted):
    Act (The): Means the Chemical Weapons Convention Implementation Act 
of 1998 (22 U.S.C. 6701 et seq.).BIS
    Bureau of Industry and Security (BIS). Means the Bureau of Industry 
and Security of the United States Department of Commerce (formerly the 
Bureau of Export Administration).
    By-product. Means any chemical substance or mixture produced without 
a separate commercial intent during the manufacture, processing, use or 
disposal of another chemical substance or mixture.
    Chemical Weapon. Means the following, together or separately:
    (1) A toxic chemical and its precursors, except where intended for 
purposes not prohibited under the Chemical Weapons Convention (CWC), 
provided that the type and quantity are consistent with such purposes;
    (2) A munition or device, specifically designed to cause death or 
other harm through the toxic properties of those toxic chemicals 
specified in paragraph (1) of this definition, which would be released 
as a result of the employment of such munition or device; or
    (3) Any equipment specifically designed for use directly in 
connection with the employment of munitions or devices specified in 
paragraph (2) of this definition.
    Chemical Weapons Convention (CWC or Convention). Means the 
Convention on the Prohibition of the Development, Production, 
Stockpiling and Use of Chemical Weapons and on Their Destruction, and 
its annexes opened for signature on January 13, 1993.
    Chemical Weapons Convention Regulations (CWCR). Means the 
regulations contained in 15 CFR parts 710 through 722.
    Consumption. Consumption of a chemical means its conversion into 
another chemical via a chemical reaction. Unreacted material must be 
accounted for as either waste or as recycled starting material.
    Declaration or report form. Means a multi-purpose form due to BIS 
regarding activities involving Schedule 1, Schedule 2, Schedule 3, or 
unscheduled discrete organic chemicals. Declaration forms will be used 
by facilities that have data declaration obligations under the CWCR and 
are ``declared'' facilities whose facility-specific information will be 
transmitted to the OPCW. Report forms will be used by entities that are 
``undeclared'' facilities or trading companies that have limited 
reporting requirements for only export and import activities under the 
CWCR and whose facility-specific information will not be transmitted to 
the OPCW. Information from declared facilities, undeclared facilities 
and trading companies will also be used to compile U.S. national 
aggregate figures on the production, processing, consumption, export and 
import of specific chemicals.

[[Page 114]]

See also related definitions of declared facility, undeclared facility 
and report.
    Declared facility or plant site. Means a facility or plant site 
required to complete data declarations of activities involving Schedule 
1, Schedule 2, Schedule 3, or unscheduled discrete organic chemicals 
above specified threshold quantities. Only certain declared facilities 
and plant sites are subject to routine inspections under the CWCR. Plant 
sites that produced either Schedule 2 or Schedule 3 chemicals for CW 
purposes at any time since January 1, 1946, are also ``declared'' plant 
sites. However, such plant sites are not subject to routine inspection 
if they are not subject to declaration requirements because of past 
production, processing or consumption of Scheduled or unscheduled 
discrete organic chemicals above specified threshold quantities.
    Discrete organic chemical. Means any chemical belonging to the class 
of chemical compounds consisting of all compounds of carbon, except for 
its oxides, sulfides, and metal carbonates, identifiable by chemical 
name, by structural formula, if known, and by Chemical Abstract Service 
registry number, if assigned.
    Domestic transfer. Means, with regard to declaration requirements 
for Schedule 1 and chemicals under the CWCR, any movement of any amount 
of Schedule 1 chemical outside the geographical boundary of a facility 
in the United States to another destination in the United States, for 
any purpose. Domestic transfer includes movement between two divisions 
of one company or a sale from one company to another. Note that any 
movement to or from a facility outside the United States is considered 
an export or import for reporting purposes, not a domestic transfer.
    EAR. Means the Export Administration Regulations (15 CFR parts 730 
through 799).
    Explosive. Means a chemical (or a mixture of chemicals) that is 
included in Class 1 of the United Nations Organization hazard 
classification system.
    Facility. Means any plant site, plant or unit.
    Facility agreement. Means a written agreement or arrangement between 
a State Party and the Organization relating to a specific facility 
subject to on-site verification pursuant to Articles IV, V, and VI of 
the Convention.
    Host Team. Means the U.S. Government team that accompanies the 
inspection team from the Organization for the Prohibition of Chemical 
Weapons during a CWC inspection for which the regulations in this 
subchapter apply.
    Host Team Leader. Means the representative from the Department of 
Commerce who heads the U.S. Government team that accompanies the 
Inspection Team during a CWC inspection for which the regulations in 
this subchapter apply.
    Hydrocarbon. Means any organic compound that contains only carbon 
and hydrogen.
    Impurity. Means a chemical substance unintentionally present with 
another chemical substance or mixture.
    Inspection Team. Means the group of inspectors and inspection 
assistants assigned by the Director-General of the Technical Secretariat 
to conduct a particular inspection.
    ITAR. Means the International Traffic in Arms Regulations (22 CFR 
parts 120 through 130).
    Organization for the Prohibition of Chemical Weapons (OPCW). Means 
the international organization, located in The Hague, the Netherlands, 
that administers the CWC.
    Person. Means any individual, corporation, partnership, firm, 
association, trust, estate, public or private institution, any State or 
any political subdivision thereof, or any political entity within a 
State, any foreign government or nation or any agency, instrumentality 
or political subdivision of any such government or nation, or other 
entity located in the United States.
    Plant. Means a relatively self-contained area, structure or building 
containing one or more units with auxiliary and associated 
infrastructure, such as:
    (1) Small administrative area;
    (2) Storage/handling areas for feedstock and products;
    (3) Effluent/waste handling/treatment area;
    (4) Control/analytical laboratory;

[[Page 115]]

    (5) First aid service/related medical section; and
    (6) Records associated with the movement into, around, and from the 
site, of declared chemicals and their feedstock or product chemicals 
formed from them, as appropriate.
    Plant site. Means the local integration of one or more plants, with 
any intermediate administrative levels, which are under one operational 
control, and includes common infrastructure, such as:
    (1) Administration and other offices;
    (2) Repair and maintenance shops;
    (3) Medical center;
    (4) Utilities;
    (5) Central analytical laboratory;
    (6) Research and development laboratories;
    (7) Central effluent and waste treatment area; and
    (8) Warehouse storage.
    Precursor. Means any chemical reactant which takes part, at any 
stage in the production, by whatever method, of a toxic chemical. The 
term includes any key component of a binary or multicomponent chemical 
system.
    Processing. Means a physical process such as formulation, extraction 
and purification in which a chemical is not converted into another 
chemical.
    Production. Means the formation of a chemical through chemical 
reaction.
    Purposes not prohibited by the CWC. Means the following:
    (1) Any peaceful purpose related to an industrial, agricultural, 
research, medical or pharmaceutical activity or other activity;
    (2) Any purpose directly related to protection against toxic 
chemicals and to protection against chemical weapons;
    (3) Any military purpose of the United States that is not connected 
with the use of a chemical weapon and that is not dependent on the use 
of the toxic or poisonous properties of the chemical weapon to cause 
death or other harm; or
    (4) Any law enforcement purpose, including any domestic riot control 
purpose and including imposition of capital punishment.
    Report. Means information due to BIS on exports and imports of 
Schedule 1, Schedule 2 or Schedule 3 chemicals above applicable 
thresholds. Such information is included in the national aggregate 
declaration transmitted to the OPCW. Facility-specific information is 
not included in the national aggregate declaration. Note: This 
definition does not apply to parts 719 and 720 (see Sec. 719.1) of this 
subchapter.
    Schedules of Chemicals. Means specific lists of toxic chemicals, 
groups of chemicals, and precursors contained in the CWC. See 
Supplements No. 1 to parts 712 through 714 of this subchapter.
    State Party. Means a country for which the CWC is in force. See 
Supplement No. 1 to this part.
    Storage. For purposes of Schedule 1 chemical reporting, means any 
quantity that is not accounted for under the categories of production, 
export, import, consumption or domestic transfer.
    Synthesis. Means production of a chemical from its reactants.
    Technical Secretariat. Means the organ of the OPCW charged with 
carrying out administrative and technical support functions for the 
OPCW, including carrying out the verification measures delineated in the 
CWC.
    Toxic Chemical. Means any chemical which, through its chemical 
action on life processes, can cause death, temporary incapacitation, or 
permanent harm to humans or animals. The term includes all such 
chemicals, regardless of their origin or of their method of production, 
and regardless of whether they are produced in facilities, in munitions, 
or elsewhere. Toxic chemicals that have been identified for the 
application of verification measures are in schedules contained in 
Supplements No. 1 to parts 712 through 714 of this subchapter.
    Trading company. Means any person involved in the export and/or 
import of scheduled chemicals in amounts greater than specified 
thresholds, but not in the production, processing or consumption of such 
chemicals in amounts greater than threshold amounts requiring 
declaration. If such persons exclusively export or import scheduled 
chemicals in amounts greater than specified thresholds, they are subject 
to reporting requirements but are not subject to routine inspections.

[[Page 116]]

    Transfer. See domestic transfer.
    Undeclared facility or plant site. Means a facility or plant site 
that is not subject to declaration requirements because of past or 
anticipated production, processing or consumption involving scheduled or 
unscheduled discrete organic chemicals above specified threshold 
quantities. However, such facilities and plant sites may have a 
reporting requirement for exports or imports of such chemicals.
    Unit. Means the combination of those items of equipment, including 
vessels and vessel set up, necessary for the production, processing or 
consumption of a chemical.
    United States. Means the several States of the United States, the 
District of Columbia, and the commonwealths, territories, and 
possessions of the United States, and includes all places under the 
jurisdiction or control of the United States, including any of the 
places within the provisions of paragraph (41) of section 40102 of Title 
49 of the United States Code, any civil aircraft of the United States or 
public aircraft, as such terms are defined in paragraphs (1) and (37), 
respectively, of section 40102 of Title 49 of the United States Code, 
and any vessel of the United States, as such term is defined in section 
3(b) of the Maritime Drug Enforcement Act, as amended (section 1903(b) 
of Title 46 App. of the United States Code).
    United States National Authority (USNA). Means the Department of 
State serving as the national focal point for the effective liaison with 
the Organization for the Prohibition of Chemical Weapons and other 
States Parties to the Convention and implementing the provisions of the 
Chemical Weapons Convention Implementation Act of 1998 in coordination 
with an interagency group designated by the President consisting of the 
Secretary of Commerce, Secretary of Defense, Secretary of Energy, the 
Attorney General, and the heads of other agencies considered necessary 
or advisable by the President, or their designees. The Secretary of 
State is the Director of the USNA.
    Unscheduled chemical. Means a chemical that is not contained in 
Schedule 1, Schedule 2, or Schedule 3 (see Supplements No. 1 to parts 
712 through 714 of this subchapter).
    Unscheduled Discrete Organic Chemical (UDOC). Means any ``discrete 
organic chemical'' that is not contained in the Schedules of Chemicals 
(see Supplements No. 1 to parts 712 through 714 of this subchapter) and 
subject to the declaration requirements of part 715 of this subchapter. 
Unscheduled discrete organic chemicals subject to declaration under this 
subchapter are those produced by synthesis that are isolated for use or 
sale as a specific end-product.
    You. The term ``you'' or ``your'' means any person (see also 
definition of ``person''). With regard to the declaration and reporting 
requirements of the CWCR, ``you'' refers to persons that have an 
obligation to report certain activities under the provisions of the 
CWCR.

[64 FR 73764, Dec. 30, 1999, as amended at 67 FR 20631, Apr. 26, 2002]



Sec. 710.2  Scope of the CWCR.

    The Chemical Weapons Convention Regulations (parts 710 through 722 
of this subchapter), or CWCR, implement certain obligations of the 
United States under the Convention on the Prohibition of the 
Development, Production, Stockpiling and Use of Chemical Weapons and on 
Their Destruction, known as the CWC or Convention.
    (a) Persons and facilities subject to the CWCR. (1) The CWCR 
declaration, reporting, and inspection requirements apply to all persons 
and facilities located in the United States, except U.S. Government 
facilities as follows:
    (i) Department of Defense facilities;
    (ii) Department of Energy facilities; and
    (iii) Facilities of other U.S. Government agencies that notify the 
USNA of their decision to be excluded from the CWCR.
    (2) For purposes of this subchapter, ``United States Government 
facilities'' are those facilities owned and operated by a U.S. 
Government agency (including those operated by contractors to the 
agency), and those facilities leased to and operated by a U.S. 
Government agency (including those operated by contractors to the 
agency). ``United States Government facilities'' does not

[[Page 117]]

include facilities owned by a U.S. Government agency and leased to a 
private company or other entity such that the private company or entity 
may independently decide for what purposes to use the facilities.
    (b) Activities subject to the CWCR. The CWCR compel data 
declarations and reports from facilities subject to the CWCR (parts 710 
through 722 of this subchapter) on activities, including production, 
processing, consumption, exports and imports, involving chemicals 
further described in parts 712 through 715 of this subchapter. These 
regulations do not apply to activities involving inorganic chemicals 
other than those listed in the Schedules of Chemicals or to other 
specifically exempted unscheduled discrete organic chemicals. In 
addition, these regulations set forth procedures for routine inspections 
of ``declared'' facilities by teams of international inspectors in part 
716 of this subchapter, and set forth clarification procedures and 
procedures for challenge inspections (see part 717) that could be 
requested at any facility or location in the United States subject to 
the CWCR. Finally, the CWCR restrict certain imports of Schedule 1 and 2 
chemicals into the United States from non-States Parties and prohibit 
imports of Schedule 1 chemicals except for research, medical, 
pharmaceutical, or protective purposes.



Sec. 710.3  Purposes of the Convention and CWCR.

    (a) Purposes of the Convention. (1) The Convention imposes upon the 
United States, as a State Party, certain declaration, inspection, and 
other obligations. In addition, the United States and other States 
Parties to the Convention undertake never under any circumstances to:
    (i) Develop, produce, otherwise acquire, stockpile, or retain 
chemical weapons, or transfer, directly or indirectly, chemical weapons 
to anyone;
    (ii) Use chemical weapons;
    (iii) Engage in any military preparations to use chemical weapons; 
or
    (iv) Assist, encourage or induce, in any way, anyone to engage in 
any activity prohibited by the Convention.
    (2) One objective of the Convention is to assure States Parties that 
lawful activities of chemical producers and users are not converted to 
unlawful activities related to chemical weapons. To achieve this 
objective and to give States Parties a mechanism to verify compliance, 
the Convention requires the United States and all other States Parties 
to submit declarations concerning chemical production, consumption, 
processing and other activities, and to permit international inspections 
within their borders.
    (b) Purposes of the Chemical Weapons Convention Regulations. To 
fulfill the United States' obligations under the Convention, the CWCR 
(parts 710 through 722 of this subchapter) prohibit certain activities, 
and compel the submission of information from all facilities in the 
United States, except for Department of Defense and Department of Energy 
facilities and facilities of other U.S. Government agencies that notify 
the USNA of their decision to be excluded from the CWCR on activities, 
including exports and imports of scheduled chemicals and certain 
information regarding unscheduled discrete organic chemicals as 
described in parts 712 through 715 of this subchapter. U.S. Government 
facilities are those owned by or leased to the U.S Government, including 
facilities that are contractor-operated. The CWCR also require access 
for on-site inspections and monitoring by the OPCW, as described in 
parts 716 and 717 of this subchapter.



Sec. 710.4  Overview of scheduled chemicals and examples of affected 
industries.

    The following provides examples of the types of industries that may 
be affected by the CWCR (parts 710 through 722 of this subchapter). 
These examples are not exhaustive, and you should refer to parts 712 
through 715 of this subchapter to determine your obligations.
    (a) Schedule 1 chemicals are listed in Supplement No. 1 to part 712 
of this subchapter. Schedule 1 chemicals have little or no use in 
industrial and agricultural industries, but may have limited use for 
research, pharmaceutical,

[[Page 118]]

medical, public health, or protective purposes.
    (b) Schedule 2 chemicals are listed in Supplement No. 1 to part 713 
of this subchapter. Although Schedule 2 chemicals may be useful in the 
production of chemical weapons, they also have legitimate uses in areas 
such as:
    (1) Flame retardant additives and research;
    (2) Dye and photographic industries (e.g., printing ink, ball point 
pen fluids, copy mediums, paints, etc.);
    (3) Medical and pharmaceutical preparation (e.g., anticholinergics, 
arsenicals, tranquilizer preparations);
    (4) Metal plating preparations;
    (5) Epoxy resins; and
    (6) Insecticides, herbicides, fungicides, defoliants, and 
rodenticides.
    (c) Schedule 3 chemicals are listed in Supplement No. 1 to part 714 
of this subchapter. Although Schedule 3 chemicals may be useful in the 
production of chemical weapons, they also have legitimate uses in areas 
such as:
    (1) The production of:
    (i) Resins;
    (ii) Plastics;
    (iii) Pharmaceuticals;
    (iv) Pesticides;
    (v) Batteries;
    (vi) Cyanic acid;
    (vii) Toiletries, including perfumes and scents;
    (viii) Organic phosphate esters (e.g., hydraulic fluids, flame 
retardants, surfactants, and sequestering agents); and
    (2) Leather tannery and finishing supplies.
    (d) Unscheduled discrete organic chemicals are used in a wide 
variety of commercial industries, and include acetone, benzoyl peroxide 
and propylene glycol.



Sec. 710.5  Authority.

    The CWCR (parts 710 through 722 of this subchapter) implement 
certain provisions of the Chemical Weapons Convention under the 
authority of the Chemical Weapons Convention Implementation Act of 1998 
(Act), the National Emergencies Act, the International Emergency 
Economic Powers Act (IEEPA), as amended, and the Export Administration 
Act of 1979, as amended, by extending verification and trade restriction 
requirements under Article VI and related parts of the Verification 
Annex of the Convention to U.S. persons. In Executive Order 13128 of 
June 25, 1999, the President delegated authority to the Department of 
Commerce to promulgate regulations to implement the Act, and consistent 
with the Act, to carry out appropriate functions not otherwise assigned 
in the Act but necessary to implement certain reporting, monitoring and 
inspection requirements of the Convention and the Act.



Sec. 710.6  Relationship between the Chemical Weapons Convention 
Regulations and the Export Administration Regulations.

    Certain obligations of the U.S. government under the CWC pertain to 
exports. These obligations are implemented in the Export Administration 
Regulations (EAR) (15 CFR parts 730 through 799) and the International 
Traffic in Arms Regulations (ITAR) (22 CFR parts 120 through 130). See 
in particular Sec. 742.18 and part 745 of the EAR, and Export Control 
Classification Numbers 1C350, 1C351 and 1C355 of the Commerce Control 
List (Supplement No. 1 to part 774 of the EAR).

 Supplement No. 1 to Part 710--States Parties to The Convention on The 
  Prohibition of The Development, Production, Stockpiling, and Use of 
                Chemical Weapons and on Their Destruction

             List of States Parties as of December 30, 1999

Albania
Algeria
Argentina
Armenia
Australia
Austria
Bahrain
Bangladesh
Belarus
Belgium
Benin
Bolivia
Bosnia-Herzegovina
Botswana
Brazil
Brunei Darussalam
Bulgaria
Burkina Faso
Burundi
Cameroon

[[Page 119]]

Canada
Chile
China*
Cook Islands
Costa Rica
Cote d'Ivoire (Ivory Coast)
Croatia
Cuba
Cyprus
Czech Republic
Denmark
Ecuador
El Salvador
Equatorial Guinea
Ethiopia
Estonia
Fiji
Finland
France
Gambia
Georgia
Germany
Ghana
Greece
Guinea
Guyana
Holy See
Hungary
Iceland
India
Indonesia
Iran
Ireland
Italy
Japan
Jordan
Kenya
Korea (Republic of)
Kuwait
Laos (P.D.R.)
Latvia
Lesotho
Liechtenstein
Lithuania
Luxembourg
Macedonia
Malawi
Maldives
Mali
Malta
Mauritius
Mauritania
Mexico
Moldova (Republic of)
Monaco
Mongolia
Morocco
Namibia
Nepal
Netherlands
New Zealand
Nicaragua
Niger
Nigeria
Norway
Oman
Pakistan
Panama
Papua New Guinea
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russian Federation
Saint Lucia
Saudi Arabia
Senegal
Seychelles
Singapore
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sudan
Suriname
Swaziland
Sweden
Switzerland
Tajikistan
Tanzania, United Republic of
Togo
Trinidad and Tobago
Tunisia
Turkey
Turkmenistan
Ukraine
United Kingdom
United States
Uruguay
Uzbekistan
Venezuela
Vietnam
Zimbabwe
*For CWC States Parties purposes, China includes Hong Kong and Macau.



PART 711_GENERAL INFORMATION REGARDING DECLARATION, REPORTING AND 
NOTIFICATION REQUIREMENTS--Table of Contents




Sec.
711.1 Overview of declaration, reporting, and notification requirements.
711.2 Who submits declarations, reports, and notifications.
711.3 Assistance in determining your obligations.
711.4 Declaration and reporting of activities occurring prior to 
          December 30, 1999.
711.5 Numerical precision of submitted data.
711.6 Where to obtain forms.
711.7 How to request authorization from BIS to make electronic 
          submissions of declarations or reports.

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

[[Page 120]]


    Source: 64 FR 73768, Dec. 30, 1999, unless otherwise noted.



Sec. 711.1  Overview of declaration, reporting, and notification 
requirements.

    Parts 712 through 715 of the CWCR (parts 710 through 722 of this 
subchapter) describe the declaration, notification and reporting 
requirements for Schedules 1, 2 and 3 chemicals and for unscheduled 
discrete organic chemicals (UDOCs). For each type of chemical, the 
Convention requires an initial declaration and subsequent annual 
declarations. If, after reviewing parts 712 through 715 of this 
subchapter, you determine that you have declaration, notification or 
reporting requirements, you may obtain the appropriate forms by 
contacting the Bureau of Industry and Security (see Sec. 711.6).



Sec. 711.2  Who submits declarations, reports, and notifications.

    The owner, operator, or senior management official of a facility 
subject to declaration, report, or notification requirements under the 
CWCR (parts 710 through 722 of this subchapter) is responsible for the 
submission of all required documents in accordance with all applicable 
provisions of the CWCR.



Sec. 711.3  Assistance in determining your obligations.

    (a) Determining if your chemical is subject to declaration, 
reporting or notification requirements.
    (1) If you need assistance in determining if your chemical is 
classified as a Schedule 1, Schedule 2, or Schedule 3 chemical, or is an 
unscheduled discrete organic chemical, submit your written request for a 
chemical determination to BIS. Such requests may be faxed to (703) 235-
1481, e-mailed to cdr@cwc.gov, or mailed to Information Technology Team, 
Bureau of Industry and Security, U.S. Department of Commerce, 1555 
Wilson Boulevard, Suite 710, Arlington, Virginia 22209-2405. Your 
request should include the information noted in paragraph (a)(2) of this 
section to ensure an accurate determination. Also include any additional 
information that you feel is relevant to the chemical or process 
involved (see part 718 of this subchapter for provisions regarding 
treatment of confidential business information). If you are unable to 
provide all of the information required in paragraph (a)(2) of this 
section, you should include an explanation identifying the reasons or 
deficiencies that preclude you from supplying the information. If BIS 
cannot make a determination based upon the information submitted, BIS 
will return the request to you and identify the additional information 
that is necessary to complete a chemical determination.
    (2) Include the following information in each chemical determination 
request:
    (i) Date of request;
    (ii) Company name and complete street address;
    (iii) Point of contact;
    (iv) Phone and fax number of contact;
    (v) E-mail address of contact, if you want an acknowledgment of 
receipt sent via e-mail;
    (vi) Chemical Name;
    (vii) Structural formula of the chemical, if the chemical is not 
specifically identified by name and chemical abstract service registry 
number in Supplements No. 1 to parts 712 through 714 of the CWCR; and
    (viii) Chemical Abstract Service registry number, if assigned.
    (b) Other inquiries. If you need assistance in interpreting the 
provisions of this subchapter or need assistance with other CWC-related 
issues, and you require a response from BIS in writing, submit a 
detailed request to BIS that explains your question, issue, or request. 
Send the request to the address or fax included in paragraph (a) of this 
section, or e-mail the request to cwcqa@cwc.gov.
    (c) BIS response to your request. BIS will respond in writing to 
your chemical determination request submitted under paragraph (a) of 
this section within 10 working days of receipt of the request. BIS will 
respond to other inquiries about industry obligations under the CWCR in 
a timely manner.
    (d) Other BIS contact information. (1) Declaration and report 
requirements. For questions on declaration or report requirements, or 
help in completing forms, you may also contact BIS's Information 
Technology Team (ITT) by phone at (703) 235-1335.

[[Page 121]]

    (2) Inquiries regarding inspections and facility agreements. For 
questions regarding inspections and facility agreements, contact BIS's 
Inspection Management Team (IMT) by phone at (202) 482-6114 or fax (202) 
482-4744.



Sec. 711.4  Declaration and reporting of activities occurring prior 
to December 30, 1999.

    (a) Facilities subject to the CWCR are required to prepare and 
submit declarations and reports, to the extent that the necessary 
information and records are available, on activities occurring prior to 
December 30, 1999. Willful failure or refusal to submit such 
declarations and reports constitutes a violation under part 719 of this 
subchapter. Declarations and reports are not required if records and 
information necessary to prepare them are not available for one or more 
of the following reasons:
    (1) The necessary information was not collected, or the necessary 
records were not kept, because no regulatory requirement to do so was in 
effect prior to December 30, 1999 and at the time of the activity;
    (2) The information, though collected at the time of the activity, 
was discarded prior to December 30, 1999 in accordance with normal 
business practices; or
    (3) The current custodian of the records or information is no longer 
affiliated with a facility subject to the CWCR due to changes in 
ownership or control of that facility which took place prior to December 
30, 1999.
    (b) If partial information is available, facilities are required to 
provide whatever information is available, on the appropriate forms, 
with a notation on Form A indicating that complete information is not 
available.
    (c) This Sec. 711.4 applies only to initial declarations and 
reports, and to annual declarations and reports for calendar years 1997, 
1998, and 1999.



Sec. 711.5  Numerical precision of submitted data.

    Numerical information submitted in declarations and reports is to be 
provided per applicable rounding rules in each part (i.e., parts 712 
through 715 of this subchapter) with a precision equal to that which can 
be reasonably provided using existing documentation, equipment, and 
measurement techniques.



Sec. 711.6  Where to obtain forms.

    Forms to complete declarations and reports required by the CWCR may 
be obtained by contacting: Information Technology Team, Bureau of 
Industry and Security, U.S. Department of Commerce, 1555 Wilson Blvd., 
Suite 710, Arlington, VA 22209-2405, Telephone: (703) 235-1335. Forms 
may also be downloaded from the Internet at www.cwc.gov.



Sec. 711.7  How to request authorization from BIS to make electronic 
submissions of declarations or reports.

    (a) Scope. This section provides an optional method of submitting 
declarations or reports. Specifically, this section applies to the 
electronic submission of declarations and reports required under the 
CWCR. If you choose to submit declarations and reports by electronic 
means, all such electronic submissions must be made through the Web-Data 
Entry System for Industry (Web-DESI), which can be accessed on the CWC 
Web site at http://www.cwc.gov.
    (b) Authorization. If you or your company has a facility, plant 
site, or trading company that has been assigned a U.S. Code Number 
(U.S.C. Number), you may submit declarations and reports electronically, 
once you have received authorization from BIS to do so. An authorization 
to submit declarations and reports electronically may be limited or 
withdrawn by BIS at any time. There are no prerequisites for obtaining 
permission to submit electronically, nor are there any limitations with 
regard to the types of declarations or reports that are eligible for 
electronic submission. However, BIS may direct, for any reason, that any 
electronic declaration or report be resubmitted in writing, either in 
whole or in part.
    (1) Requesting approval to submit declarations and reports 
electronically. To submit declarations and reports electronically, you 
or your company must submit a written request to BIS at the address 
identified in Sec. 711.6 of the

[[Page 122]]

CWCR. Both the envelope and letter must be marked ``Attn: Electronic 
Declaration or Report Request.'' Your request should be on company 
letterhead and must contain your name or the company's name, your 
mailing address at the company, the name of the facility, plant site or 
trading company and its U.S. Code Number, the address of the facility, 
plant site or trading company (this address may be different from the 
mailing address), the list of individuals who are authorized to view, 
edit, or edit and submit declarations and reports on behalf of your 
company, and the telephone number and name and title of the official 
responsible for certifying that each individual listed in the request is 
authorized to view, edit, or edit and submit declarations and reports on 
behalf of you or your company. Additional information required for 
submitting electronic declarations and reports may be found on BIS's Web 
site at http://www.cwc.gov. Once you have completed and submitted the 
necessary certifications, you may be authorized by BIS to view, edit, or 
edit and submit declarations and reports electronically.
    Note to Sec. 711.7(b)(1): You must submit a separate request for 
each facility, plant site or trading company owned by your company 
(e.g., each site that is assigned a unique U.S. Code Number).
    (2) Assignment and use of passwords for facilities, plant sites and 
trading companies (U.S.C. password) and Web-DESI user accounts (user 
name and password).
    (i) Each person, facility, plant site or trading company authorized 
to submit declarations and reports electronically will be assigned a 
password (U.S.C. password) that must be used in conjunction with the 
U.S.C. Number. Each individual authorized by BIS to view, edit, or edit 
and submit declarations and reports electronically for a facility, plant 
site or trading company will be assigned a Web-DESI user account (user 
name and password) telephonically by BIS. A Web-DESI user account will 
be assigned to you only if your company has certified to BIS that you 
are authorized to act for it in viewing, editing, or editing and 
submitting electronic declarations and reports under the CWCR.
    Note to Sec. 711.7(b)(2)(i): When individuals must have access to 
multiple Web-DESI accounts, their companies must identify such 
individuals on the approval request for each of these Web-DESI accounts. 
BIS will coordinate with such individuals to ensure that the assigned 
user name and password is the same for each account.
    (ii) Your company may reveal the facility, plant site or trading 
company password (U.S.C. password) only to Web-DESI users with valid 
passwords, their supervisors, and employees or agents of the company 
with a commercial justification for knowing the password.
    (iii) If you are an authorized Web-DESI account user, you may not:
    (A) Disclose your user name or password to anyone;
    (B) Record your user name or password, either in writing or 
electronically;
    (C) Authorize another person to use your user name or password; or
    (D) Use your user name or password following termination, either by 
BIS or by your company, of your authorization or approval for Web-DESI 
use.
    (iv) To prevent misuse of the Web-DESI account:
    (A) If Web-DESI user account information (i.e., user name and 
password) is lost, stolen or otherwise compromised, the company and the 
user must report the loss, theft or compromise of the user account 
information, immediately, by calling BIS at (703) 235-1335. Within two 
business days of making the report, the company and the user must submit 
written confirmation to BIS at the address provided in Sec. 711.6 of 
the CWCR.
    (B) Your company is responsible for immediately notifying BIS 
whenever a Web-DESI user leaves the employ of the company or otherwise 
ceases to be authorized by the company to submit declarations and 
reports electronically on its behalf.
    (v) No person may use, copy, appropriate or otherwise compromise a 
Web-DESI account user name or password assigned to another person. No 
person, except a person authorized access by the company, may use or 
copy the facility, plant site or trading company password (U.S.C 
password), nor may any person steal or otherwise compromise this 
password.

[[Page 123]]

    (c) Electronic submission of declarations and reports. (1) General 
instructions. Upon submission of the required certifications and 
approval of the company's request to use electronic submission, BIS will 
provide instructions on both the method for transmitting declarations 
and reports electronically and the process for submitting required 
supporting documents, if any. These instructions may be modified by BIS 
from time to time.
    (2) Declarations and reports. The electronic submission of a 
declaration or report will constitute an official document as required 
under parts 712 through 715 of the CWCR. Such submissions must provide 
the same information as written declarations and reports and are subject 
to the recordkeeping provisions of part 720 of the CWCR. The company and 
Web-DESI user submitting the declaration or report will be deemed to 
have made all representations and certifications as if the submission 
were made in writing by the company and signed by the certifying 
official. Electronic submission of a declaration or report will be 
considered complete upon transmittal to BIS.
    (d) Updating. A company approved for electronic submission of 
declarations or reports under Web-DESI must promptly notify BIS of any 
change in its name, ownership or address. If your company wishes to have 
an individual added as a Web-DESI user, your company must inform BIS and 
follow the instructions provided by BIS. Your company should conduct 
periodic reviews to ensure that the company's designated certifying 
official and Web-DESI users are individuals whose current 
responsibilities make it necessary and appropriate that they act for the 
company in either capacity.

[69 FR 2502, Jan. 16, 2004]



PART 712_ACTIVITIES INVOLVING SCHEDULE 1 CHEMICALS--Table of Contents




Sec.
712.1 Round to zero rule that applies to activities involving Schedule 1 
          chemicals.
712.2 Prohibitions involving imports of Schedule 1 chemicals.
712.3 Initial and annual declaration requirements for facilities engaged 
          in the production of Schedule 1 chemicals for purposes not 
          prohibited by the CWC.
712.4 New Schedule 1 production facility.
712.5 Advance notification and annual report of all exports and imports 
          of Schedule 1 chemicals to, or from, other States' Parties.
712.6 Frequency and timing of declarations, reports and notifications.
712.7 Amended declaration or report.

Supplement No. 1 to Part 712--Schedule 1 Chemicals

    Authority: 22 U.S.C. 6701 et seq.; 50 U.S.C. 1601 et seq.; 50 U.S.C. 
1701 et seq.; E.O. 12938 (59 FR 59099; 3 CFR, 1994 Comp., p. 950), as 
amended by E.O. 13094 (63 FR 40803; 3 CFR, 1998 Comp., p. 200); E.O. 
13128, 64 FR 36703.

    Source: 64 FR 73769, Dec. 30, 1999, unless otherwise noted.



Sec. 712.1  Round to zero rule that applies to activities involving 
Schedule 1 chemicals.

    (a) See Sec. 711.6 of this subchapter for information on obtaining 
the forms you will need to declare and report activities involving 
Schedule 1 chemicals.
    (b) Facilities that produce, export or import mixtures containing 
less than 0.5% aggregate quantities of Schedule 1 chemicals as 
unavoidable by-products or impurities may round to zero and are not 
subject to the provisions of this part 712. Schedule 1 content may be 
calculated by volume or weight, whichever yields the lesser percent. 
Note that such mixtures may be subject to regulatory requirements of 
other federal agencies.



Sec. 712.2  Prohibitions involving imports of Schedule 1 chemicals.

    (a) You may not import any Schedule 1 chemical unless:
    (1) The import is from a State Party;
    (2) The import is for research, medical, pharmaceutical, or 
protective purposes;
    (3) The import is in types and quantities strictly limited to those 
that can be justified for such purposes; and
    (4) You have notified BIS 45 calendar days prior to the import 
pursuant to Sec. 712.5.
    (b)(1) The provisions of paragraph (a) of this section do not apply 
to the retention, ownership, possession, transfer, or receipt of a 
Schedule 1 chemical

[[Page 124]]

by a department, agency, or other entity of the United States, or by a 
person described in paragraph (b)(2) of this section, pending 
destruction of the Schedule 1 chemical;
    (2) A person referred to in paragraph (b)(1) of this section is:
    (i) Any person, including a member of the Armed Forces of the United 
States, who is authorized by law or by an appropriate officer of the 
United States to retain, own, possess transfer, or receive the Schedule 
1 chemical; or
    (ii) In an emergency situation, any otherwise non-culpable person if 
the person is attempting to seize or destroy the Schedule 1 chemical.

    Note to Sec. 712.2: For specific provisions relating to the prior 
notification of exports of all Schedule 1 chemicals, see Sec. 742.18 of 
the Export Administration Regulations (EAR) (15 CFR parts 730 through 
799). For specific provisions relating to license requirements for 
exports of Schedule 1 chemicals, see Sec. Sec. 742.2 and 742.18 of the 
EAR for Schedule 1 chemicals subject to the jurisdiction of the 
Department of Commerce and see the International Traffic in Arms 
Regulations (22 CFR parts 120 through 130) for Schedule 1 chemicals 
subject to the jurisdiction of the Department of State.



Sec. 712.3  Initial and annual declaration requirements for 

facilities engaged in the production of Schedule 1 chemicals for 
purposes not prohibited by the CWC.

    (a) Declaration requirements. (1) Initial declaration. You must 
complete the forms specified in paragraph (b)(1) of this section, 
providing a current technical description of your facility or its 
relevant parts, if you produced Schedule 1 chemicals at your facility in 
excess of 100 grams aggregate in any one of the calendar years 1997, 
1998, or 1999. Note: Do not include production data in your initial 
declaration. Such information should be included in your annual 
declaration on past activities. See paragraph (a)(2) of this section.
    (2) Annual declaration on past activities. You must complete the 
forms specified in paragraph (b)(2) of this section if you produced at 
your facility in excess of 100 grams aggregate of Schedule 1 chemicals 
in the previous calendar year, beginning with calendar year 1997. As a 
declared Schedule 1 facility, in addition to declaring the production of 
each Schedule 1 chemical that comprises your aggregate production of 
Schedule 1 chemicals, you must also declare the total amount of each 
Schedule 1 chemical used (consumed) and stored at your facility, and 
domestically transferred from your facility during the previous calendar 
year, whether or not you produced that Schedule 1 chemical at your 
facility.
    (3) Annual declaration on anticipated activities. You must complete 
the forms specified in paragraph (b)(3) of this section if you 
anticipate that you will produce at your facility more than 100 grams 
aggregate of Schedule 1 chemicals in the next calendar year. If you are 
not already a declared facility, you must complete an initial 
declaration (see paragraph (a)(1) of this section) 200 calendar days 
before commencing operations or increasing production which will result 
in production of more than 100 grams aggregate of Schedule 1 chemicals 
(see Sec. 712.4).
    (b) Declaration forms to be used. (1) Initial declaration. (i) You 
must complete the Certification Form, Form 1-1 and Form A if you 
produced at your facility in excess of 100 grams aggregate of Schedule 1 
chemicals in calendar year 1997, 1998, or 1999. You must provide a 
detailed current technical description of your facility or its relevant 
parts including a narrative statement, a detailed diagram of the 
declared areas in the facility, and an inventory of equipment in the 
declared area.
    (ii) If you plan to change the technical description of your 
facility from your initial declaration completed and submitted pursuant 
to paragraph (a)(1) of this section and Sec. 712.6, you must notify BIS 
200 calendar days prior to the change. Such notifications must be made 
through an amended declaration by completing a Certification Form, Form 
1-1 and Form A, including the new description of the facility. See Sec. 
712.7 for additional instructions on amending Schedule 1 declarations.
    (2) Annual declaration on past activities. If you are subject to the 
declaration requirement of paragraph (a)(2) of this section, you must 
complete the Certification Form and Forms 1-1, 1-2, 1-2A, 1-2B, and Form 
A if your facility was involved in the production of Schedule 1 
chemicals in the previous

[[Page 125]]

calendar year, beginning with calendar year 1997. Form B is optional.
    (3) Annual declaration on anticipated activities. If you anticipate 
that you will produce at your facility in excess of 100 grams aggregate 
of Schedule 1 chemicals in the next calendar year you must complete the 
Certification Form and Forms 1-1, 1-4, and Form A. Form B is optional.
    (c) Quantities to be declared. If you produced in excess of 100 
grams aggregate of Schedule 1 chemicals in the previous calendar year, 
you must declare the entire quantity of such production, rounded to the 
nearest gram. You must also declare the quantity of any Schedule 1, 
Schedule 2 or Schedule 3 precursor chemical used to produce the declared 
Schedule 1 chemical, rounded to the nearest gram. You must further 
declare the quantity of each Schedule 1 chemical consumed or stored by, 
or domestically transferred from, your facility, whether or not the 
Schedule 1 chemical was produced by your facility, rounded to the 
nearest gram. In calculating the amount of Schedule 1 chemical you 
produced, consumed or stored, count only the amount of the Schedule 1 
chemical(s) in a mixture, not the total weight of the mixture (i.e., do 
not count the weight of the solution, solvent, or container).

    Note to Sec. 712.3(c): Schedule 1 reaction intermediates which 
exist or might exist during the course of synthesis to produce non-
scheduled chemicals and which cannot be isolated using available 
technology should not be declared if the reaction is allowed to go to 
completion, completely consuming the real or hypothetical intermediates.

    (d) ``Declared'' Schedule 1 facilities and routine inspections. Only 
facilities that produced in excess of 100 grams aggregate of Schedule 1 
chemicals in calendar year 1997 or 1998, or during the previous calendar 
year, or that anticipate producing in excess of 100 grams aggregate of 
Schedule 1 chemicals during the next calendar year are considered 
``declared'' Schedule 1 facilities for the years declared. A 
``declared'' Schedule 1 facility is subject to initial and routine 
inspection by the OPCW (see part 716 of this subchapter).
    (e) Approval of declared Schedule 1 production facilities. 
Facilities that submit declarations pursuant to this section are 
considered approved Schedule 1 production facilities for purposes of the 
CWC, unless otherwise notified by BIS within 30 days of receipt by BIS 
of an annual declaration on past activities or annual declaration on 
anticipated activities (see paragraphs (a)(2) and (a)(3) of this 
section). If your facility does not produce more than 100 grams 
aggregate of Schedule 1 chemicals, no approval by BIS is required.



Sec. 712.4  New Schedule 1 production facility.

    (a) Establishment of a new Schedule 1 production facility. (1) If 
your facility was not declared under Sec. 712.3 in a previous calendar 
year, and you intend to begin production of Schedule 1 chemicals at your 
facility in quantities greater than 100 grams aggregate per year for 
research, medical, or pharmaceutical purposes, you must provide an 
initial declaration (a current detailed technical description of your 
facility) to BIS at least 200 calendar days in advance of commencing 
such production. Such facilities are considered ``new Schedule 1 
production facilities'' and are subject to an initial inspection within 
200 calendar days of submitting an initial declaration.
    (2) New Schedule 1 production facilities that submit an initial 
declaration pursuant to paragraph (a)(1) of this section are considered 
approved Schedule 1 production facilities for purposes of the CWC, 
unless otherwise notified by BIS within 30 days of receipt by BIS of 
that initial declaration.
    (b) Types of declaration forms required. If your new Schedule 1 
production facility will produce in excess of 100 grams aggregate of 
Schedule 1 chemicals, you must complete the Certification Form, Form 1-1 
and Form A. You must also provide a detailed technical description of 
the new facility or its relevant parts, including a detailed diagram of 
the declared areas in the facility, and an inventory of equipment in the 
declared areas.
    (c) Two hundred days after a new Schedule 1 production facility 
submits its initial declaration, it is subject to

[[Page 126]]

the annual declaration requirements of Sec. 712.3(a)(2) and (a)(3).



Sec. 712.5  Advance notification and annual report of all exports 

1 and imports of Schedule 1 chemicals to, or from, other 
States Parties.

---------------------------------------------------------------------------

    \1\ Effective May 18, 1999, these advance notification and annual 
report requirements for exports are set forth in parts 742 and 745 of 
the Export Administration Regulations (EAR) (15 CFR parts 742 and 745).
---------------------------------------------------------------------------

    Pursuant to the Convention, the United States is required to notify 
the OPCW not less than 30 days in advance of every export or import of a 
Schedule 1 chemical, in any quantity, to or from another State Party. In 
addition, the United States is required to provide a report of all 
exports and imports of Schedule 1 chemicals to or from other States 
Parties during each calendar year. If you plan to export or import any 
quantity of a Schedule 1 chemical from or to your declared facility, 
undeclared facility or trading company, you must notify BIS in advance 
of the export or import and complete an annual report of exports and 
imports that actually occurred during the previous calendar year. The 
United States will transmit to the OPCW the advance notifications and a 
detailed annual declaration of each actual export or import of a 
Schedule 1 chemical from/to the United States. Note that the 
notification and annual report requirements of this section do not 
relieve you of any requirement to obtain a license from the Department 
of Commerce for the export of Schedule 1 chemicals subject to the Export 
Administration Regulations (15 CFR parts 730 through 799) or from the 
Department of State for the export of Schedule 1 chemicals subject to 
the International Traffic in Arms Regulations (22 CFR parts 120 through 
130). Only facilities that produce in excess of 100 grams aggregate of 
Schedule 1 chemicals annually are ``declared'' facilities and are 
subject to routine inspections pursuant to part 716 of this subchapter.
    (a) Advance notification of exports and imports. (1) You must notify 
BIS at least 45 calendar days prior to exporting or importing any 
quantity of a Schedule 1 chemical listed in Supplement No. 1 to this 
part to or from another State Party. Note that notifications for exports 
may be sent to BIS prior to or after submission of a license application 
to BIS for Schedule 1 chemicals subject to the EAR and controlled under 
ECCNs 1C350 or 1C351 or to the Department of State for Schedule 1 
chemicals controlled under the ITAR. Such notices must be submitted 
separately from license applications.
    (i) Notifications should be on company letterhead or must clearly 
identify the reporting entity by name of company, complete address, name 
of contact person and telephone and fax numbers, along with the 
following information:
    (A) Chemical name;
    (B) Structural formula of the chemical;
    (C) Chemical Abstract Service (CAS) Registry Number;
    (D) Quantity involved in grams;
    (E) Planned date of export or import;
    (F) Purpose (end-use) of export or import (i.e., research, medical, 
pharmaceutical, or protective purpose);
    (G) Name(s) of exporter and importer;
    (H) Complete street address(es) of exporter and importer;
    (I) U.S. export license or control number, if known; and
    (J) Company identification number, once assigned by BIS.
    (ii) Send the notification by fax to (703) 235-1481 or to the 
following address for mail and courier deliveries:
    Information Technology Team, Bureau of Industry and Security, 
Department of Commerce, 1555 Wilson Boulevard, Suite 710, Arlington, VA 
22209-2405, Attn: ``Advance Notification of Schedule 1 Chemical [Export] 
[Import].''
    (iii) Upon receipt of the notification, BIS will inform the exporter 
of the earliest date the shipment may occur under the notification 
procedure. To export the Schedule 1 chemical subject to an export 
license requirement either under the EAR or the ITAR, the exporter must 
have applied for and been granted a license (see Sec. Sec. 742.2 and 
742.18 of the EAR, or the ITAR at 22 CFR parts 120 through 130).
    (b) Annual report requirements for exports and imports of Schedule 1 
chemicals. Any person subject to the CWCR that exported or imported any 
quantity of

[[Page 127]]

Schedule 1 chemical to or from another State Party during the previous 
calendar year, beginning with calendar year 1997, has a reporting 
requirement under this section.
    (1) Annual report on exports and imports. Declared and undeclared 
facilities, trading companies, and any other person subject to the CWCR 
that exported or imported any quantity of a Schedule 1 chemical to or 
from another State Party in a previous calendar year, beginning with 
calendar year 1997, must submit an annual report on exports and imports.

    Note to paragraph (b)(1): The U.S. Government will not submit to the 
OPCW company-specific information relating to the export or import of 
Schedule 1 chemicals contained in reports. The U.S. Government will add 
all export and import information contained in reports to establish the 
U.S. national aggregate declaration on exports and imports.

    (2) Report forms to submit. (i) Declared Schedule 1 facilities. (A) 
If your facility declared production of a Schedule 1 chemical and you 
also exported or imported any amount of that same Schedule 1 chemical, 
you may report the export or import by:
    (1) Submitting, along with your declaration, Form 1-3 for that same 
Schedule 1 chemical to be reported. Attach Form A, as appropriate; Form 
B is optional; or
    (2) Submitting, separately from your declaration, a Certification, 
Form 1-1, and a Form 1-3 for each Schedule 1 chemical to be reported. 
Attach Form A, as appropriate; Form B is optional.
    (B) If your facility declared production of a Schedule 1 chemical 
and exported or imported any amount of a different Schedule 1 chemical, 
you may report the export or import by:
    (1) Submitting, along with your declaration, a Form 1-3 for each 
Schedule 1 chemical to be reported. Attach Form A, as appropriate; Form 
B is optional; or
    (2) Submitting, separately from your declaration, a Certification 
Form, Form 1-1, and a Form 1-3 for each Schedule 1 chemical to be 
reported. Attach Form A, as appropriate; Form B is optional.
    (ii) If you are an undeclared facility, trading company, or any 
other person subject to the CWCR, and you exported or imported any 
amount of a Schedule 1 chemical, you must submit a Certification Form, 
Form 1-1, and a Form 1-3 for each Schedule 1 chemical to be reported. 
Attach Form A, as appropriate; Form B is optional.
    (c) Paragraph (a) of this section does not apply to the activities 
and persons set forth in Sec. 712.2(b).



Sec. 712.6  Frequency and timing of declarations, reports and 
notifications.

    Declarations, reports and notifications required under this part 
must be postmarked by the appropriate date identified in Table 1 of this 
section. Required declarations, reports and notifications include:
    (a) Initial declaration (technical description);
    (b) Annual declaration on past activities (production during the 
previous calendar year, beginning with 1997);
    (c) Annual report on exports and imports from trading companies, 
facilities and other persons (during the previous calendar year, 
beginning with 1997);
    (d) Annual declaration on anticipated activities (production in the 
next calendar year, beginning in calendar year 2000 for production 
anticipated for calendar year 2001);
    (e) Advance notification of any export to or import from another 
State Party; and
    (f) Initial declaration of a new Schedule 1 production facility.

     Table 1 to Sec. 712.6--Deadlines for Submission of Schedule 1
                              Declarations
------------------------------------------------------------------------
      Declarations and
        notifications           Applicable forms          Due dates
------------------------------------------------------------------------
Initial Declaration--         Certification, 1-1,   March 30, 2000.
 Declared facility             A, B (optional).
 (technical description).
Annual Declaration on Past    Certification, 1-1,   For 1997, 1998, and
 Activities (previous          1-2, 1-2A, 1-2B, 1-   1999 March 30,
 calendar year, starting       3 (if also exported   2000. Thereafter,
 with 1997)--Declared          or imported), A (as   February 28.
 facility (past production).   appropriate), B
                               (optional).

[[Page 128]]

 
Annual report on exports and  Certification, 1-1,   For 1997, 1998, and
 imports (previous calendar    1-3, A (as            1999 March 30,
 year, starting with 1997)     appropriate), B       2000. Thereafter,
 (facility, trading company,   (optional).           February 28.
 other persons).
Annual Declaration on         Certification, 1-1,   August 3 of each
 Anticipated Activities        1-4, A (as            year prior to the
 (next calendar year).         appropriate), B       calendar year in
                               (optional).           which anticipated
                                                     activities will
                                                     take place,
                                                     beginning in
                                                     calendar year 2000.
Advance Notification of any   Notify on             45 calendar days
 export to or import from      letterhead. See       prior to the export
 another State Party.          Sec. 712.5 of       or import.
                               this subchapter.
Initial Declaration of a new  Certification, 1-1,   200 calendar days
 Schedule 1 facility.          A (as appropriate),   before commencing
                               B (optional).         such production.
------------------------------------------------------------------------



Sec. 712.7  Amended declaration or report.

    (a) You must submit an amended declaration or report for changes to 
previously submitted information on chemicals, activities and end-use 
purposes or the addition of new chemicals, activities and end-use 
purposes.
    (b) For declared Schedule 1 facilities, changes that may affect 
verification activities, such as changes of owner or operator, company 
name, address, or inspection point of contact, require an amended 
declaration. Non-substantive typographical errors and changes to the 
declaration point of contact do not require submission of an amended 
declaration or report and may be corrected in subsequent declarations or 
reports.
    (c) For undeclared Schedule 1 facilities, trading companies and 
other persons, changes that do not directly affect the purpose of the 
Convention, such as changes to a company name, address, point of 
contact, or non-substantive typographical errors, do not require 
submission of an amended report and may be corrected in subsequent 
reports.
    (d) If you are required to submit an amended declaration or report 
pursuant to paragraph (a) or (b) of this section, you must complete and 
submit a new Certification Form and the specific form(s) being amended 
(e.g., annual declaration on past activities, annual declaration on 
anticipated activities). Only complete that portion of each form that 
corrects the previously submitted information.

           Supplement No. 1 to Part 712--Schedule 1 Chemicals

------------------------------------------------------------------------
                                                          (CAS registry
                                                             number)
------------------------------------------------------------------------
A. Toxic chemicals:
    (1) O-Alkyl (<=C10, incl. cycloalkyl) alkyl (Me,
     Et, n-Pr or i-Pr)-phosphonofluoridates
        e.g. Sarin: O-Isopropyl                               (107-44-8)
         methylphosphonofluoridate....................
        Soman: O-Pinacolyl methylphosphonofluoridate..         (96-64-0)
    (2) O-Alkyl (<=C10, incl. cycloalkyl) N,N-dialkyl          (77-81-6)
     (Me, Et, n-Pr or i-Pr) phosphoramidocyanidates
     e.g. Tabun: O-Ethyl N,N-dimethyl
     phosphoramidocyanidate...........................
    (3) O-Alkyl (H or <=C10, incl. cycloalkyl) S-2-         (50782-69-9)
     dialkyl (Me, Et, n-Pr or i-Pr)-aminoethyl alkyl
     (Me, Et, n-Pr or i-Pr) phosphonothiolates and
     corresponding alkylated or protonated salts e.g.
     VX: O-Ethyl S-2-diisopropylaminoethyl methyl
     phosphonothiolate................................
    (4) Sulfur mustards:
        2-Chloroethylchloromethylsulfide..............       (2625-76-5)
        Mustard gas: Bis(2-chloroethyl)sulfide........        (505-60-2)
        Bis(2-chloroethylthio)methane.................      (63869-13-6)
        Sesquimustard: 1,2-Bis(2-                            (3563-36-8)
         chloroethylthio)ethane.......................
        1,3-Bis(2-chloroethylthio)-n-propane..........      (63905-10-2)
        1,4-Bis(2-chloroethylthio)-n-butane...........     (142868-93-7)
        1,5-Bis(2-chloroethylthio)-n-pentane..........     (142868-94-8)
        Bis(2-chloroethylthiomethyl)ether.............      (63918-90-1)
        O-Mustard: Bis(2-chloroethylthioethyl)ether...      (63918-89-8)
    (5) Lewisites:
        Lewisite 1: 2-Chlorovinyldichloroarsine.......        (541-25-3)
        Lewisite 2: Bis(2-chlorovinyl)chloroarsine....      (40334-69-8)

[[Page 129]]

 
        Lewisite 3: Tris(2-chlorovinyl)arsine.........      (40334-70-1)
    (6) Nitrogen mustards:
        HN1: Bis(2-chloroethyl)ethylamine.............        (538-07-8)
        HN2: Bis(2-chloroethyl)methylamine............         (51-75-2)
        HN3: Tris(2-chloroethyl)amine.................        (555-77-1)
    (7) Saxitoxin.....................................      (35523-89-8)
    (8) Ricin.........................................       (9009-86-3)
    B. Precursors:
    (9) Alkyl (Me, Et, n-Pr or i-Pr)                          (676-99-3)
     phosphonyldifluorides e.g. DF:
     Methylphosphonyldifluoride.......................
    (10) O-Alkyl (H or <=C10, incl. cycloalkyl) O-2-        (57856-11-8)
     dialkyl (Me, Et, n-Pr or i-Pr)-aminoethyl alkyl
     (Me, Et, N-Pr or i-Pr) phosphonites and
     corresponding alkylated or protonated salts e.g.
     QL: O-Ethyl O-2-diisopropylaminoethyl
     methylphosphonite................................
    (11) Chlorosarin: O-Isopropyl                            (1445-76-7)
     methylphosphonochloridate........................
    (12) Chlorosoman: O-Pinacolyl                            (7040-57-5)
     methylphosphonochloridate........................
------------------------------------------------------------------------
Notes to Supplement No. 1:
Note 1: Note that the following Schedule 1 chemicals are controlled for
  export purposes under the Export Administration Regulations (see part
  774 of the EAR, the Commerce Control List): 0-Ethyl-2-
  diisopropylaminoethyl methylphosphonite (QL) (C.A.S. 57856-11-
  8), Ethylphosphonyl difluoride (C.A.S. 753-98-0),
  Methylphosphonyl difluoride (C.A.S. 676-99-3), Saxitoxin
  (35523-89-8), Ricin (9009-86-3).
Note 2: All Schedule 1 chemicals not listed in Note 1 to this Supplement
  are controlled for export purposes by the Office of Defense Trade
  Control of the Department of State under the International Traffic in
  Arms Regulations (22 CFR parts 120 through 130).



PART 713_ACTIVITIES INVOLVING SCHEDULE 2 CHEMICALS--Table of Contents




Sec.
713.1 Prohibition on imports of Schedule 2 chemicals from non-States 
          Parties.
713.2 Declaration on past production of Schedule 2 chemicals for 
          chemical weapons purposes.
713.3 Initial and annual declaration requirements for plant sites that 
          produce, process or consume Schedule 2 chemicals in excess of 
          specified thresholds.
713.4 Initial and annual declaration and reporting requirements for 
          exports and imports of Schedule 2 chemicals.
713.5 Advance declaration requirements for additionally planned 
          production, processing or consumption of Schedule 2 chemicals.
713.6 Frequency and timing of declarations and reports.
713.7 Amended declaration or report.

Supplement No. 1 to Part 713--Schedule 2 Chemicals

    Authority: 22 U.S.C. 6701 et seq.; 50 U.S.C. 1601 et seq.; 50 U.S.C. 
1701 et seq; E.O. 12938 (59 FR 59099; 3 CFR, 1994 Comp., p. 950), as 
amended by E.O. 13094 (63 FR 40803; 3 CFR, 1998 Comp., p. 200); E.O. 
13128, 64 FR 36703.

    Source: 64 FR 73722, Dec. 30, 1999, unless otherwise noted.



Sec. 713.1  Prohibition on imports of Schedule 2 chemicals from 
non-States Parties.

    (a) See Sec. 711.6 of this subchapter for information on obtaining 
the forms you will need to declare and report activities involving 
Schedule 2 chemicals. You may not import any Schedule 2 chemical (see 
Supplement No. 1 to this part) on or after April 29, 2000, from any 
destination other than a State Party to the Convention. See Supplement 
No. 1 to part 710 of this subchapter for a list of States that are party 
to the Convention.

    Note to paragraph (a). See Sec. 742.18 of the Export Administration 
Regulations (15 CFR part 742) for prohibitions that apply to exports of 
Schedule 2 chemicals on or after April 29, 2000 to non-States Parties 
and for End-Use Certificate requirements for exports of Schedule 2 
chemicals prior to April 29, 2000 to such destinations.

    (b) Paragraph (a) of this section does not apply to:
    (1) The transfer or receipt of a Schedule 2 chemical from a non-
State Party by a department, agency, or other entity of the United 
States, or by any person, including a member of the Armed Forces of the 
United States, who is authorized by law, or by an appropriate officer of 
the United States to transfer or receive the Schedule 2 chemical; or
    (2) Mixtures containing Schedule 2 chemicals, if the concentration 
of each Schedule 2 chemical in the mixture is 10% or less by weight. 
Note, however, that such mixtures may be subject to regulatory 
requirements of other federal agencies.

[[Page 130]]



Sec. 713.2  Declaration on past production of Schedule 2 chemicals for 
chemical weapons purposes.

    You must complete the Certification Form and Forms 2-1, 2-2, 2-4, 
Form A, if you produced at your plant site any quantity of a Schedule 2 
chemical at any time since January 1, 1946, for chemical weapons 
purposes. Form B is optional. You must declare the total quantity of 
such a chemical produced, rounded to the nearest kilogram. Note that you 
are not subject to routine inspection unless you are a declared facility 
pursuant to Sec. 713.3.



Sec. 713.3  Initial and annual declaration requirements for plant sites 

that produce, process or consume Schedule 2 chemicals in excess of 
specified thresholds.

    (a) Declaration of production, processing or consumption of Schedule 
2 chemicals for purposes not prohibited by the CWC.
    (1) Quantities of production, processing or consumption that trigger 
declaration requirements. You must complete the forms specified in 
paragraph (b) of this section if you have been or will be involved in 
the following activities:
    (i) Initial declaration. You produced, processed or consumed at one 
or more plants on your plant site during any of the calendar years 1994, 
1995, or 1996, a Schedule 2 chemical in excess of the following 
declaration threshold quantities:
    (A) 1 kilogram of chemical BZ: 3-Quinuclidinyl benzilate (see 
Schedule 2, paragraph A.3 included in Supplement No. 1 to this part);
    (B) 100 kilograms of chemical PFIB: 1,1,3,3,3-Pentafluoro-
2(trifluoromethyl)-1-propene or 100 kilograms of chemical Amiton: 0,0-
Diethyl S-[2-(diethylamino) ethyl] phosphorothiolate and corresponding 
alkylated or protonated salts (see Schedule 2, paragraphs A.1 and A.2 
included in Supplement No. 1 to this part); or
    (C) 1 metric ton of any chemical listed in Schedule 2, Part B (see 
Supplement No. 1 to this part).

    Note to paragraph (a)(1)(i). To determine whether you have an 
initial declaration requirement for Schedule 2 activities, you must 
determine whether you produced, processed or consumed a Schedule 2 
chemical above the applicable threshold quantity at one or more plants 
on your plant site in calendar years 1994, 1995, or 1996. For example, 
if you determine that one plant on your plant site produced greater than 
1 kilogram of the chemical BZ in calendar year 1995, and no plants on 
your plant site produced, processed or consumed any Schedule 2 chemical 
above the applicable threshold quantity in calendar years 1994 or 1996, 
you have an initial declaration requirement under this paragraph. You 
must submit three Forms 2-3--one for each of the calendar years 1994, 
1995, and 1996--and complete question 2-3.1 on each of the forms to 
declare production data on BZ for calendar years 1994, 1995 and 1996. 
For calendar year 1995, you would declare the quantity of BZ actually 
produced. For calendar years 1994 and 1996, you would declare ``0'' 
production quantity. Since the plant site did not engage in any other 
declarable activity (i.e., consumption, processing), you would leave 
blank questions 2-3.2 and 2-3.3 on Form 2-3 for calendar years 1994, 
1995, and 1996. Note that declaring a ``0'' quantity for production in 
1994 and 1996, as opposed to leaving the question blank, permits BIS to 
distinguish the activity that triggered the initial declaration 
requirement for each year from activities that were not declarable 
during that period.

    (ii) Annual declaration on past activities. You produced, processed 
or consumed at one or more plants on your plant site during any of the 
previous three calendar years, a Schedule 2 chemical in excess of the 
applicable declaration threshold quantity specified in paragraphs 
(a)(1)(i)(A) through (C) of this section.

    Note to paragraph (a)(1)(ii). To determine whether you have an 
annual declaration on past activities requirement for Schedule 2 
chemicals, you must determine whether you produced, processed or 
consumed a Schedule 2 chemical above the applicable threshold quantity 
at one or more plants on your plant site in any one of the three 
previous calendar years. For example, for the 1997 declaration period, 
if you determine that one plant on your plant site produced greater than 
1 kilogram of the chemical BZ in calendar year 1995, and no plants on 
your plant site produced, processed or consumed any Schedule 2 chemical 
above the applicable threshold quantity in calendar years 1996 or 1997, 
you still have a declaration requirement under this paragraph for the 
previous calendar year (1997). However, you must only declare on Form 2-
3 (question 2-3.1), production data for calendar year 1997. You would 
declare ``0'' production quantity because you did not produce BZ above 
the applicable threshold

[[Page 131]]

quantity in calendar year 1997. Since the plant site did not engage in 
any other declarable activity (i.e., consumption, processing) in the 
1995-1997 declaration period, you would leave blank questions 2-3.2 and 
2-3.3 on Form 2-3. Note that declaring a ``0'' production quantity for 
1997, as opposed to leaving the question blank, permits BIS to 
distinguish the activity that triggered the declaration requirement from 
activities that were not declarable during that period.

    (iii) Annual declaration on anticipated activities. You anticipate 
that you will produce, process or consume at one or more plants on your 
plant site during the next calendar year, starting with activities 
anticipated for calendar year 2001, a Schedule 2 chemical in excess of 
the applicable declaration threshold quantity set forth in paragraphs 
(a)(1)(i)(A) through (C) of this section.
    (2) Mixtures containing a Schedule 2 chemical. (i)The quantity of a 
Schedule 2 chemical contained in a mixture must be counted when 
determining the total quantity of a Schedule 2 chemical produced, 
processed, or consumed at your plant only if the concentration of the 
Schedule 2 chemical in the mixture is 30% or more by volume or by 
weight, whichever yields the lesser percent.
    (ii) Counting the amount of the Schedule 2 chemical in a mixture. If 
your mixture contains 30% or more concentration of a Schedule 2 
chemical, you must count only the amount (weight) of the Schedule 2 
chemical in the mixture, not the total weight of the mixture.
    (iii) Determining declaration requirements for production, 
processing and consumption. You must include the amount (weight) of a 
Schedule 2 chemical in a mixture when determining the total production, 
total processing, or total consumption of that Schedule 2 chemical at a 
plant on your plant site. If the total amount of the produced, processed 
or consumed Schedule 2 chemical exceeds the applicable declaration 
threshold set forth in paragraphs (a)(1)(i)(A) through (C) of this 
section, you have a declaration requirement. For example, if during 
calendar year 1997, a plant on your plant site produced a mixture 
containing 300 kilograms of thiodiglycol in a concentration of 32% and 
also produced 800 kilograms of thiodiglycol, that plant produced 1100 
kilograms and exceeded the declaration threshold of 1 metric ton for 
that Schedule 2 chemical. You must declare past production of 
thiodiglycol at that plant site for calendar year 1997. If, on the other 
hand, a plant on your plant site processed a mixture containing 300 
kilograms of thiodiglycol in a concentration of 25% and also processed 
800 kilograms of thiodiglycol in other than mixture form, the total 
amount of thiodiglycol processed at that plant for CWCR purposes would 
be 800 kilograms and would not trigger a declaration requirement. This 
is because the concentration of thiodiglycol in the mixture is less than 
30% and therefore did not have to be ``counted'' and added to the other 
800 kilograms of processed thiodiglycol at that plant.
    (b) Types of declaration forms to be used. (1) Initial declaration. 
You must complete the Certification Form and Forms 2-1, 2-2, 2-3, 2-3A, 
and Form A if you produced, processed or consumed at one or more plants 
on your plant site a Schedule 2 chemical in excess of the applicable 
declaration threshold quantity specified in paragraphs (a)(1)(i)(A) 
through (C) of this section during any of the three calendar years 1994, 
1995, or 1996. Form B is optional. If you are subject to initial 
declaration requirements, you must include data for each of the calendar 
years 1994, 1995, and 1996.
    (2) Annual declaration on past activities. You must complete the 
Certification Form and Forms 2-1, 2-2, 2-3, 2-3A, and Form A if one or 
more plants on your plant site produced, processed or consumed more than 
the applicable threshold quantity of a Schedule 2 chemical described in 
paragraphs (a)(1)(i)(A) through (C) of this section in any of the three 
previous calendar years. Form B is optional. If you are subject to 
annual declaration requirements, you must include data for the previous 
calendar year only.
    (3) Annual declaration on anticipated activities. You must complete 
the Certification Form and Forms 2-1, 2-2, 2-3, 2-3A, 2-3C, and Form A 
if you plan to produce, process, or consume at any plant on your plant 
site a Schedule 2 chemical above the applicable threshold quantity set 
forth in paragraphs (a)(1)(i)(A) through (C) of this section

[[Page 132]]

during the following calendar year, beginning with activities planned 
for calendar year 2001. Form B is optional.
    (c) Quantities to be declared. (1) Production, processing and 
consumption of a Schedule 2 chemical above the declaration threshold--
(i) Initial declaration. If you are required to complete forms pursuant 
to paragraph (a)(1)(i) of this section, you must declare the aggregate 
quantity resulting from each type of activity (production, processing or 
consumption) from each plant on your plant site that exceeds the 
applicable threshold quantity for that Schedule 2 chemical for each of 
the calendar years 1994, 1995, and 1996. Do not aggregate amounts of 
production, processing or consumption from plants on the plant site that 
did not individually produce, process or consume a Schedule 2 chemical 
in amounts greater than the applicable threshold levels. For those years 
in which you produced, processed or consumed the declared chemical below 
the declaration threshold, you declare ``0'' only for the declared 
activities.
    (ii) Annual declaration on past activities. If you are required to 
complete forms pursuant to paragraph (a)(1)(ii) of this section, you 
must declare the aggregate quantity resulting from each type of activity 
(production, processing or consumption) from each plant on your plant 
site that exceeds the applicable threshold quantity for that Schedule 2 
chemical. Do not aggregate amounts of production, processing or 
consumption from plants on the plant site that did not individually 
produce, process or consume a Schedule 2 chemical in amounts greater 
than the applicable threshold levels. If in the previous calendar year 
you produced, processed or consumed below the declaration threshold, but 
your declaration requirement is triggered because of activities 
occurring in an earlier year, you declare ``0'' only for the declared 
activities.
    (2) Rounding. For the chemical BZ, report quantities to the nearest 
hundredth of a kilogram (10 grams). For PFIB and the Amiton family, 
report quantities to the nearest 1 kilogram. For all other Schedule 2 
chemicals, report quantities to the nearest 10 kilograms.
    (d) ``Declared'' Schedule 2 plant sites. A plant site that comprises 
at least one plant that produced, processed or consumed a Schedule 2 
chemical above the applicable threshold quantity set forth in paragraphs 
(a)(1)(i)(A) through (C) of this section during any of the previous 
three calendar years or is anticipated to produce, process or consume a 
Schedule 2 chemical above the applicable threshold quantity in the next 
calendar year is a ``declared'' plant site. A plant site that submitted 
an initial declaration for activities that occurred in 1994, 1995, or 
1996 is a ``declared'' Schedule 2 plant site for those years.
    (e) Declared Schedule 2 plant sites subject to routine inspections. 
A ``declared'' Schedule 2 plant site is subject to initial and routine 
inspection by the Organization for the Prohibition of Chemical Weapons 
if it produced, processed or consumed in any of the three previous 
calendar years, or is anticipated to produce, process or consume in the 
next calendar year, in excess of ten times the applicable declaration 
threshold quantity set forth in paragraphs (a)(1)(i)(A) through (C) of 
this section (see part 716 of this subchapter). A plant site that 
submitted an initial declaration for calendar years 1994, 1995, and 
1996, and exceeded the applicable inspection threshold is also subject 
to an initial inspection.



Sec. 713.4  Initial and annual declaration and reporting requirements 
for exports and imports of Schedule 2 chemicals.

    (a) Declarations and reports of exports and imports of Schedule 2 
chemicals.
    (1) Declarations. A Schedule 2 plant site that is declared because 
it produced, processed or consumed a Schedule 2 chemical above the 
applicable threshold quantity, and also exported from or imported to the 
plant site that same Schedule 2 chemical above the applicable threshold 
quantity, must submit export and import information as part of its 
declaration.

    Note to paragraph (a)(1): A declared Schedule 2 plant site may need 
to declare exports or imports of Schedule 2 chemicals that it produced, 
processed or consumed above the applicable threshold quantity and also 
report exports or imports of different Schedule 2 chemicals that it did 
not produce,

[[Page 133]]

process or consume above the applicable threshold quantities.

    (2) Reports. A declared plant site that does not meet the 
description of paragraph (a)(1) of this section, and an undeclared plant 
site or a trading company or any other person subject to the CWCR must 
submit a report if it exported or imported a Schedule 2 chemical above 
the applicable threshold quantity.

    Note to paragraph (a)(2): The U.S. Government will not submit to the 
OPCW company-specific information relating to the export or import of 
Schedule 2 chemicals contained in reports. The U.S. Government will add 
all export and import information contained in reports to export and 
import information contained in declarations to establish the U.S. 
national aggregate declaration on exports and imports.
    Note to paragraphs (a)(1) and (2): Declared and undeclared plant 
sites must count, for declaration or report purposes, all exports from 
and imports to the entire plant site, not only from or to individual 
plants on the plant site.

    (b) Quantities of exports or imports that trigger a declaration or 
report requirement. (1) You have a declaration or report requirement and 
must complete the forms specified in paragraph (d) of this section if 
you exported or imported a Schedule 2 chemical in excess of the 
following threshold quantities:
    (i) 1 kilogram of chemical BZ: 3-Quinuclidinyl benzilate (See 
Schedule 2, paragraph A.3 included in Supplement No. 1 to this part);
    (ii) 100 kilograms of chemical PFIB: 1,1,3,3,3-Pentafluoro-
2(trifluoromethyl)-1-propene or 100 kilograms of Amiton : O,O Diethyl S-
[2(diethylamino)ethyl] phosphorothiolate and corresponding alkylated or 
protonated salts (see Schedule 2, paragraphs A.1 and A.2 included in 
Supplement No.1 to this part);
    (iii) 1 metric ton of any chemical listed in Schedule 2, Part B (see 
Supplement No.1 to this part).
    (2) Mixtures containing a Schedule 2 chemical. The quantity of a 
Schedule 2 chemical contained in a mixture must be counted for the 
declaration or reporting of an export or import only if the 
concentration of the Schedule 2 chemical in the mixture is 30% or more 
by volume or by weight, whichever yields the lesser percent.

    Note 1 to paragraph (b)(2). See Sec. 713.3(a)(2)(ii) for 
information on counting amounts of Schedule 2 chemicals contained in 
mixtures and determining declaration and report requirements.
    Note 2 to paragraph (b)(2). The ``30% and above'' mixtures rule 
applies only for declaration and report purposes. This rule does not 
apply for purposes of determining whether the export of your mixture to 
a non-State Party requires an End-Use Certificate or for determining 
whether you need an export license from the Department of Commerce (see 
Sec. Sec. 742.2, 742.18 and 745.2 of the Export Administration 
Regulations) or from the Department of State (see the International 
Traffic in Arms Regulations (22 CFR parts 120 through 130).

    (c) Declaration and report requirements. (1) Initial declaration. A 
plant site described in paragrpah (a)(1) of this section that has an 
initial declaration requirement for production, processing, or 
consumption of a Schedule 2 chemical must also declare the export or 
import of that same Schedule 2 chemical if the amount exported or 
imported in 1994, 1995 or 1996 exceeded the applicable threshold 
quantity set forth in paragraph (b)(1)(i) through (iii) of this section. 
For the initial declaration, the plant site must only declare the export 
or import information for any of the calendar years (1994, 1995 and/or 
1996) in which the export or import exceeded the applicable threshold 
quantity.
    (2) Initial report on exports and imports. Declared plant sites 
described in paragraph (a)(2) of this section, undeclared plant sites, 
trading companies or any other person subject to the CWCR that exported 
or imported a Schedule 2 chemical in 1996 in excess of the applicable 
threshold quantity set forth in paragraph (b) of this section, must 
submit an initial report on exports or imports for calendar year 1996.
    (3) Annual declaration on past activities. A plant site described in 
paragraph (a)(1) that has an annual declaration requirement for 
production, processing, or consumption of a Schedule 2 chemical for the 
previous calendar year, beginning in 1997, must also declare the export 
and/or import of that same Schedule 2 chemical if the amount exceeded 
the applicable threshold quantity set forth in paragraph (b). The

[[Page 134]]

plant site must declare the export or import information for that same 
Schedule 2 chemical as part of its annual declaration of past 
activities.
    (4) Annual report on exports and imports. Declared plant sites 
described in paragraph (a)(2), and undeclared plant sites, trading 
companies or any other person subject to the CWCR that exported or 
imported a Schedule 2 chemical in a previous calendar year, beginning in 
1997, in excess of the applicable threshold quantity set forth in 
paragraphs (b)(1) (i) through (iii) must submit an annual report on 
exports or imports.
    (d) Types of declaration and report forms to be used. (1) Initial 
declaration. If you are a declared Schedule 2 plant site as described in 
paragraph (a)(1), you must complete Form 2-3B in addition to the forms 
required by Sec. 713.3(b)(1). You must complete the forms for each 
declared Schedule 2 chemical and for each of the calendar years 1994, 
1995, and 1996, in which the export or import exceeded the applicable 
threshold quantity.
    (2) Initial report on exports and imports. (i) If you are a declared 
plant site as described in paragraph (a)(2), you may fulfill your 
reporting requirements by:
    (A) Submitting, along with your initial declaration, a Form 2-3B for 
each Schedule 2 chemical you exported or imported above the applicable 
threshold quantity. Attach Form A, as appropriate; Form B is optional.
    (B) Submitting, separately from your initial declaration, a 
Certification Form, Form 2-1, and Form 2-3B for each Schedule 2 chemical 
you exported or imported above the applicable threshold quantity. Attach 
Form A, as appropriate; Form B is optional.
    (ii) If you are an undeclared plant site or trading company, you 
must complete the Certification Form, Form 2-1, and Form 2-3B for each 
Schedule 2 chemical you exported or imported above the applicable 
threshold quantity. Attach Form A, as appropriate; Form B is optional.
    (3) Annual declaration on past activities. If you are a declared 
Schedule 2 plant site as described in paragraph (a)(1), you must 
complete Form 2-3B, in addition to the forms required by Sec. 
713.3(b)(2), for each declared Schedule 2 chemical exported or imported 
above the applicable threshold quantity in the previous calendar year.
    (4) Annual report on exports and imports. (i) If you are a declared 
plant site as described in paragraph (a)(2), you may fulfill your annual 
reporting requirements by:
    (A) Submitting, along with your annual declaration on past 
activities, a Form 2-3B for each Schedule 2 chemical you exported or 
imported above the applicable threshold quantity. Attach Form A, as 
appropriate; Form B is optional.
    (B) Submitting, separately from your annual declaration on past 
activities, a Certification Form, Form 2-1, and Form 2-3B for each 
Schedule 2 chemical you exported or imported above the applicable 
threshold quantity. Attach Form A, as appropriate; Form B is optional.
    (ii) If you are an undeclared plant site, trading company or any 
other person subject to the CWCR, you must complete the Certification 
Form, Form 2-1, and Form 2-3B for each Schedule 2 chemical you exported 
or imported above the applicable threshold quantity. Attach Form A, as 
appropriate; Form B is optional.
    (e) Quantities to be declared. (1) Calculations. If you exported 
from or imported to your plant site, trading company, or other location 
more than the applicable threshold quantity of a Schedule 2 chemical, 
you must declare or report all exports and imports by destination, and 
indicate the total amount exported to or imported from each destination. 
Only indicate the total annual quantity exported to or imported from a 
specific destination if the total annual quantity to or from that 
destination is more than 1% of the applicable threshold (i.e., more than 
10 grams of BZ, 1 kilogram of PFIB and Amiton and corresponding 
alkylated or protonated salts, or 10 kilograms of all other Schedule 2 
chemicals). However, in determining whether your total exports and 
imports worldwide for the year in question trigger a declaration or 
report requirement, you must include all exports and imports, including 
exports and imports falling within the 1% exemption in your calculation.

[[Page 135]]

    (2) Rounding. For purposes of declaring or reporting exports and 
imports of a Schedule 2 chemical, you must total all exports and imports 
per calendar year per recipient or source destination and then round as 
follows: for the chemical BZ, the total quantity for each destination 
should be reported to the nearest hundredth of a kilogram (10 grams); 
for PFIB and Amiton and corresponding alkylated or protonated salts, the 
quantity for each destination should be reported to the nearest 1 
kilogram; and for all other Schedule 2 chemicals, the total quantity for 
each destination should be reported to the nearest 10 kilograms.



Sec. 713.5  Advance declaration requirements for additionally planned 
production, processing, or consumption of Schedule 2 chemicals.

    (a) Declaration requirements for additionally planned activities. 
(1) You must declare additionally planned production, processing, or 
consumption of Schedule 2 chemicals after the annual declaration on 
anticipated activities for the next calendar year has been delivered to 
BIS if:
    (i) You plan that a previously undeclared plant on your plant site 
under Sec. 713.3(a)(1)(iii) will produce, process, or consume a 
Schedule 2 chemical above the applicable declaration threshold;
    (ii) You plan to produce, process, or consume at a plant declared 
under Sec. 713.3(a)(1)(iii) an additional Schedule 2 chemical above the 
applicable declaration threshold;
    (iii) You plan an additional activity (production, processing, or 
consumption) at your declared plant above the applicable declaration 
threshold for a chemical declared under Sec. 713.3(a)(1)(iii);
    (iv) You plan to increase the production, processing, or consumption 
of a Schedule 2 chemical by a plant declared under Sec. 
713.3(a)(1)(iii) from the amount exceeding the applicable declaration 
threshold to an amount exceeding the applicable inspection threshold 
(see Sec. 716.1(b)(2));
    (v) You plan to change the starting or ending date of anticipated 
production, processing, or consumption declared under Sec. 
713.3(a)(1)(iii) by more than three months; or
    (vi) You plan to increase your production, processing, or 
consumption of a Schedule 2 chemical by a declared plant site by 20 
percent or more above that declared under Sec. 713.3(a)(1)(iii).
    (2) If you must submit a declaration on additionally planned 
activities because you plan to engage in any of the activities listed in 
paragraphs (a)(1) (i) through (vi) of this section, you should also 
declare changes to your declaration relating to the following 
activities. You do not have to submit an additionally planned 
declaration if you are only changing the following non-quantitative 
activities:
    (i) Changes to the plant's production capacity;
    (ii) Changes or additions to the product group codes for the plant 
site or the plant(s);
    (iii) Changes to the plant's activity status (i.e., dedicated, 
multipurpose, or other status);
    (iv) Changes to the plant's multipurpose activities;
    (v) Changes to the plant site's status relating to domestic transfer 
of the chemical;
    (vi) Changes to the plant site's purposes for which the chemical 
will be produced, processed or consumed; or
    (vii) Changes to plant site's status relating to exports of the 
chemical or the addition of new countries for export (not to exceed 10 
countries).
    (b) Declaration forms to be used. If you are required to declare 
additionally planned activities pursuant to paragraph (a) of this part, 
you must complete the Certification Form and Forms 2-1, 2-2, 2-3, and 2-
3C as appropriate. Such forms are due to BIS at least 15 days prior to 
beginning the additional activity.



Sec. 713.6  Frequency and timing of declarations and reports.

    Declarations and reports required under this part must be postmarked 
by the appropriate date identified in Table 1 of this section. Required 
declarations and reports include:
    (a) Declaration on past production of Schedule 2 chemicals for 
chemical weapons (CW) purposes since January 1, 1946;

[[Page 136]]

    (b) Initial declaration (production, processing, consumption, 
export, or import of Schedule 2 chemicals during calendar years 1994, 
1995, and 1996);
    (c) Initial report on exports and imports from trading companies, 
plant sites and other persons (during calendar year 1996);
    (d) Annual declaration on past activities (production, processing, 
consumption, export or import of Schedule 2 chemicals during the 
previous calendar year, beginning with 1997);
    (e) Annual report on exports and imports from trading companies, 
plant sites and other persons (during the previous calendar year, 
beginning with 1997); and
    (f) Annual declaration on anticipated activities (production, 
processing or consumption during the next calendar year, beginning in 
calendar year 2000 for activities anticipated for calendar year 2001).

     Table 1 to Sec. 713.6--Deadlines for Submission of Schedule 2
                              Declarations
------------------------------------------------------------------------
        Declarations            Applicable forms          Due dates
------------------------------------------------------------------------
Initial Declaration (for      Certification, 2-1,   March 30, 2000.
 calendar years 1994, 1995,    2-2, 2-3, 2-3A, 2-
 and 1996)--Declared plant     3B (if also
 site (production,             exported or
 processing, consumption,      imported), A (as
 exports and imports).         appropriate), B
                               (optional).
Initial Report on Exports     Certification, 2-1,   March 30, 2000.
 and Imports (for calendar     2-3B, A (as
 year 1996)--Plant site,       appropriate), B
 trading company, other        (optional).
 persons.
Annual Declaration on Past    Certification , 2-1,  For 1997, 1998, and
 Activities (previous          2-2, 2-3 2-3A, 2-3B   1999. Thereafter,
 calendar year, starting       (if also exported     February 28, March
 with 1997)--Declared plant    or imported), A (as   30, 2000.
 site (production,             appropriate), B
 processing, consumption,      (optional).
 exports and imports).
Annual Report on Exports and  Certification, 2-1,   For 1997, 1998, and
 Imports (previous calendar    2-3B, A (as           1999. Thereafter,
 year, starting with 1997)--   appropriate), B       February 28, March
 Plant site, trading           (optional).           30, 2000.
 company, other persons.
Annual Declaration on         Certification, 2-1,   September 3 of each
 Anticipated Activities        2-2, 2-3, 2-3A, 2-    year prior to the
 (next calendar year).         3C, A (as             calendar year in
                               appropriate), B       which anticipated
                               (optional).           activities will
                                                     take place,
                                                     beginning in
                                                     calendar year 2000.
Declaration on Additionally   Certification, 2-1,   15 calendar days
 Planned Activities--          2-3C, A (as           before the
 (production, processing and   appropriate), B       additionally
 consumption).                 (optional).           planned activity
                                                     begins.
Declaration on Past           Certification, 2-1,   March 30, 2000.
 Production of Schedule 2      2-2, 2-4 A (as
 Chemicals for CW Purposes.    appropriate), B
                               (optional).
------------------------------------------------------------------------



Sec. 713.7  Amended declaration or report.

    (a) You must submit an amended declaration or report for changes to 
previously submitted information on chemicals, activities and end-use 
purposes or the addition of new chemicals, activities and end-use 
purposes.
    (b) For declared plant sites subject to inspection, changes that may 
affect verification activities, such as changes of owner or operator, 
company name, address, or inspection point of contact require an amended 
declaration.
    (c) For declared plant sites not subject to inspection, undeclared 
plant sites, trading companies, and other persons, changes that do not 
directly affect the purpose of the Convention, such as changes to a 
company name, address, declaration point of contact, or non-substantive 
typographical errors, do not require submission of an amended 
declaration or report and may be corrected in subsequent declarations or 
reports.
    (d) If you are required to submit an amended declaration or report 
pursuant to paragraph (a) or (b) of this section, you must complete and 
submit a new Certification Form and the specific form(s) being amended 
(e.g., annual declaration on past activities). Only complete that 
portion of each form that corrects the previously submitted information.

[[Page 137]]

           Supplement No. 1 to Part 713--Schedule 2 Chemicals

A. Toxic chemicals:
    (1) Amiton: O,O-Diethyl S-[2-(diethylamino)ethyl]          (78-53-5)
     phosphorothiolate and corresponding alkylated or
     protonated salts.................................
    (2) PFIB: 1,1,3,3,3-Pentafluoro-2-                        (382-21-8)
     (trifluoromethyl)-1-propene......................
    (3) BZ: 3-Quinuclidinyl benzilate.................       (6581-06-2)
B. Precursors:
    (4) Chemicals, except for those listed in Schedule        (676-97-1)
     1, containing a phosphorus atom to which is
     bonded one methyl, ethyl or propyl (normal or
     iso) group but not further carbon atoms, e.g.
     Methylphosphonyl dichloride......................
    Dimethyl methylphosphonate........................        (756-79-6)
    Exemption: Fonofos: O-Ethyl S-phenyl                      (944-22-9)
     ethylphosphono-thiolothionate....................
    (5) N,N-Dialkyl (Me, Et, n-Pr or i-Pr)
     phosphoramidic dihalides
    (6) Dialkyl (Me, Et, n-Pr or i-Pr) N,N-dialkyl
     (Me, Et, n-Pr or i-Pr)-phosphoramidates
    (7) Arsenic trichloride...........................       (7784-34-1)
    (8) 2,2-Diphenyl-2-hydroxyacetic acid.............         (76-93-7)
    (9) Quinuclidine-3-ol.............................       (1619-34-7)
    (10) N,N-Dialkyl (Me, Et, n-Pr or i-Pr) aminoethyl-
     2-chlorides and corresponding protonated salts
    (11) N,N-Dialkyl (Me, Et, n-Pr or i-Pr)
     aminoethane-2-ols and corresponding protonated
     salts
    Exemptions: N,N-Dimethylaminoethanol and                  (108-01-0)
     corresponding protonated salts...................
    N,N-Diethylaminoethanol and corresponding                 (100-37-8)
     protonated salts.................................
    (12) N,N-Dialkyl (Me, Et, n-Pr or i-Pr)
     aminoethane-2-thiols and corresponding protonated
     salts
    (13) Thiodiglycol: Bis(2-hydroxyethyl) sulfide....        (111-48-8)
    (14) Pinacolyl alcohol: 3,3-Dimethylbutane-2-ol...        (464-07-3)
------------------------------------------------------------------------



PART 714_ACTIVITIES INVOLVING SCHEDULE 3 CHEMICALS--Table of Contents




Sec.
714.1 Declaration on past production of Schedule 3 chemicals for 
          chemical weapons purposes.
714.2 Initial and annual declaration requirements for plant sites that 
          produce a Schedule 3 chemical in excess of 30 metric tons.
714.3 Initial and annual reporting requirements for exports and imports 
          of Schedule 3 chemicals.
714.4 Advance declaration requirements for additionally planned 
          production of a Schedule 3 chemical.
714.5 Frequency and timing of declarations.
714.6 Amended declaration or report.

Supplement No. 1 to Part 714--Schedule 3 Chemicals

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73777, Dec. 30, 1999, unless otherwise noted.



Sec. 714.1  Declaration on past production of Schedule 3 chemicals for 
chemical weapons purposes.

    (a) See Sec. 711.6 of this subchapter for information on obtaining 
the forms you will need to declare and report activities involving 
Schedule 3 chemicals.
    (b) You must complete the Certification Form, Forms 3-1, 3-2, 3-4, 
Form A if you produced at one or more plants on your plant site any 
quantity of a Schedule 3 chemical at any time since January 1, 1946, for 
chemical weapons purposes. Form B is optional. You must declare the 
total quantity of such chemical produced, rounded to the nearest tenth 
of a metric ton (or 100 kilograms). You are not subject to routine 
inspection unless you are a declared facility pursuant to Sec. 714.2.



Sec. 714.2  Initial and annual declaration requirements for plant sites 
that produce a Schedule 3 chemical in excess of 30 metric tons.

    (a) Declaration of production of Schedule 3 chemicals for purposes 
not prohibited by the CWC. (1) Production quantities that trigger the 
declaration requirement. You must complete the appropriate forms 
specified in paragraph (b) of this section if you have produced or 
anticipate producing a Schedule 3 chemical as follows:
    (i) Initial declaration. You produced at one or more plants on your 
plant site in excess of 30 metric tons of any single Schedule 3 chemical 
during calendar year 1996.
    (ii) Annual declaration on past activities. You produced at one or 
more plants on your plant site in excess of 30 metric tons of any single 
Schedule 3 chemical during the previous calendar year, beginning with 
1997.
    (iii) Annual declaration on anticipated activities. You anticipate 
that you will produce at one or more plants on your

[[Page 138]]

plant site in excess of 30 metric tons of any single Schedule 3 chemical 
in the next calendar year.
    (2) Mixtures containing a Schedule 3 chemical. (i) The quantity of a 
Schedule 3 chemical contained in a mixture must be counted for 
declaration purposes only if the concentration of the Schedule 3 
chemical in the mixture is 80% or more by volume or by weight, whichever 
yields the lesser percent.
    (ii) Counting the amount of the Schedule 3 chemical in a mixture. If 
your mixture contains 80% or more concentration of a Schedule 3 
chemical, you must count only the amount (weight) of the Schedule 3 
chemical in the mixture, not the total weight of the mixture.
    (b) Types of declaration forms to be used. (1) Initial declaration. 
You must complete the Certification Form and Forms 3-1, 3-2, 3-3, and 
Form A if you produced at one or more plants on your plant site in 
excess of 30 metric tons of any single Schedule 3 chemical during 
calendar year 1996. Form B is optional.
    (2) Annual declaration on past activities. You must complete the 
Certification Form and Forms 3-1, 3-2, 3-3, and Form A if one or more 
plants on your plant site produced in excess of 30 metric tons of any 
single Schedule 3 chemical during the previous calendar year, beginning 
with production during calendar year 1997. Form B is optional.
    (3) Annual declaration on anticipated activities. You must complete 
the Certification Form, and Forms 3-1 and 3-3 if you anticipate that you 
will produce at one or more plants on your plant site in excess of 30 
metric tons of any single Schedule 3 chemical in the next calendar year.
    (c) Quantities to be declared. (1) Production of a Schedule 3 
chemical in excess of 30 metric tons. If your plant site is subject to 
the declaration requirements of paragraph (a) of this section, you must 
declare the range within which the production at your plant site falls 
(30 to 200 metric tons, 200 to 1,000 metric tons, etc.) as specified on 
Form 3-3. When specifying the range of production for your plant site, 
you must aggregate the production quantities of all plants on the plant 
site that produced the Schedule 3 chemical in amounts greater than 30 
metric tons. You must complete a separate Form 3-3 for each Schedule 3 
chemical for which production at your plant site exceeds 30 metric tons.
    (2) Rounding. To determine the production range into which your 
plant site falls, add all the production of the declared Schedule 3 
chemical during the calendar year from all plants on your plant site 
that produced the Schedule 3 chemical in amounts exceeding 30 metric 
tons, and round to the nearest ten metric tons.
    (d) ``Declared'' Schedule 3 plant sites. A plant site that comprises 
at least one plant that produced in excess of 30 metric tons of a 
Schedule 3 chemical during the previous calendar year, or that you 
anticipate will produce more than 30 metric tons of a Schedule 3 
chemical in the next calendar year, is a ``declared'' Schedule 3 plant 
site. A plant site that submitted an initial declaration for 1996 and/or 
annual declaration on past activities for 1997 or 1998 is a ``declared'' 
Schedule 3 plant site for the years declared.
    (e) Routine inspections of declared Schedule 3 plant sites. A 
``declared'' Schedule 3 plant site is subject to routine inspection by 
the Organization for the Prohibition of Chemical Weapons (see part 716 
of this subchapter) if the declared plants on your plant site produced 
during the previous calendar year or you anticipate they will produce 
during the next calendar year in excess of 200 metric tons aggregate of 
any Schedule 3 chemical. A plant site that submitted an initial 
declaration for 1996 and/or an annual declaration on past activities for 
1997 or 1998, and exceeded the inspection threshold, is also subject to 
a routine inspection.



Sec. 714.3  Initial and annual report requirements for exports and 
imports of Schedule 3 chemicals.

    (a) Any person subject to the CWCR that exported from or imported to 
the United States a Schedule 3 chemical in excess of 30 metric tons in 
any calendar year, beginning with calendar year 1996, has a reporting 
requirement under this section.
    (1) Initial report on exports and imports. Declared plant sites, 
undeclared plant sites, trading companies, and any other

[[Page 139]]

person subject to the CWCR that exported from or imported to the United 
States in excess of 30 metric tons of a Schedule 3 chemical in calendar 
year 1996 must submit an initial report on exports and imports.
    (2) Annual report on exports and imports. Declared plant sites, 
undeclared plant sites, trading companies, and any other person subject 
to the CWCR that exported from or imported to the United States in 
excess of 30 metric tons of a Schedule 3 chemical in a previous calendar 
year, beginning with calendar year 1997, must submit an annual report on 
exports and imports.

    Note 1 to paragraphs (a)(1) and (a)(2). Declared and undeclared 
plant sites must count, for report purposes, all exports from and 
imports to the entire plant site, not only from or to individual plants 
on the plant site.
    Note 2 to paragraphs (a)(1) and (a)(2): The U.S. Government will not 
submit to the OPCW company-specific information relating to the export 
or import of Schedule 3 chemicals contained in reports. The U.S. 
Government will add all export and import information contained in 
reports to establish the U.S. national aggregate declaration on exports 
and imports.

    (3) Mixtures containing a Schedule 3 chemical. The quantity of a 
Schedule 3 chemical contained in a mixture must be counted for reporting 
an export or import only if the concentration of the Schedule 3 chemical 
in the mixture is 80% or more by volume or by weight, whichever yields 
the lesser percent. For reporting purposes, only count the weight of the 
Schedule 3 chemical in the mixture, not the entire weight of the 
mixture.

    Note to paragraph (a)(3). The ``80% and above'' mixtures rule 
applies only for report purposes. This rule does not apply for purposes 
of determining whether the export of your mixture to a non-State Party 
requires an End-Use Certificate or for determining whether you need an 
export license from the Department of Commerce (see Sec. Sec. 742.2, 
742.18 and 745.2 of the Export Administration Regulations) or from the 
Department of State (see the International Traffic in Arms Regulations 
(22 C.F.R. 120 through 130)).

    (b) Types of forms to be used. (1) Declared Schedule 3 plant sites. 
(i) If your plant site is declared for production of a Schedule 3 
chemical (and has completed questions 3-3.1 and 3-3.2 on Form 3-3) and 
you also exported or imported that same Schedule 3 chemical in excess of 
30 metric tons, you may report the export or import by:
    (A) Completing question 3-3.3 on Form 3-3 on your declaration for 
that same Schedule 3 chemical to be reported; or
    (B) Submitting, separately from your declaration, a Certification 
Form, Form 3-1, and a Form 3-3 for each Schedule 3 chemical to be 
reported, completing only question 3-3.3. Attach Form A, as appropriate; 
Form B is optional.
    (ii) If your plant site declared production of a Schedule 3 chemical 
and exported or imported a different Schedule 3 chemical in excess of 30 
metric tons, you may report the export or import by:
    (A) Submitting, along with your declaration, a Form 3-3 for each 
Schedule 3 chemical to be reported, completing only question 3-3.3. 
Attach Form A, as appropriate; Form B is optional; or
    (B) Submitting, separately from your declaration, a Certification 
Form, Form 3-1 and a Form 3.3 for each Schedule 3 chemical to be 
reported, completing only question 3-3.3. Attach Form A, as appropriate; 
Form B is optional.
    (2) If you are an undeclared plant site or trading company, or any 
other person subject to the CWCR, you must submit a Certification Form, 
Form 3-1, and a Form 3-3 for each Schedule 3 chemical to be reported, 
completing only question 3-3.3. Attach Form A, as appropriate; Form B is 
optional.
    (c) Quantities to be reported. (1) Calculations. If you exported 
from or imported to your plant site or trading company more than 30 
metric tons of a Schedule 3 chemical in the previous calendar year, you 
must report all exports and imports of that chemical by destination, and 
indicate the total amount exported to or imported from each destination. 
Only indicate the total annual quantity exported to or imported from a 
specific destination if the total annual quantity to or from that 
destination is more than 1% of the applicable threshold (i.e., more than 
0.3 metric tons). However, in determining whether your total exports and 
imports

[[Page 140]]

worldwide for the year in question trigger a report requirement, you 
must include all exports and imports, including exports and imports 
falling within the 1% exemption in your calculation.
    (2) Rounding. For purposes of reporting exports and imports of a 
Schedule 3 chemical, you must total all exports and imports per calendar 
year per recipient or source destination and then round to the nearest 
0.1 metric tons.

    Note to Sec. 714.3: Under the Convention, the United States is 
obligated to provide the OPCW a national aggregate annual declaration of 
the quantities of each Schedule 3 chemical exported and imported. The 
U.S. Government will not submit your company-specific information 
relating to the export or import of a Schedule 3 chemical reported under 
this Sec. 714.3. The U.S. Government will add all export and import 
information submitted by various facilities under this section to 
produce a national aggregate annual declaration of destination-by-
destination trade for each Schedule 3 chemical.



Sec. 714.4  Advance declaration requirements for additionally planned 
production of Schedule 3 chemicals.

    (a) Declaration requirements. (1) You must declare additionally 
planned production of Schedule 3 chemicals after the annual declaration 
on anticipated activities for the next calendar year has been delivered 
to BIS if:
    (i) You plan that a previously undeclared plant on your plant site 
under Sec. 714.2(a)(1)(iii) will produce a Schedule 3 chemical above 
the declaration threshold;
    (ii) You plan to produce at a plant declared under Sec. 
714.2(a)(1)(iii) an additional Schedule 3 chemical above the declaration 
threshold;
    (iii) You plan to increase the production of a Schedule 3 chemical 
by declared plants on your plant site from the amount exceeding the 
applicable declaration threshold to an amount exceeding the applicable 
inspection threshold (see Sec. 716.1(b)(3)); or
    (iv) You plan to increase the aggregate production of a Schedule 3 
chemical at a declared plant site to an amount above the upper limit of 
the range previously declared under Sec. 714.2(a)(1)(iii).
    (2) If you must submit a declaration on additionally planned 
activities because you plan to engage in any of the activities listed in 
paragraphs (a)(1)(i) through (iv) of this section, you should also 
declare any changes to the anticipated purposes of production or product 
group codes. You do not have to submit a declaration on additionally 
planned activities if you are only changing your purposes of production 
or product group codes.
    (b) Declaration forms to be used. If you are required to declare 
additionally planned activities pursuant to paragraph (a) of this 
section, you must complete the Certification Form and Forms 3-1, 3-2, 
and 3-3 as appropriate. Such forms are due to BIS at least 15 days in 
advance of the beginning of the additional or new activity.



Sec. 714.5  Frequency and timing of declarations.

    Declarations and reports required under this part must be postmarked 
by the appropriate date identified in Table 1 of this section. Required 
declarations and reports include:
    (a) Declaration on past production of any amount of Schedule 3 
chemicals for chemical weapons (CW) purposes since January 1, 1946;
    (b) Initial declaration (production of Schedule 3 chemicals during 
calendar year 1996);
    (c) Initial report on exports and imports from trading companies, 
plant sites and other persons (during calendar year 1996);
    (d) Annual declaration on past activities (production of Schedule 3 
chemicals during the previous calendar year, beginning with 1997);
    (e) Annual report on exports and imports from trading companies, 
plant sites and other persons (during the previous calendar year, 
beginning with 1997); and
    (f) Annual declaration on anticipated activities (production during 
the next calendar year, beginning in calendar year 2000 for activities 
anticipated for calendar year 2001).

[[Page 141]]



     Table 1 to Sec. 714.5--Deadlines for Submission of Schedule 3
                              Declarations
------------------------------------------------------------------------
        Declarations            Applicable forms          Due dates
------------------------------------------------------------------------
Initial Declaration (for      Certification, 3-1,   March 30, 2000.
 calendar year 1996)--         3-2, 3-3 (if also
 Declared plant site           exported or
 (production).                 imported), A (as
                               appropriate), B
                               (optional).
Initial Report on Exports     Certification, 3-1,   March 30, 2000.
 and Imports (for calendar     3-3.3 and 3-3.4, A
 year 1996)--Plant site,       (as appropriate), B
 trading company, other        (optional).
 persons.
Annual Declaration on Past    Certification, 3-1,   For 1997, 1998, and
 Activities (previous          3-2, 3-3 (if also     1999, March 30,
 calendar year, starting       exported or           2000. Thereafter,
 with 1997)--Declared plant    imported), A (as      February 28.
 site (production).            appropriate), B
                               (optional).
Annual Report on Exports and  Certification, 3-1,   For 1997, 1998, and
 Imports (previous calendar    3-3.3 and 3-3.4, A    1999, March 30,
 year, starting with 1997)--   (as appropriate), B   2000. Thereafter,
 Plant site, trading           (optional).           February 28.
 company, other persons.
Annual Declaration on         Certification, 3-1,   September 3 of each
 Anticipated Activities        3-3.1 and 3-3.2, A    year prior to the
 (Production) (next calendar   (as appropriate), B   calendar year in
 year).                        (optional).           which anticipated
                                                     activities will
                                                     take place,
                                                     beginning in
                                                     calendar year 2000.
Declaration on Additionally   Certification, 3-1,   15 calendar days
 Planned Activities.           3-3.1 and 3-3.2, A    before the
                               (as appropriate), B   additionally
                               (optional).           planned activity
                                                     begins.
Declaration on Past           Certification, 3-1,   March 30, 2000.
 Production of Schedule 3      3-2, 3-4, A (as
 Chemicals for CW Purposes.    appropriate), B
                               (optional).
------------------------------------------------------------------------



Sec. 714.6  Amended declaration or report.

    (a) You must submit an amended declaration or report for changes to 
previously submitted information on chemicals, activities and end-use 
purposes or the addition of new chemicals, activities and end-use 
purposes.
    (b) For declared plant sites subject to inspection, changes that may 
affect verification activities, such as changes of owner or operator, 
company name, address, or inspection point of contact, require an 
amended declaration.
    (c) For declared plant sites not subject to inspection, undeclared 
plant sites, trading companies, and other persons, changes that do not 
directly affect the purpose of the Convention, such as changes to a 
company name, address, declaration point of contact, or non-substantive 
typographical errors, do not require submission of an amended 
declaration or report and may be corrected in subsequent declarations or 
reports.
    (d) If you are required to submit an amended declaration or report 
pursuant to paragraph (a) or (b) of this section, you must complete and 
submit a new Certification Form and the specific form(s) being amended 
(e.g., annual declaration on past activities). Only complete that 
portion of each form that corrects the previously submitted information.

           Supplement No. 1 to Part 714--Schedule 3 Chemicals

------------------------------------------------------------------------
 
------------------------------------------------------------------------
A. Toxic chemicals:
    (1) Phosgene: Carbonyl dichloride.................         (75-44-5)
    (2) Cyanogen chloride.............................        (506-77-4)
    (3) Hydrogen cyanide..............................         (74-90-8)
    (4) Chloropicrin: Trichloronitromethane...........         (76-06-2)
B. Precursors:
    (5) Phosphorus oxychloride........................      (10025-87-3)
    (6) Phosphorus trichloride........................       (7719-12-2)
    (7) Phosphorus pentachloride......................      (10026-13-8)
    (8) Trimethyl phosphite...........................        (121-45-9)
    (9) Triethyl phosphite............................        (122-52-1)
    (10) Dimethyl phosphite...........................        (868-85-9)
    (11) Diethyl phosphite............................        (762-04-9)
    (12) Sulfur monochloride..........................      (10025-67-9)
    (13) Sulfur dichloride............................      (10545-99-0)
    (14) Thionyl chloride.............................       (7719-09-7)
    (15) Ethyldiethanolamine..........................        (139-87-7)

[[Page 142]]

 
    (16) Methyldiethanolamine.........................        (105-59-9)
    (17) Triethanolamine..............................        (102-71-6)
------------------------------------------------------------------------
Note to Supplement No. 1: Refer to Supplement No. 1 to part 774 of the
  Export Administration Regulations (the Commerce Control List), ECCN
  1C355, Related Controls for chemicals controlled under the
  International Traffic in Arms Regulations (22 CFR parts 120 through
  130).



PART 715_ACTIVITIES INVOLVING UNSCHEDULED DISCRETE ORGANIC CHEMICALS 
(UDOCs)--Table of Contents




Sec.
715.1 Initial and annual declaration requirements for production by 
          synthesis of unscheduled discrete organic chemicals (UDOCs).
715.2 Frequency and timing of declarations.
715.3 Amended declaration.

Supplement No. 1 to Part 715--Definition of an Unscheduled Discrete 
          Organic Chemical
Supplement No. 2 to Part 715--Examples of Unscheduled Discrete Organic 
          Chemicals (UDOCs) and UDOC Production

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73780, Dec. 30, 1999, unless otherwise noted.



Sec. 715.1  Initial and annual declaration requirements for production 
by synthesis of unscheduled discrete organic chemicals (UDOCs).

    (a) See Sec. 711.6 of this subchapter for information on obtaining 
the forms you will need to declare production of unscheduled discrete 
organic chemicals. Declaration of production by synthesis of UDOCs for 
purposes not prohibited by the CWC. (1) Production quantities that 
trigger the declaration requirement. You must complete the forms 
specified in paragraph (b) of this section if your plant site produced 
by synthesis:
    (i) In excess of 200 metric tons aggregate of all UDOCs (including 
all UDOCs containing the elements phosphorus, sulfur or fluorine, 
referred to as ``PSF-chemicals'') in calendar year 1996 (for the initial 
declaration) or the previous calendar year beginning with 1997 (for an 
annual declaration); or
    (ii) In excess of 30 metric tons of an individual PSF-chemical at 
one or more plants in calendar year 1996 (for the initial declaration) 
or in the previous calendar year beginning with 1997 (for an annual 
declaration).
    (2) UDOCs subject to declaration requirements under this part. (i) 
UDOCs subject to declaration requirements under this part are those 
produced by synthesis that have been isolated for:
    (A) Use; or
    (B) Sale as a specific end product.
    (ii) Exemptions. (A) Polymers and oligomers consisting of two or 
more repeating units which are formed by the chemical reaction of 
monomeric or polymeric substances;
    (B) Chemicals and chemical mixtures produced through a biological or 
biomediated process;
    (C) Products from the refining of crude oil, including sulfur-
containing crude oil;
    (D) Metal carbides (i.e., chemicals consisting only of metal and 
carbon); and
    (E) UDOCs produced by synthesis that are ingredients or by-products 
in foods designed for consumption by humans and/or animals.

    Note to Paragraph (a)(2): See Supplement No. 2 to this part for 
examples of UDOCs subject to the declaration requirements of this part, 
and for examples of activities that are not considered production by 
synthesis.

    (3) Exemptions for UDOC plant sites. UDOC plant sites that 
exclusively produced hydrocarbons or explosives are exempt from UDOC 
declaration requirements. For the purposes of this part, the following 
definitions apply for hydrocarbons and explosives:
    (i) Hydrocarbon means any organic compound that contains only carbon 
and hydrogen; and
    (ii) Explosive means a chemical (or a mixture of chemicals) that is 
included in Class 1 of the United Nations Organization hazard 
classification system.
    (b) Types of declaration forms to be used. (1) Initial declaration. 
You must complete the Certification Form and Form UDOC (consisting of 
two pages). Attach Form A as appropriate; Form B is optional.

[[Page 143]]

    (2) Annual declaration on past activities. You must complete the 
Certification Form and Form UDOC (consisting of two pages). Attach Form 
A as appropriate; Form B is optional.
    (c) ``Declared'' UDOC plant sites. A plant site that produced by 
synthesis in excess of 200 metric tons aggregate of all UDOCs (including 
all PSF-chemicals), or that comprises at least one plant that produced 
by synthesis in excess of 30 metric tons of an individual PSF-chemical 
during the previous year, is a ``declared'' UDOC plant site. A plant 
site that submitted an initial declaration for 1996 and/or annual 
declaration on past activities for 1997 or 1998 is a ``declared'' UDOC 
plant site for the years declared.
    (d) Routine inspections of declared UDOC plant sites. A ``declared'' 
UDOC plant site is subject to routine inspection by the Organization for 
the Prohibition of Chemical Weapons (see part 716 of this subchapter) if 
it produced by synthesis during the previous calendar year more than 200 
metric tons aggregate of UDOCs. A plant site that submitted an initial 
declaration for 1996 and/or annual declaration on past activities for 
1997 or 1998, and exceeded the inspection threshold, is also subject to 
a routine inspection.



Sec. 715.2  Frequency and timing of declarations.

    Declarations required under this part must be postmarked by the 
appropriate dates identified in Table 1 of this section. Required 
declarations include:
    (a) Initial declaration (production during calendar year 1996).
    (b) Annual declaration on past activities (production during the 
previous calendar year, beginning with 1997).

  Table 1 to Sec. 715.2--Deadlines for Submission of Declarations for
         Unscheduled Discrete Organic Chemical (UDOC) Facilities
------------------------------------------------------------------------
          Declarations             Applicable forms        Due dates
------------------------------------------------------------------------
Initial Declaration (calendar     Certification,      March 30, 2000.
 year 1996)--Declared plant site.  UDOC, A (as
                                   appropriate), B
                                   (optional).
Annual Declaration on Past        Certification,      For 1997, 1998,
 Activities (previous calendar     UDOC, A (as         and 1999 March
 year, starting with 1997)--       appropriate), B     30, 2000.
 Declared plant site.              (optional).         Thereafter,
                                                       February 28.
------------------------------------------------------------------------



Sec. 715.3  Amended declaration.

    (a) Amended declarations are required to correct certain 
inaccuracies in a previously submitted declaration. These amended 
declarations are necessary to change a production range above the amount 
originally declared, or the production of a PSF-chemical above 30 metric 
tons by a plant not previously counted as a PSF-plant.
    (b) Changes that do not directly affect the purpose of the 
Convention, such as changes to a company name, address, point of 
contact, or non-substantive typographical errors, do not require 
submission of an amended declaration and may be corrected in subsequent 
declarations.
    (c) If you are required to submit an amended declaration pursuant to 
paragraph (a) of this section, you must complete and submit a new 
Certification Form and the specific form(s) being amended (e.g., annual 
declaration on past activities). Only complete that portion of each form 
that amends the previously submitted information.

  Supplement No. 1 to Part 715--Definition of an Unscheduled Discrete 
                            Organic Chemical

    Unscheduled discrete organic chemical means any chemical: (1) 
belonging to the class of chemical compounds consisting of all compounds 
of carbon except for its oxides, sulfides and metal carbonates 
identifiable by chemical name, by structural formula, if known, and by 
Chemical Abstract Service registry number, if assigned; and (2) that is 
not contained in the Schedules of Chemicals (see Supplements No. 1 to 
parts 712 through 714 of this subchapter). Unscheduled discrete organic 
chemicals subject to declaration under this part are those produced by 
synthesis that are isolated for use or sale as a specific end-product.

    Note: Carbon oxides consist of chemical compounds that contain only 
the elements carbon and oxygen and have the chemical formula 
CxOy, where x and y denote integers.

[[Page 144]]

The two most common carbon oxides are carbon monoxide (CO) and carbon 
dioxide (CO2). Carbon sulfides consist of chemical compounds 
that contain only the elements carbon and sulfur, and have the chemical 
formula CaSb, where a and b denote integers. The 
most common carbon sulfide is carbon disulfide (CS2). Metal 
carbonates consist of chemical compounds that contain a metal (i.e., the 
Group I Alkalis, Groups II Alkaline Earths, the Transition Metals, or 
the elements aluminum, gallium, indium, thallium, tin, lead, bismuth or 
polonium), and the elements carbon and oxygen. Metal carbonates have the 
chemical formula Md(CO3)e, where d and 
e denote integers and M represents a metal. Common metal carbonates are 
sodium carbonate (Na2CO3) and calcium carbonate 
(CaCO3). In addition, metal carbides or other compounds 
consisting of only a metal, as described above, and carbon (e.g., 
calcium carbide (CaC2)), are exempt from declaration 
requirements (see Sec. 715.1(a)(2)(ii)(D) of this part).

 Supplement No. 2 to Part 715--Examples of Unscheduled Discrete Organic 
                  Chemicals (UDOCs) and UDOC Production

    (1) Examples of UDOCs not subject to declaration include:
    (i) UDOCs produced coincidentally as by-products that are not 
isolated for use or sale as a specific end product, and are routed to, 
or escape from, the waste stream of a stack, incinerator, or waste 
treatment system or any other waste stream;
    (ii) UDOCs, contained in mixtures, which are produced coincidentally 
and not isolated for use or sale as a specific end-product;
    (iii) UDOCs produced by recycling (i.e., involving one of the 
processes listed in paragraph (3) of this supplement) of previously 
declared UDOCs;
    (iv) UDOCs produced by the mixing (i.e., the process of combining or 
blending into one mass) of previously declared UDOCs; and
    (v) Intermediate UDOCs used in a single or multi-step process to 
produce another declared UDOC.
    (2) Examples of UDOCs that you must declare under part 715 include, 
but are not limited to, the following, unless they are not isolated for 
use or sale as a specific end product:
    (i) Acetophenone (CAS  98-86-2);
    (ii) 6-Chloro-2-methyl aniline (CAS  87-63-8);
    (iii) 2-Amino-3-hydroxybenzoic acid (CAS  548-93-6); and
    (iv) Acetone (CAS  67-64-1).
    (3) Examples of activities that are not considered production by 
synthesis under part 715 and, thus, the end products resulting from such 
activities would not be declared under part 715, are as follows:
    (i) Fermentation;
    (ii) Extraction;
    (iii) Purification;
    (iv) Distillation; and
    (v) Filtration.



PART 716_INITIAL AND ROUTINE INSPECTIONS OF DECLARED FACILITIES
--Table of Contents




Sec.
716.1 General information on the conduct of initial and routine 
          inspections.
716.2 Purposes and types of inspections of declared facilities.
716.3 Consent to inspections; warrants for inspections.
716.4 Scope and conduct of inspections.
716.5 Notification, duration and frequency of inspections.
716.6 Facility agreements.
716.7 Samples.
716.8 On-site monitoring of Schedule 1 facilities.
716.9 Report of inspection-related costs.

Supplement No. 1 to Part 716--Notification, Duration, and Frequency of 
          Inspections
Supplement No. 2 to Part 716--Schedule 1 Model Facility Agreement
Supplement No. 3 to Part 716--Schedule 2 Model Facility Agreement

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73782, Dec. 30, 1999, unless otherwise noted.



Sec. 716.1  General information on the conduct of initial and routine 
inspections.

    This part provides general information about the conduct of initial 
and routine inspections of declared facilities subject to inspection 
under CWC Verification Annex Part VI (E), Part VII(B), Part VIII(B) and 
Part IX(B). See part 717 of this subchapter for provisions concerning 
challenge inspections.
    (a) Overview. Each State Party to the CWC, including the United 
States, has agreed to allow certain inspections of declared facilities 
by inspectors employed by the Organization for the Prohibition of 
Chemical Weapons (OPCW) to ensure that activities are consistent with 
obligations under the Convention.

[[Page 145]]

The Department of Commerce is responsible for leading, hosting and 
escorting inspections of all facilities subject to the provisions of 
this subchapter (see Sec. 710.2 of this subchapter).
    (b) Declared facilities subject to initial and routine inspections. 
(1) Schedule 1 facilities. (i) Your declared facility is subject to 
inspection if it produced in excess of 100 grams aggregate of Schedule 1 
chemicals in the previous calendar year or anticipates producing in 
excess of 100 grams aggregate of Schedule 1 chemicals during the next 
calendar year.
    (ii) If you are a new Schedule 1 production facility pursuant to 
Sec. 712.4 of this subchapter, your facility is subject to an initial 
inspection within 200 days of submitting an initial declaration.
    (iii) If your declared facility submitted an annual declaration on 
past activities for calendar year 1997 or 1998, you are subject to an 
initial inspection.

    Note to paragraph (b)(1): All Schedule 1 facilities submitting a 
declaration are subject to inspection.

    (2) Schedule 2 plant sites. (i) Your declared plant site is subject 
to inspection if at least one plant on your plant site produced, 
processed or consumed, in any of the three previous calendar years, or 
you anticipate that at least one plant on your plant site will produce, 
process or consume in the next calendar year, any Schedule 2 chemical in 
excess of the following:
    (A) 10 kg of chemical BZ: 3-Quinuclidinyl benzilate (see Schedule 2, 
Part A, paragraph 3 in Supplement No. 1 to part 713 of this subchapter);
    (B) 1 metric ton of chemical PFIB: 1,1,3,3,3-Pentafluoro-
2(trifluoromethyl)-1-propene or any chemical belonging to the Amiton 
family (see Schedule 2, Part A, paragraphs 1 and 2 in Supplement No. 1 
to part 713 of this subchapter); or
    (C) 10 metric tons of any chemical listed in Schedule 2, Part B (see 
Supplement No. 1 to part 713 of this subchapter).
    (ii) If your declared plant site submitted an initial declaration 
for calendar years 1994, 1995 and 1996, and at least one plant on your 
plant site produced a Schedule 2 chemical during any one of those three 
years in excess of the applicable inspection threshold quantity set 
forth in paragraphs (b)(2)(i)(A) through (C) of this section, you are 
subject to an initial inspection.

    Note to paragraph (b)(2): The applicable inspection threshold 
quantity for Schedule 2 plant sites is ten times higher than the 
applicable declaration threshold quantity. Only declared plant sites, 
comprising at least one declared plant that exceeds the applicable 
inspection threshold quantity, are subject to inspection.

    (3) Schedule 3 plant sites. (i) Your declared plant site is subject 
to inspection if the declared plants on your plant site produced during 
the previous calendar year, or you anticipate will produce in the next 
calendar year, in excess of 200 metric tons aggregate of any Schedule 3 
chemical (see Supplement No. 1 to part 714 of this subchapter).
    (ii) If your declared plant site submitted an initial declaration 
for calendar year 1996 and/or annual declaration on past activities for 
calendar year 1997 or 1998, and exceeded the inspection threshold set 
forth in paragraph (b)(3)(i) of this section, you are subject to a 
routine inspection.

    Note to paragraph (b)(3): The methodology for determining a 
declarable and inspectable plant site is different. A Schedule 3 plant 
site that submits a declaration is subject to inspection only if the 
aggregate production of a Schedule 3 chemical at all declared plants on 
the plant site exceeds 200 metric tons.

    (4) Unscheduled discrete organic chemical plant sites. (i) Your 
declared plant site is subject to inspection if it produced by synthesis 
more than 200 metric tons aggregate of unscheduled discrete organic 
chemicals during the previous calendar year.
    (ii) If your declared plant site submitted an initial declaration 
for calendar year 1996 and/or annual declaration on past activities for 
calendar year 1997 or 1998, and exceeded the inspection threshold set 
forth in paragraph (b)(4)(i) of this section, you are subject to a 
routine inspection.

    Note 1 to paragraph (b)(4): You must include amounts of unscheduled 
discrete organic chemicals containing phosphorus, sulfur or fluorine in 
the calculation of your plant site's aggregate production of unscheduled 
discrete organic chemicals.

[[Page 146]]

    Note 2 to paragraph (b)(4): All UDOC plant sites that submit a 
declaration based on Sec. 715.1(a)(i) of this subchapter are subject to 
a routine inspection.

    (c) Responsibilities of the Department of Commerce. As the host and 
escort for the international Inspection Team for all inspections of 
facilities subject to the provisions of this subchapter under this part, 
the Department of Commerce will: lead on-site inspections; provide Host 
Team notification to the facility of an impending inspection; take 
appropriate action to obtain an administrative warrant in the event the 
facility does not consent to the inspection; dispatch an advance team to 
the vicinity of the site to provide administrative and logistical 
support for the impending inspection and, upon request, to assist the 
facility with inspection preparation; escort the Inspection Team on-site 
throughout the inspection process; assist the Inspection Team with 
verification activities; negotiate the development of a site-specific 
facility agreement, if appropriate, during an initial inspection of a 
facility (see Sec. 716.6); and ensure that an inspection adheres to the 
Convention, the Act and any warrant issued thereunder, and a site-
specific facility agreement, if concluded.



Sec. 716.2  Purposes and types of inspections of declared facilities.

    (a) Schedule 1 facilities. (1) Purposes of inspections. The aim of 
inspections of Schedule 1 facilities is to verify that:
    (i) The facility is not used to produce any Schedule 1 chemical, 
except for the declared Schedule 1 chemicals;
    (ii) The quantities of Schedule 1 chemicals produced, processed or 
consumed are correctly declared and consistent with needs for the 
declared purpose; and
    (iii) The Schedule 1 chemical is not diverted or used for purposes 
other than those declared.
    (2) Types of inspections. (i) Initial inspections. During initial 
inspections of declared Schedule 1 facilities, in addition to the 
verification activities listed in paragraph (a)(1) of this section, the 
Host Team and the Inspection Team will draft site-specific facility 
agreements (see Sec. 716.6) for the conduct of routine inspections.
    (ii) Routine inspections. During routine inspections of declared 
Schedule 1 facilities, the verification activities listed in paragraph 
(a)(1) of this section will be carried out pursuant to site-specific 
facility agreements (Sec. 716.6) developed during the initial 
inspections and concluded between the U.S. Government and the OPCW 
pursuant to the Convention.
    (b) Schedule 2 plant sites. (1) Purposes of inspections. (i) The 
general aim of inspections of declared Schedule 2 plant sites is to 
verify that activities are in accordance with obligations under the 
Convention and consistent with the information provided in declarations. 
Particular aims of inspections of declared Schedule 2 plant sites are to 
verify:
    (A) The absence of any Schedule 1 chemical, especially its 
production, except if in accordance with the provisions of the 
Convention;
    (B) Consistency with declarations of levels of production, 
processing or consumption of Schedule 2 chemicals; and
    (C) That Schedule 2 chemicals are not diverted to activities 
prohibited under the Convention.
    (ii) During initial inspections, inspectors shall collect 
information to determine the frequency and intensity of subsequent 
inspections by assessing the risk to the object and purpose of the 
Convention posed by the relevant chemicals, the characteristics of the 
plant site and the nature of the activities carried out there. The 
inspectors will take the following criteria into account, inter alia:
    (A) The toxicity of the scheduled chemicals and of the end-products 
produced with them, if any;
    (B) The quantity of the scheduled chemicals typically stored at the 
inspected site;
    (C) The quantity of feedstock chemicals for the scheduled chemicals 
typically stored at the inspected site;
    (D) The production capacity of the Schedule 2 plants; and
    (E) The capability and convertibility for initiating production, 
storage and filling of toxic chemicals at the inspected site.
    (2) Types of inspections. (i) Initial inspections. During initial 
inspections of

[[Page 147]]

declared Schedule 2 plant sites, in addition to the verification 
activities listed in paragraph (b)(1) of this section, the Host Team and 
the Inspection Team will generally draft site-specific facility 
agreements for the conduct of routine inspections (see Sec. 716.6).
    (ii) Routine inspections. During routine inspections of declared 
Schedule 2 plant sites, the verification activities listed in paragraph 
(b)(1) of this section will be carried out pursuant to any appropriate 
site-specific facility agreements developed during the initial 
inspections (see Sec. 716.6), and concluded between the U.S. Government 
and the OPCW pursuant to the Convention and the Act.
    (c) Schedule 3 plant sites. (1) Purposes of inspections. The general 
aim of inspections of declared Schedule 3 plant sites is to verify that 
activities are consistent with the information provided in declarations. 
The particular aim of inspections is to verify the absence of any 
Schedule 1 chemical, especially its production, except in accordance 
with the Convention.
    (2) Routine inspections. During routine inspections of declared 
Schedule 3 plant sites, in addition to the verification activities 
listed in paragraph (c)(1) of this section, the Host Team and the 
Inspection Team may draft site-specific facility agreements for the 
conduct of subsequent routine inspections (see Sec. 716.6). Although 
the Convention does not require facility agreements for declared 
Schedule 3 plant sites, the owner, operator, occupant or agent in charge 
of a plant site may request one. The Host Team will not seek a facility 
agreement if the owner, operator, occupant or agent in charge of the 
plant site does not request one. Subsequent routine inspections will be 
carried out pursuant to site-specific facility agreements, if 
applicable.
    (d) Unscheduled Discrete Organic Chemicals plant sites. Declared 
unscheduled discrete organic chemical (UDOC) plant sites will be subject 
to inspection beginning April 29, 2000.
    (1) Purposes of inspections. The general aim of inspections of 
declared UDOC plant sites is to verify that activities are consistent 
with the information provided in declarations. The particular aim of 
inspections is to verify the absence of any Schedule 1 chemical, 
especially its production, except in accordance with the Convention.
    (2) Routine inspections. During routine inspections of declared UDOC 
plant sites, in addition to the verification activities listed in 
paragraph (d)(1) of this section, the Host Team and the Inspection Team 
may develop draft site-specific facility agreements for the conduct of 
subsequent routine inspections (see Sec. 716.6). Although the 
Convention does not require facility agreements for declared UDOC plant 
sites, the owner, operator, occupant or agent in charge of a plant site 
may request one. The Host Team will not seek a facility agreement if the 
owner, operator, occupant or agent in charge of the plant site does not 
request one. Subsequent routine inspections will be carried out pursuant 
to site-specific facility agreements, if applicable.



Sec. 716.3  Consent to inspections; warrants for inspections.

    (a) The owner, operator, occupant or agent in charge of a facility 
may consent to an initial or routine inspection. The individual giving 
consent on behalf of the facility represents that he or she has the 
authority to make this decision for the facility.
    (b) In instances where consent is not provided by the owner, 
operator, occupant or agent in charge for an initial or routine 
inspection, the Department of Commerce intends to seek administrative 
warrants as provided by the Act.



Sec. 716.4  Scope and conduct of inspections.

    (a) General. Each inspection shall be limited to the purposes 
described in Sec. 716.2 and shall be conducted in the least intrusive 
manner, consistent with the effective and timely accomplishment of its 
purpose as provided in the Convention.
    (b) Scope. (1) Description of inspections. During inspections, 
inspectors will receive a pre-inspection briefing from facility 
representatives; visually inspect the facilities or plants producing 
scheduled chemicals or UDOCs, which may include storage areas, feed 
lines, reaction vessels and ancillary

[[Page 148]]

equipment, control equipment, associated laboratories, first aid or 
medical sections, and waste and effluent handling areas, as necessary to 
accomplish their inspection; examine relevant records; and may take 
samples as provided by the Convention, the Act and consistent with the 
requirements set forth by the Director of the United States National 
Authority (USNA) at 22 CFR part 103, and the facility agreement, if 
applicable.
    (2) Scope of consent. When an owner, operator, occupant, or agent in 
charge of a facility consents to an initial or routine inspection, he or 
she is consenting to provide access to the Inspection Team and Host Team 
to any area of the facility, any item located on the facility, 
interviews with facility personnel, and any records necessary for the 
Inspection Team to complete its mission. When consent is granted for an 
inspection, the owner, operator, occupant, or agent in charge agrees to 
provide the same degree of access provided for under section 305 of the 
Act. The determination of whether the Inspection Team's request to 
inspect any area, building, item or record is reasonable is the 
responsibility of the Host Team Leader.
    (c) Pre-inspection briefing. Upon arrival at the inspection site and 
before commencement of the inspection, facility representatives will 
provide to the Inspection Team and Host Team a pre-inspection briefing 
on the facility, the activities carried out there, safety measures, and 
administrative and logistical arrangements necessary for the inspection, 
which may be aided with the use of maps and other documentation as 
deemed appropriate by the facility. The time spent for the briefing will 
be limited to the minimum necessary and may not exceed three hours.
    (1) The pre-inspection briefing will address:
    (i) Plant site safety and alarms;
    (ii) Activities, business and manufacturing operations;
    (iii) Physical layout;
    (iv) Delimitation of declared facility;
    (v) Scheduled chemicals/chemistries (declared and undeclared);
    (vi) Process flow;
    (vii) Units specific to declared operations; and
    (viii) Administrative and logistic information.
    (2) The pre-inspection briefing may also address, inter alia:
    (i) Introduction of key facility personnel;
    (ii) Management, organization and history;
    (iii) Confidential business information concerns;
    (iv) Types and location of records/documents;
    (v) Data declaration updates/revisions;
    (vi) Draft facility agreement, if applicable; and
    (vii) Proposed inspection plan.
    (d) Visual plant inspection. The Inspection Team may visually 
inspect the declared plant or facility and other areas of the plant site 
or facility as agreed by the Host Team Leader after consulting with the 
facility representative.
    (e) Records review. The facility must have available for the 
Inspection Team to review, on the inspection site, access to all 
supporting materials and documentation used by the facility to prepare 
declarations and to comply with the CWCR (see Sec. Sec. 721.1 and 721.2 
of this subchapter). Such access may be to paper copies or via 
electronic remote access by computer during the inspection period or as 
otherwise agreed upon by the Inspection Team and Host Team Leader.
    (f) Effect of facility agreements. Routine inspections at facilities 
for which the United States has concluded a facility agreement with the 
OPCW will be conducted in accordance with the facility agreement. The 
existence of a facility agreement does not in any way limit the right of 
the owner, operator, occupant, or agent in charge of the facility to 
withhold consent to an inspection request.
    (g) Hours of inspections. Consistent with the provisions of the 
Convention, the Host Team will ensure, to the extent possible, that each 
inspection is commenced, conducted, and concluded during ordinary 
working hours, but no

[[Page 149]]

inspection shall be prohibited or otherwise disrupted from commencing, 
continuing or concluding during other hours.
    (h) Health and safety regulations and requirements. In carrying out 
their activities, the Inspection Team and Host Team shall observe 
federal, state, and local health and safety regulations and health and 
safety requirements established at the inspection site, including those 
for the protection of controlled environments within a facility and for 
personal safety. Such health and safety regulations and requirements 
will be set forth in, but will not necessarily be limited to, the 
facility agreement, if applicable.
    (i) Preliminary factual findings. Upon completion of an inspection, 
the Inspection Team will meet with the Host Team and facility personnel 
to review the written preliminary findings of the Inspection Team and to 
clarify ambiguities. The Host Team will discuss the preliminary findings 
with the facility, and the Host Team Leader will take into consideration 
the facility's input when providing official comment on the preliminary 
findings to the Inspection Team. This meeting will be completed not 
later than 24 hours after the completion of the inspection.



Sec. 716.5  Notification, duration and frequency of inspections.

    (a) Notification. (1)(i) Content of notice. Inspections of 
facilities may be made only upon issuance of written notice by the 
United States National Authority (USNA) to the owner and to the 
operator, occupant or agent in charge of the premises to be inspected. 
The Department of Commerce will also provide a separate Host Team 
notification to the inspection point of contact identified in 
declarations submitted by the facility. If the United States is unable 
to provide actual written notice to the owner, operator, or agent in 
charge, the Department of Commerce, or if the Department of Commerce is 
unable, the Federal Bureau of Investigation, may post notice prominently 
at the facility to be inspected. The notice shall include all 
appropriate information provided by the OPCW to the USNA concerning:
    (A) The type of inspection;
    (B) The basis for the selection of the facility or location for the 
type of inspection sought;
    (C) The time and date that the inspection will begin and the period 
covered by the inspection; and
    (D) The names and titles of the inspectors.
    (ii) In addition to appropriate information provided by the OPCW in 
its notification to the USNA, the Department of Commerce's Host Team 
notification will request that the facility indicate whether it will 
consent to an inspection, and will state whether an advance team is 
available to assist the site in preparation for the inspection. If an 
advance team is available, facilities that request advance team 
assistance are not required to reimburse the U.S. Government for costs 
associated with these activities. If a facility does not agree to 
provide consent to an inspection within four hours of receipt of the 
Host Team notification, BIS intends to seek an administrative warrant.
    (iii) The following table sets forth the notification procedures for 
inspection:

                       Table to Sec. 716.5(a)(1)
------------------------------------------------------------------------
           Activity                  Agency action       Facility action
------------------------------------------------------------------------
(A) OPCW notification of        (1) U.S. National       (i)Acknowledge
 inspection.                     Authority transmits     receipt of fax.
                                 actual written notice
                                 and inspection
                                 authorization to the
                                 owner and operator,
                                 occupant, or agent in
                                 charge via facsimile
                                 within 6 hours.
                                (2) Upon notification   (i) Indicates
                                 from the U.S.           whether it
                                 National Authority,     grants consent.
                                 BIS immediately        (ii) May request
                                 transmits Host Team     advance team
                                 notification via        support. No
                                 facsimile to the        requirement for
                                 inspection point of     reimbursement
                                 contact to ascertain    of U.S.
                                 whether the facility    Government's
                                 (1) grants consent      services.
                                 and (2) requests
                                 assistance in
                                 preparing for the
                                 inspection. In
                                 absence of consent
                                 within four hours of
                                 transmission, BIS
                                 intends to seek an
                                 administrative
                                 warrant.

[[Page 150]]

 
(B) Preparation for inspection  (1) BIS advance team    (i) If advance
                                 arrives in the          team support is
                                 vicinity of the         provided,
                                 facility to be          facility works
                                 inspected 1-2 days      with the
                                 after OPCW              advance team on
                                 notification for        inspection-
                                 logistical and          related issues.
                                 administrative
                                 preparations.
------------------------------------------------------------------------

    (2) Timing of notice. (i) Schedule 1 facilities. For declared 
Schedule 1 facilities, the Technical Secretariat will notify the USNA of 
an initial inspection not less than 72 hours prior to arrival of the 
inspection team in the United States, and will notify the USNA of a 
routine inspection not less than 24 hours prior to arrival of the 
Inspection Team in the United States. The USNA will provide written 
notice to the owner and to the operator, occupant or agent in charge of 
the premises within six hours of receiving notification from the OPCW 
Technical Secretariat or as soon as possible thereafter. The Department 
of Commerce will provide Host Team notice to the inspection point of 
contact of the facility as soon as possible after the OPCW notifies the 
USNA of the inspection.
    (ii) Schedule 2 plant sites. For declared Schedule 2 plant sites, 
the Technical Secretariat will notify the USNA of an initial or routine 
inspection not less than 48 hours prior to arrival of the Inspection 
Team at the plant site to be inspected. The USNA will provide written 
notice to the owner and to the operator, occupant or agent in charge of 
the premises within six hours of receiving notification from the OPCW 
Technical Secretariat or as soon as possible thereafter. The Department 
of Commerce will provide Host Team notice to the inspection point of 
contact at the plant site as soon as possible after the OPCW notifies 
the USNA of the inspection.
    (iii) Schedule 3 and unscheduled discrete organic chemical plant 
sites. For declared Schedule 3 and unscheduled discrete organic chemical 
plant sites, the Technical Secretariat will notify the USNA of an 
initial or routine inspection not less than 120 hours prior to arrival 
of the Inspection Team at the plant site to be inspected. The USNA will 
provide written notice to the owner and to the operator, occupant or 
agent in charge of the premises within six hours of receiving 
notification from the OPCW Technical Secretariat or as soon as possible 
thereafter. The Department of Commerce will provide Host Team notice to 
the inspection point of contact of the plant site as soon as possible 
after the OPCW notifies the USNA of the inspection.
    (b) Period of inspections. (1) Schedule 1 facilities. For a declared 
Schedule 1 facility, the Convention does not specify a maximum duration 
for an initial inspection. The estimated period of routine inspections 
will be as stated in the facility agreement, unless extended by 
agreement between the Inspection Team and the Host Team Leader. The Host 
Team Leader will consult with the inspected facility on any request for 
extension of an inspection prior to making an agreement with the 
Inspection Team. Activities involving the pre-inspection briefing and 
preliminary findings are in addition to inspection activities. See Sec. 
716.4 (c) and (i) for a description of these activities.
    (2) Schedule 2 plant sites. For declared Schedule 2 plant sites, the 
maximum duration of initial and routine inspections shall be 96 hours, 
unless extended by agreement between the Inspection Team and the Host 
Team Leader. The Host Team Leader will consult with the inspected plant 
site on any request for extension of an inspection prior to making an 
agreement with the Inspection Team. Activities involving the pre-
inspection briefing and preliminary findings are in addition to 
inspection activities. See Sec. 716.4 (c) and (i) for a description of 
these activities.
    (3) Schedule 3 and discrete organic chemical plant sites. For 
declared Schedule 3 or unscheduled discrete organic chemical plant 
sites, the maximum duration of initial and routine inspections shall be 
24 hours, unless extended by agreement between the Inspection Team and 
the Host Team Leader. The

[[Page 151]]

Host Team Leader will consult with the inspected plant site on any 
request for extension of an inspection prior to making an agreement with 
the Inspection Team. Activities involving the pre-inspection briefing 
and preliminary findings are in addition to inspection activities. See 
Sec. 716.4 (c) and (i) for a description of these activities.
    (c) Frequency of inspections. The frequency of inspections is as 
follows:
    (1) Schedule 1 facilities. As provided by the Convention, the 
frequency of inspections at declared Schedule 1 facilities is determined 
by the OPCW based on the risk to the object and purpose of the 
Convention posed by the quantities of chemicals produced, the 
characteristics of the facility and the nature of the activities carried 
out at the facility. The frequency of inspections will be stated in the 
facility agreement.
    (2) Schedule 2 plant sites. As provided by the Convention and the 
Act, the maximum number of inspections at declared Schedule 2 plant 
sites is 2 per calendar year per plant site. The OPCW will determine the 
frequency of routine inspections for each declared Schedule 2 plant site 
based on the inspectors' assessment of the risk to the object and 
purpose of the Convention posed by the relevant chemicals, the 
characteristics of the plant site, and the nature of the activities 
carried out there. The frequency of inspections will be stated in the 
facility agreement, if applicable.
    (3) Schedule 3 plant sites. As provided by the Convention, no 
declared Schedule 3 plant site may receive more than two inspections per 
calendar year and the combined number of inspections of Schedule 3 and 
unscheduled discrete organic chemical plant sites in the United States 
may not exceed 20 per calendar year.
    (4) Unscheduled Discrete Organic Chemical plant sites. As provided 
by the Convention, no declared UDOC plant site may receive more than two 
inspections per calendar year and the combined number of inspections of 
Schedule 3 and unscheduled discrete organic chemical plant sites in the 
United States may not exceed 20 per calendar year.



Sec. 716.6  Facility agreements.

    (a) Description and requirements. A facility agreement is a site-
specific agreement between the U.S. Government and the OPCW. Its purpose 
is to define procedures for inspections of a specific declared facility 
that is subject to inspection because of the type or amount of chemicals 
it produces, processes or consumes.
    (1) Schedule 1 facilities. The Convention requires that facility 
agreements be concluded between the United States and the OPCW for all 
declared Schedule 1 facilities.
    (2) Schedule 2 plant sites. The USNA will ensure that such facility 
agreements are concluded with the OPCW unless the owner, operator, 
occupant or agent in charge of the plant site and the OPCW Technical 
Secretariat agree that such a facility agreement is not necessary.
    (3) Schedule 3 and unscheduled discrete organic chemical plant 
sites. If the owner, operator, occupant or agent in charge of a declared 
Schedule 3 or unscheduled discrete organic chemical plant site requests 
a facility agreement, the USNA will ensure that a facility agreement for 
such a plant site is concluded with the OPCW.
    (b) Notification; negotiation of draft and final facility 
agreements; and conclusion of facility agreements. Prior to the 
development of a facility agreement, the Department of Commerce shall 
notify the owner, operator, occupant, or agent in charge of the 
facility, and if the owner, operator, occupant or agent in charge so 
requests, the notified person may participate in preparations with 
Department of Commerce representatives for the negotiation of such an 
agreement. During the initial inspection of a declared facility, the 
Inspection Team and the Host Team will negotiate a draft facility 
agreement. To the maximum extent practicable consistent with the 
Convention, the owner and the operator, occupant or agent in charge of 
the facility may observe facility agreement negotiations between the 
U.S. Government and OPCW. As a general rule, BIS will consult with the 
affected facility on the contents of the agreements and take facility 
comments into consideration during negotiations. The Department

[[Page 152]]

of Commerce will participate in the negotiation of, and approve, all 
final facility agreements with the OPCW. Facilities will be notified of 
and have the right to observe final facility agreement negotiations 
between the United States and OPCW to the maximum extent practicable, 
consistent with the Convention. Prior to the conclusion of a final 
facility agreement, the affected facility will have an opportunity to 
comment on the facility agreement. BIS will give consideration to such 
comments prior to approving final facility agreements with the OPCW. The 
United States National Authority shall ensure that facility agreements 
for Schedule 1, Schedule 2, Schedule 3 and unscheduled discrete organic 
chemical facilities are concluded, as appropriate, with the OPCW in 
coordination with the Department of Commerce.
    (c) Format and content. Schedule 1 and Schedule 2 model facility 
agreements are included in Supplement No. 2 and Supplement No. 3 to this 
part. These model facility agreements implement the general provisions 
of the Convention pertaining to inspections, including health and safety 
procedures, confidentiality of information, media and public relations, 
information about the facility, inspection equipment, pre-inspection 
activities, conduct of the inspection (including access to and 
inspection of areas, buildings and structures, access to and inspection 
of records and documentation, arrangements for interviews of facility 
personnel, photographs, sampling, and measurements), and logistical 
arrangements for the inspectors, such as communications and lodging. 
Attachments to the facility agreements will provide site-specific 
information such as working hours, special safety and health procedures, 
as well as site-specific agreements as to documents and records to be 
provided, specific areas of a facility to be inspected, site diagrams, 
sampling, photography, interview procedures, use of inspection 
equipment, procedures for protection of confidential business 
information, and administrative arrangements.
    (d) Further information. For further information about facility 
agreements, please write or call: Inspection Management Team, Bureau of 
Industry and Security, U.S. Department of Commerce, 14th Street and 
Pennsylvania Avenue, N.W., Room 6087B, Washington, D.C. 20230-0001, 
Telephone: (202) 482-6114.



Sec. 716.7  Samples.

    The owner, operator, occupant or agent in charge of a facility must 
provide a sample as provided for in the Convention and consistent with 
requirements set forth by the Director of the United States National 
Authority in 22 CFR part 103.



Sec. 716.8  On-site monitoring of Schedule 1 facilities.

    Declared Schedule 1 facilities are subject to verification by 
monitoring with on-site instruments as provided by the Convention. For 
facilities subject to the CWCR, however, such monitoring is not 
anticipated. The U.S. Government will ensure that any monitoring that 
may be requested by the OPCW is carried out pursuant to the Convention 
and U.S. law.



Sec. 716.9  Report of inspection-related costs.

    Pursuant to section 309(b)(5) of the Act, any facility that has 
undergone any inspections pursuant to this subchapter during a given 
calendar year must report to BIS within 90 days of an inspection on its 
total costs related to that inspection. Although not required, such 
reports should identify categories of costs separately if possible, such 
as personnel costs (production-line, administrative, legal), costs of 
producing records, and costs associated with shutting down chemical 
production or processing during inspections, if applicable. This 
information should be reported to BIS on company letterhead at the 
address given in Sec. 716.6(d), with the following notation: ``Attn: 
Report of inspection-related costs.''

[[Page 153]]

 Supplement No. 1 to Part 716--Notification, Duration and Frequency of 
                               Inspections

----------------------------------------------------------------------------------------------------------------
                                                                                                  Unscheduled
                                      Schedule 1          Schedule 2          Schedule 3       discrete organic
                                                                                                   chemicals
----------------------------------------------------------------------------------------------------------------
Notice of initial or routine      24 hours prior to   48 hours prior to   120 hours prior to  120 hours prior to
 inspection to USNA.               arrival at the      arrival at the      arrival at the      arrival at the
                                   point of entry.     plant site.         plant site.         plant site.
Duration of inspection..........  As specified in     96 hours..........  24 hours..........  24 hours.
                                   facility
                                   agreement.
Maximum number of inspections...  Determined by OPCW  2 per calendar      2 per calendar      2 per calendar
                                   based on            year per plant      year per plant      year per plant
                                   characteristics     site.               site.               site.
                                   of facility and
                                   the nature of the
                                   activities
                                   carried out at
                                   the facility.
                                 ---------------------
Notification of challenge               12 hours prior to arrival of inspection team at the point of entry.
 inspection to USNA*.
                                 ---------------------
Duration of Challenge                                                84 hours.
 inspection*.
----------------------------------------------------------------------------------------------------------------
*See part 717 of this subchapter.

    Supplement No. 2 to Part 716--Schedule 1 Model Facility Agreement

    Draft Model Agreement specifying the general form and content for 
facility agreements to be concluded pursuant to Verification Annex, Part 
VI, paragraph 31 (other facilities).
    Facility Agreement between the Organization for the Prohibition of 
Chemical Weapons and the Government of the United States of America 
Regarding On-site Inspections at the ------ Facility Located at the ----
------.
    The Organization for the Prohibition of Chemical Weapons, 
hereinafter referred to as ``Organization'', and the Government of the 
United States of America, hereinafter referred to as ``inspected State 
Party'', both constituting the Parties to this Agreement, have agreed on 
the following arrangements in relation to the conduct of inspections 
pursuant to paragraph 3 of Article VI of the Convention on the 
Prohibition of the Development, Production, Stockpiling and Use of 
Chemical Weapons and on Their Destruction, hereinafter referred to as 
``Convention'', at ------ (insert name of the facility, its precise 
location, including the address), declared under paragraphs 7 and 8 of 
Article VI, hereinafter referred to as ``facility''.

                      Section 1. General Provisions

    1. The purpose of this Agreement is to facilitate the implementation 
of the provisions of the Convention in relation to inspections conducted 
at the facility pursuant to paragraph 3 of Article VI of the Convention 
and in accordance with the obligations of the inspected State Party and 
the Organization under the Convention.
    2. Nothing in this Agreement shall be applied or interpreted in a 
way that is contradictory to the provisions of the Convention, including 
paragraph 1 of Article VII.1 In case of inconsistency between 
this Agreement and the Convention, the Convention shall prevail.
---------------------------------------------------------------------------

    \1\ Each State Party shall, in accordance with its constitutional 
processes, adopt the necessary measures to implement its obligations 
under this Convention.
---------------------------------------------------------------------------

    3. The Parties have agreed to apply for planning purposes the 
general factors contained in Attachment 1.
    4. The frequency and intensity of inspections at the facility are 
given in Part B of Attachment 1 and reflect the risk assessment of the 
Organization conducted pursuant to paragraphs 23 or 30 of Part VI of the 
Verification Annex, whichever applies.
    5. The inspection team shall consist of no more than ---- persons.
    6. The language for communication between the inspection team and 
the inspected State Party during inspections shall be English.
    7. In case of any development due to circumstances brought about by 
unforeseen events or acts of nature, which could affect inspection 
activities at the facility, the inspected State Party shall notify the 
Organization and the inspection team as soon as practically possible.
    8. In case of need for the urgent departure, emergency evacuation or 
urgent travel of inspector(s) from the territory of the inspected State 
Party, the inspection team leader shall inform the inspected State Party 
of such a need. The inspected State Party shall arrange without undue 
delay such departure, evacuation or travel. In all cases, the inspected 
State Party shall determine the means of transportation and routes to be

[[Page 154]]

taken. The costs of such departure, evacuation or travel of inspectors 
shall be borne by the Organization.
    9. Inspectors shall wear identification badges at all times when on 
the premises of the facility.

                      Section 2. Health and Safety

    1. Health and safety matters during inspections are governed by the 
Convention, the Organization's Health and Safety Policy and Regulations, 
and applicable national, local and facility safety and environmental 
regulations. The specific arrangements for implementing the relevant 
provisions of the Convention and the Organization's Health and Safety 
Policy in relation to inspections at the facility are contained in 
Attachment 2.
    2. Pursuant to paragraph 1 of this section, all applicable health 
and safety regulations relevant to the conduct of the inspection at the 
facility are listed in Attachment 2 and shall be made available for use 
by the inspection team at the facility.
    3. In case of the need to modify any health-and safety-related 
arrangements at the facility contained in Attachment 2 to this Agreement 
bearing on the conduct of inspections, the inspected State Party shall 
notify the Organization. Any such modification shall apply provisionally 
until the inspected State Party and the Organization have reached 
agreement on this issue. In case no agreement has been reached by the 
time of the completion of the inspection, the relevant information may 
be included in the preliminary factual findings. Any agreed modification 
shall be recorded in Attachment 2 to this Agreement in accordance with 
paragraph 2 of Section 13 of this Agreement.
    4. In the course of the pre-inspection briefing the inspection team 
shall be briefed by the representatives of the facility on all health 
and safety matters which, in the view of those representatives, are 
relevant to the conduct of the inspection at the facility, including:
    (a) The health and safety measures at the Schedule 1 facilities to 
be inspected and the likely risks that may be encountered during the 
inspection;
    (b) Any additional health and safety measures or regulations that 
need to be observed at the facility;
    (c) Procedures to be followed in case of an accident or in case of 
other emergencies, including a briefing on emergency signals, routes and 
exits, and the location of emergency meeting points and medical 
facilities; and
    (d) Specific inspection activities which must be limited within 
particular areas at the facility, and in particular within those 
Schedule 1 facilities to be inspected under the inspection mandate, for 
reasons of health and safety.
    Upon request, the inspection team shall certify receipt of any such 
information if it is provided in written form.
    5. During the course of an inspection, the inspection team shall 
refrain from any action which by its nature could endanger the safety of 
the team, the facility, or its personnel or could cause harm to the 
environment. Should the inspected State Party refuse certain inspection 
activities, it may explain the circumstances and safety considerations 
involved, and shall provide alternative means for accomplishing the 
inspection activities.
    6. In the case of emergency situations or accidents involving 
inspection team members while at the facility, the inspection team shall 
comply with the facility's emergency procedures and the inspected State 
Party shall to the extent possible provide medical and other assistance 
in a timely and effective manner with due regard to the rules of medical 
ethics if medical assistance is requested. Information on medical 
services and facilities to be used for this purpose is contained in Part 
D of Attachment 2. If the Organization undertakes other measures for 
medical support in regard to inspection team members involved in 
emergency situations or accidents, the inspected State Party will render 
assistance to such measures to the extent possible. The Organization 
will be responsible for the consequences of such measures.
    7. The inspected State party shall, to the extent possible, assist 
the Organization in carrying out any inquiry into an accident or 
incident involving a member of the inspection team.
    8. If, for health and safety reasons given by the inspected State 
Party, health and safety equipment of the inspected State Party is 
required to be used by the inspection team, the cost so incurred shall 
be borne by the inspected State Party.
    9. The inspection team may use its own approved health and safety 
equipment. If the inspected State Party determines it to be necessary, 
the inspected State Party shall conduct a fit test on masks brought with 
the inspection team. If the inspected State Party so requests on the 
basis of confirmed contamination or hazardous waste requirements or 
regulations, any such piece of equipment involved in the inspection 
activities will be left at the facility at the end of the inspection. 
The inspection team reserves the right to destroy equipment left at the 
facility or witness its destruction by agreed procedures. The inspected 
State Party will reimburse the Organization for the loss of the 
inspection team's equipment.
    10. In accordance with the Organization's Health and Safety Policy, 
the inspected State Party may provide available data based on detection 
and monitoring, to the agreed extent necessary to satisfy concerns

[[Page 155]]

that may exist regarding the health and safety of the inspection team.

                       Section 3. Confidentiality

    1. Matters related to confidentiality are governed by the 
Convention, including its Confidentiality Annex and paragraph 1 of 
Article VII, and the Organization's Policy on Confidentiality. The 
specific arrangements for implementing the provisions of the Convention 
and the Organization's Policy on Confidentiality in relation to the 
protection of confidential information at the facility are contained in 
Attachment 3.
    2. Upon request, the inspected State Party will procure a container 
to be placed under joint seal to maintain documents that the inspection 
team, inspected State Party, or the facility representative decides to 
keep as reference for future inspections. The inspected State Party 
shall be reimbursed by the Organization for the purchase of such 
container.
    3. All documents, including photographs, provided to the inspection 
team will be controlled as follows:
    (a) Information to be taken off-site. Information relevant to the 
finalization of the preliminary factual findings that the inspected 
State Party permits the inspection team to take off-site will be marked 
and numbered by the inspected State Party. In accordance with the 
inspected State Party's Procedures for Information Control, markings on 
the information will clearly state that the inspection team may take it 
off-site and will contain a classification pursuant to the 
Organization's Policy on Confidentiality at a level requested by the 
inspected State Party. The representative of the facility will 
acknowledge the release of such information in writing prior to 
disclosure to the inspection team.
    (b) Information restricted for use on-site. Information that the 
inspected State Party permits the inspection team to use on-site during 
inspections but not take off-site will be marked and numbered by the 
inspected State Party. In accordance with the inspected State Party's 
Procedures for Information Control, markings on the information will 
clearly restrict its use on-site and will contain a classification 
pursuant to the Organization's Policy on Confidentiality at a level 
requested by the inspected State Party. The representative of the 
facility will acknowledge the release of such information in writing 
prior to disclosure to the inspection team. Upon conclusion of the 
inspection, the inspection team shall return the information to the 
inspected State Party, and the facility representative shall acknowledge 
receipt in writing. If so requested by the inspection team, the 
information can be placed in the joint sealed container for future 
reference.
    (c) Information restricted for use on-site and requiring direct 
supervision. Information that the inspected State Party permits the 
inspection team to use on-site only under direct supervision of the 
inspected State Party or the representative of the inspected facility 
will be marked and numbered by the inspected State Party. In accordance 
with the inspected State Party's Procedures for Information Control, 
markings on the information will clearly restrict its use on-site under 
direct supervision and will contain a classification pursuant to the 
Organization's Policy on Confidentiality at a level requested by the 
inspected State Party. The representative of the facility will 
acknowledge the release of such information in writing prior to 
disclosure to the inspection team. The inspection team shall return the 
information to the inspected State Party immediately upon completion of 
review and the facility representative shall acknowledge receipt in 
writing. If so requested by the inspection team, the information can be 
placed in the joint sealed container for future reference.

                  Section 4. Media and Public Relations

    1. Inspection team media and public relations are governed by the 
Organization's Media and Public Relations Policy. The specific 
arrangements for the inspection team's contacts with the media or the 
public, if any, in relation to inspections of the facility are contained 
in Attachment 4.

                     Section 5. Inspection Equipment

    1. As agreed between the inspected State Party and the Organization, 
the approved equipment listed in Part A of Attachment 5 and with which 
the inspected State Party has been given the opportunity to familiarize 
itself will, at the discretion of the Organization and on a routine 
basis, be used specifically for the Schedule 1 inspection. The equipment 
will be used in accordance with the Convention, the relevant decisions 
taken by the Conference of States Parties, and any agreed procedures 
contained in Attachment 5.
    2. The provisions of paragraph 1 above are without prejudice to 
paragraphs 27 to 29 of Part II of the Verification Annex.
    3. The items of equipment available on-site, not belonging to the 
Organization, which the inspected State Party has volunteered to provide 
to the inspection team upon its request for use on-site during the 
conduct of inspections, together with any procedures for the use of such 
equipment, if required, any requested support which can be provided, and 
conditions for the provision of equipment are listed in Part B of 
Attachment 5. Prior to any use of such equipment, the inspection team 
may confirm that the performance characteristics of such equipment are 
consistent with those for similar Organization-approved equipment, or, 
with respect to items of equipment which are not

[[Page 156]]

on the list of Organization-approved equipment, are consistent with the 
intended purpose for using such equipment.2
---------------------------------------------------------------------------

    \2\ i.e. The inspection team may confirm that the performance 
characteristics of such equipment meet the technical requirements 
necessary to support the inspection task intended to be accomplished.
---------------------------------------------------------------------------

    4. Requests from the inspection team for the inspected State Party 
during the inspection to provide equipment mentioned in paragraph 3 
above shall be made in writing by an authorized member of the inspection 
team using the form contained in Attachment 5. The same procedure will 
also apply to other requests of the inspection team in accordance with 
paragraph 30 of Part II of the Verification Annex.
    5. Agreed procedures for the decontamination of any equipment are 
contained in Part C of Attachment 5.
    6. For the purpose of verification, the list of agreed on-site 
monitoring instruments, if any, as well as agreed conditions, procedures 
for use, maintenance, repair, modification, replacement and provisions 
for the inspected State Party's support, if required, installation 
points, and security measures to prevent tampering with such on-site 
monitoring instruments are contained in Part D of Attachment 5.

                  Section 6. Pre-Inspection Activities

    1. The inspection team shall be given a pre-inspection briefing by 
the representatives of the facility in accordance with paragraph 37 of 
Part II of the Verification Annex. The pre-inspection briefing shall 
include:
    (a) Information on the facility as described in Attachment 6;
    (b) Health and safety specifications described in Section 2 above 
and detailed in Attachment 2;
    (c) Any changes to the above-mentioned information since the last 
inspection; and
    (d) Information on administrative and logistical arrangements 
additional to those contained in Attachment 10, if any, that shall apply 
during the inspection, as contained in Section 10.
    2. Any information about the facility that the inspected State Party 
has volunteered to provide to the inspection team during the pre-
inspection briefing with indications as to which information may be 
transferred off-site is referenced in Part B of Attachment 6.

                  Section 7. Conduct of the Inspection

                        7.1 Standing Arrangements

    1. The inspection period shall begin immediately upon completion of 
the pre-inspection briefing unless agreed otherwise. Upon completion of 
the pre-inspection briefing, the inspected State Party may, on a 
voluntary basis, provide a site tour at the request of the inspection 
team. Arrangements for the conduct of a site tour, if any, are contained 
in Attachment 7.
    2. Upon conclusion of the pre-inspection briefing, the inspection 
team leader shall provide to the designated representative of the 
inspected State Party a preliminary inspection plan to facilitate the 
conduct of the inspection.
    3. Before commencement of inspection activities, the inspection team 
leader shall inform the representative of the inspected State Party 
about the initial steps to be taken in implementing the inspection plan. 
The plan will be adjusted by the inspection team as circumstances 
warrant throughout the inspection process in consultation with the 
inspected State Party as to its implementability in regard to paragraph 
40 of Part II of the Verification Annex.
    4. The activities of the inspection team shall be so arranged as to 
ensure the timely and effective discharge of its functions and the least 
possible inconvenience to the inspected State Party and disturbance to 
the facility inspected. The inspection team shall avoid unnecessarily 
hampering or delaying the operation of a facility and avoid affecting 
safety. In particular, the inspection team shall not operate the 
facility. If the inspection team considers that, to fulfil the mandate, 
particular operations should be carried out in the facility, it shall 
request the designated representative of the facility to have them 
performed.
    5. At the beginning of the inspection, the inspection team shall 
have the right to confirm the precise location of the facility utilizing 
visual and map reconnaissance, a site diagram, or other suitable 
techniques.
    6. The inspection team shall, upon request of the inspected State 
Party, communicate with the personnel of the facility only in the 
presence of or through a representative of the inspected State Party.
    7. The inspected State Party shall, upon request, provide a 
securable work space for the inspection team, including adequate space 
for the storage of equipment. The inspection team shall have the right 
to seal its work space. For ease of inspection, the inspected State 
Party will work with the facility representative to provide work space 
at the facility, if possible.

                   7.2 Access to the Declared Facility

    1. The object of the inspection shall be the declared Schedule 1 
facility as referenced in Attachment 6.
    2. Pursuant to paragraph 45 of Part II of the Verification Annex, 
the inspection team shall have unimpeded access to the declared facility 
in accordance with the relevant Articles and Annexes of the Convention 
and Attachments 6, 8, and 9.

[[Page 157]]

        7.3 Access to and Inspection of Documentation and Records

    1. The agreed list of the documentation and records to be routinely 
made available for inspection purposes to the inspection team by the 
inspected State Party during an inspection, as well as arrangements with 
regard to access to such records for the purpose of protecting 
confidential information, are contained in Attachment 8. Such 
documentation and records will be provided to the inspection team upon 
request.
    2. Only those records placed in the custody of the inspection team 
that are attached to the preliminary factual findings in accordance with 
Section 3 may leave the premises. Those records placed in the custody of 
the inspection team that are not attached to the preliminary factual 
findings must be retained in the inspection team's on-site container or 
returned to the inspected State Party.

                        7.4 Sampling and Analysis

    1. Without prejudice to paragraphs 52 to 58 of Part II of the 
Verification Annex, procedures for sampling and analysis for 
verification purposes are contained in Attachment 9.
    2. Sampling and analysis, for inspection purposes, may be carried 
out to fulfill the inspection mandate. Each such sample will be split 
into a minimum of four parts at the request of the inspection team in 
accordance with Part C of Attachment 9. One part shall be analyzed in a 
timely manner on-site. The second part of the split sample may be 
controlled by the inspection team for future reference and, if 
necessary, analysis off-site at laboratories designated by the 
Organization. That part of the sample may be destroyed at any time in 
the future upon the decision of the inspection team but in any case no 
later than 60 days after it was taken. The third part may be retained by 
the inspected State Party. The fourth part may be retained by the 
facility.
    3. Pursuant to paragraph 52 of the Part II of the Verification 
Annex, representatives of the inspected State Party or facility shall 
take samples at the request of the inspection team in the presence of 
inspectors. The inspected State Party will inform the inspection team of 
the authorized facility representative's 3 determination of 
whether the sample shall be taken by representatives of the facility or 
the inspection team or other individuals present. If inspectors are 
granted the right to take samples themselves in accordance with 
paragraph 52 of Part II of the Verification Annex, the relevant advance 
agreement between the inspection team and the inspected State Party 
shall be in writing. The representatives of the inspected State Party or 
of the inspected facility shall have the right to be present during 
sampling. Agreed conditions and procedures for such sample collection 
are contained in Part B of Attachment 9 to this Agreement.
---------------------------------------------------------------------------

    \3\ The authorized facility representative is the owner or the 
operator, occupant or agent in charge of the premises being inspected.
---------------------------------------------------------------------------

    4. Facility sampling equipment shall as a rule be used for taking 
samples required for the purposes of the inspection. This is without 
prejudice to the right of the inspection team pursuant to paragraph 27 
of Part II of the Verification Annex to use its own approved sampling 
equipment in accordance with paragraph 1 of Section 5 and Parts A and B 
of Attachment 5 to this Agreement.
    5. Should the inspection team request that a sample be taken and the 
inspected State Party be unable to accede or agree to the request, the 
inspected State Party will make every reasonable effort to satisfy the 
inspection team's concerns by other means to enable the inspection team 
to fulfil its mandate. The inspected State Party will provide a written 
explanation for its inability to accede or agree to the request. Any 
such response shall be supported by relevant document(s). The 
explanation of the inspected State Party shall be included in the 
preliminary factual findings.
    6. In accordance with paragraph 53 of Part II of the Verification 
Annex, where possible, the analysis of samples shall be performed on-
site and the inspection team shall have the right to perform on-site 
analysis of samples using approved equipment brought by it for the 
splitting, preparation, handling, analysis, integrity and transport of 
samples. The assistance that will be provided by the inspected State 
Party and the analysis procedures to be followed are contained in Part D 
of Attachment 9 to this Agreement.
    7. The inspection team may request the inspected State Party to 
perform the analysis in the inspection team's presence. The inspection 
team shall have the right to be present during any sampling and analysis 
conducted by the inspected State Party.
    8. The results of such analysis shall be reported in writing as soon 
as possible after the sample is taken.
    9. The inspection team shall have the right to request repeat 
analysis or clarification in connection with ambiguities.
    10. If at any time, and for any reason, on-site analysis is not 
possible, the inspection team has the right to have sample(s) analyzed 
off-site at Organization-designated laboratories. In selecting such 
designated laboratories for the off-site analysis, the Organization will 
give due regard to requirements of the inspected State Party.
    11. Transportation of samples will be in accordance with the 
procedures outlined in Part E of Attachment 9.
    12. If at any time, the inspected State Party or facility 
representative determines

[[Page 158]]

that inspection team on-site analysis activities are not in accordance 
with the facility agreement or agreed analysis procedures, or otherwise 
pose a threat to safety or environmental regulations or laws, the 
inspected State Party, in consultation with the facility representative, 
will cease these on-site activities pending resolution. If both parties 
cannot agree to proceed with the analysis, the inspection team will 
document this in its preliminary factual findings.
    13. Conditions and procedures for the disposal of hazardous 
materials generated during sampling and on-site analysis during the 
inspection are contained in Part F of Attachment 9 to this Agreement.

                     7.5 Arrangements for Interviews

    1. The inspection team shall have the right, subject to applicable 
United States legal protections for individuals, to interview any 
facility personnel in the presence of representatives of the inspected 
State Party with the purpose of establishing relevant facts in 
accordance with paragraph 46 of Part II of the Verification Annex and 
inspected State Party's policy and procedures. Agreed procedures for 
conducting interviews are contained in Attachment 11.
    2. The inspection team will submit to the inspected State Party 
names and/or positions of those desired for interviews. The requested 
individual(s) will be made available to the inspection team no later 
than 24 hours after submission of the formal request, unless agreed 
otherwise. The inspection team may also be requested to submit questions 
in writing prior to conducting interviews. The specific timing and 
location of interviews will be determined with the facility in 
coordination with the inspected State Party and consistent with adequate 
notification of the interviewees, and minimizing the operation impacts 
on the facility and individuals to be interviewed.
    3. The inspected State Party may recommend to the inspection team 
that interviews be conducted in either ``panel'' or individual formats. 
At a minimum, interviews will be conducted with a member of the facility 
staff and an inspected State Party representative. Legal counsel may 
also be required to be present by the inspected State Party. The 
interview may be interrupted for consultation between the interviewee, 
the facility representative, the inspected State Party representative, 
and legal counsel.
    4. The inspected State Party will have the right to restrict the 
content of interviews to information directly related to the mandate or 
purpose of the inspection.
    5. Outside the interview process and in discharging their functions, 
inspectors shall communicate with personnel of the facility only through 
the representative(s) of the inspected State Party.

                           7.6 Communications

    1. In accordance with paragraph 44 of Part II of the Verification 
Annex, the inspection team shall have the right to communicate with the 
headquarters of the Technical Secretariat. For this purpose they may use 
their own, duly certified approved equipment, in accordance with 
paragraph 1 of Section 5. The representative of the inspected facility 
retains the right to control the use of communications equipment in 
specific areas, buildings, or structures if such use would be 
incompatible with applicable safety or fire regulations.
    2. In case the inspection team and the inspected State Party agree 
to use any of the inspected State Party's communications equipment, the 
list of such equipment and the provisions for its use are contained in 
Part B of Attachment 5 to this Agreement.
    3. The agreed means of communication between inspection team sub-
teams in accordance with paragraph 44 of Part II of the Verification 
Annex are contained in Part E of Attachment 5.

                             7.7 Photographs

    1. In accordance with the provisions of paragraph 48 of Part II of 
the Verification Annex, the Confidentiality Annex and inspected State 
Party's policy and procedures, the inspection team shall have the right 
to have photographs taken at their request by the representatives of the 
inspected State Party or the inspected facility. One camera of the 
instant development type furnished by the inspection team or the 
inspected State Party shall be used for taking identical photographs in 
sequence. Cameras furnished by the inspection team will remain either in 
their work space or equipment storage area except when carried by 
inspection team members for a specific inspection activity. Cameras will 
only be used for specified inspection purposes. Personal cameras are not 
allowed to be taken to the facility.
    2. Pursuant to the Confidentiality Annex, the inspected State Party, 
in consultation with the facility representative, shall have the right 
to determine that contents of the photographs conform to the stated 
purpose of the photographs. The inspection team shall determine whether 
photographs conform to those requested and, if not, repeat photographs 
shall be taken. Photographs that do not meet the satisfaction of both 
sides will be destroyed by the inspected State Party in the presence of 
the inspection team. The inspection team, the inspected State Party and 
the facility, if so requested, shall each retain one copy of every 
photograph. The copies shall be signed, dated, and classified, in 
accordance with Section 3, and note the location and subject of the 
photograph and carry the same identification

[[Page 159]]

number. Agreed procedures for photography are contained in Attachment 
12.
    3. The representative of the inspected facility has the right to 
object to the use of photographic equipment in specific areas, buildings 
or structures if such use would be incompatible with safety or fire 
regulations given the characteristics of the chemicals stored in the 
area in question. Restrictions for use are contained in Parts A and/or B 
of Attachment 5 to this Agreement. If the objection is raised due to 
safety concerns, the inspected State Party will, if possible, furnish 
photographic equipment that meets the regulations. If the use of 
photographic equipment is not permissible at all in specific areas, 
buildings or structures for the reasons stated above, the inspected 
State Party shall provide a written explanation of its objection to the 
inspection team leader. The explanation, along with the inspection team 
leader's comments will be included in the inspection team's preliminary 
factual findings.

                            Section 8. Visits

    1. This section applies to visits conducted pursuant to paragraphs 
15 and 16 of Part III of the Verification Annex.
    2. The size of a team on such a visit shall be kept to the minimum 
number of personnel necessary to perform the specific tasks for which 
the visit is being conducted and shall in any case not exceed the size 
of inspection team referenced in paragraph 5 of Section 1.
    3. The duration of the visit pursuant to this Section shall be 
limited to the minimum time required to perform the specific tasks 
relating to monitoring systems for which the visit is being conducted 
and in any case shall not exceed the estimated period of inspection 
referenced in Part B of Attachment 1 of this Agreement.
    4. Access provided to the monitoring systems during the visit shall 
be limited to that required to perform the specific tasks for which the 
visit is being conducted, unless otherwise agreed to with the inspected 
State Party.
    5. General arrangements and notifications for a visit shall be the 
same as for the conduct of an inspection.

             Section 9. Debriefing and Preliminary Findings

    1. In accordance with paragraph 60 of Part II of the Verification 
Annex, upon completion of an inspection the inspection team shall meet 
with representatives of the inspected State Party and the personnel 
responsible for the inspection site to review the preliminary findings 
of the inspection team and to clarify any ambiguities. The inspection 
team shall provide to the representatives of the inspected State Party 
its preliminary findings in written form according to a standardized 
format, together with a list of any samples and copies of written 
information and data gathered and other material to be taken off-site. 
The document shall be signed by the head of the inspection team. In 
order to indicate that he has taken notice of the contents of the 
document, the representative of the inspected State Party shall 
countersign the document. The meeting shall be completed not later than 
24 hours after the completion of the inspection.
    2. The document on preliminary findings shall also include, inter 
alia, the list of results of analysis, if conducted on-site, records of 
seals, results of inventories, copies of photographs to be retained by 
the inspection team, and results of specified measurements. It will be 
prepared in accordance with the preliminary findings format referenced 
in Annex 5. Any substantive changes to this format will be made only 
after consultation with the inspected State Party.
    3. Before the conclusion of the debriefing, the inspected State 
Party may provide comments and clarifications to the inspection team on 
any issue related to the conduct of the inspection. The inspection team 
shall provide to the representative of the inspected State Party its 
preliminary findings in written form sufficiently prior to the 
conclusion of the debriefing to permit the inspected State Party to 
prepare any comments and clarifications. The inspected State Party's 
written comments and clarifications shall be attached to the document on 
preliminary findings.
    4. The inspection team shall depart from the site upon the 
conclusion of the meeting on preliminary findings.

                 Section 10. Administrative Arrangements

    1. The inspected State Party shall provide or arrange for the 
provision of the amenities listed in detail in Attachment 10 to the 
inspection team throughout the duration of the inspection. The inspected 
State Party shall be reimbursed by the Organization for such costs 
incurred by the inspection team, unless agreed otherwise.
    2. Requests from the inspection team for the inspected State Party 
to provide or arrange amenities shall be made in writing by an 
authorized member of the inspection team 4 using the form 
contained in Attachment 10. Requests shall be made as soon as the need 
for amenities has been identified. The provision of such requested 
amenities shall be certified in writing by the authorized member of the 
inspection team. Copies of all such certified requests shall be kept by 
both parties.
---------------------------------------------------------------------------

    \4\ The name of the authorized member(s) of the inspection team 
should be communicated to the inspected State Party no later than at the 
Point of Entry.

---------------------------------------------------------------------------

[[Page 160]]

    3. The inspection team has the right to refuse extra amenities that 
in its view are not needed for the conduct of the inspection.

                         Section 11. Liabilities

    1. Any claim by the inspected State Party against the Organization 
or by the Organization against the inspected State Party in respect of 
any alleged damage or injury resulting from inspections at the facility 
in accordance with this Agreement, without prejudice to paragraph 22 of 
the Confidentiality Annex, shall be settled in accordance with 
international law and, as appropriate, with the provisions of Article 
XIV of the Convention.

                    Section 12. Status of Attachments

    1. The Attachments form an integral part of this Agreement. Any 
reference to the Agreement includes the Attachments. However, in case of 
any inconsistency between this Agreement and any Attachment, the 
sections of the Agreement shall prevail.

            Section 13. Amendments, Modifications and Updates

    1. Amendments to the sections of this Agreement may be proposed by 
either Party and shall be agreed to and enter into force under the same 
conditions as provided for under paragraph 1 of Section 15.
    2. Modifications to the Attachments of this Agreement, other than 
Attachment 1 and Part B of Attachment 5, may be agreed upon at any time 
between the representative of the Organization and the representative of 
the inspected State Party, each being specifically authorized to do so. 
The Director-General shall inform the Executive Council about any such 
modifications. Each Party to this Agreement may revoke its consent to a 
modification not later than four weeks after it had been agreed upon. 
After this time period the modification shall take effect.
    3. The inspected State Party will update Part A of Attachment 1 and 
Part B of Attachment 5 and Attachment 6 as necessary for the effective 
conduct of inspections. The Organization will update Part B of 
Attachment 1 and Annex 5, subject to paragraph 2 of Section 9, as 
necessary for the effective conduct of inspections.

                   Section 14. Settlement of Disputes

    1. Any dispute between the Parties that may arise out of the 
application or interpretation of this Agreement shall be settled in 
accordance with Article XIV of the Convention.

                      Section 15. Entry Into Force

    1. This Agreement shall enter into force after approval by the 
Executive Council and signature by the two Parties. If the inspected 
State Party has additional internal requirements, it shall so notify the 
Organization in writing by the date of signature. In such cases, this 
Agreement shall enter into force on the date that the inspected State 
Party gives the Organization written notification that its internal 
requirements for entry into force have been met.

                  Section 16. Duration and Termination

    1. This Agreement shall cease to be in force when, as determined by 
the Executive Council, the provisions of paragraphs 3 and 8 of Article 
VI and Part VI of the Verification Annex no longer apply to this 
facility.
    Done at ---- in ---- copies, in English, each being equally 
authentic.\5\
---------------------------------------------------------------------------

    \5\ The language(s) to be chosen by the inspected State Party from 
the languages of the Convention shall be the same as the language(s) 
referred to in paragraph 6 of Section 1 of this Agreement.
---------------------------------------------------------------------------

                               Attachments

    The following attachments shall be completed where applicable.
Attachment 1: General Factors for the Conduct of Inspections
Attachment 2: Health and Safety Requirements and Procedures
Attachment 3: Specific Arrangements in Relation to the Protection of 
Confidential Information at the Facility
Attachment 4: Arrangements for the Inspection Team's Contacts with the 
Media or the Public
Attachment 5: Inspection Equipment
Attachment 6: Information on the Facility Provided in Accordance with 
Section 6
Attachment 7: Arrangements for Site Tour
Attachment 8: Records Routinely Made Available to the Inspection Team at 
the Facility
Attachment 9: Sampling and Analysis for Verification Purposes
Attachment 10: Administrative Arrangements
Attachment 11: Agreed Procedures for Conducting Interviews
Attachment 12: Agreed Procedures for Photography

      Attachment 1--General Factors for the Conduct of Inspections

    Part A. To Be Provided and Updated by the inspected State Party:

    1. Schedule 1 facility(s) working hours, if applicable: 
6----hrs to ----hrs (local time) (days)
---------------------------------------------------------------------------

    \6\ All references to time use a 24 hour clock.
---------------------------------------------------------------------------

    2. Working days: --------------------
    3. Holidays or other non-working days:
________________________________________________________________________
________________________________________________________________________

[[Page 161]]

    4. Inspection activities which could/could not 7 be 
supported during non-working hours with notation of times and 
activities:
---------------------------------------------------------------------------

    \7\ Choose one option.
---------------------------------------------------------------------------

________________________________________________________________________
________________________________________________________________________
    5. Any other factors that could adversely affect the effective 
conduct of inspections:
    (a) inspection requests:
    Should the facility withhold consent to an inspection, the inspected 
State Party shall take all appropriate action under its law to obtain a 
search warrant from a United States magistrate judge. Upon receipt of a 
warrant, the inspected State Party will accede to the Organization's 
request to conduct an inspection. Such inspection will be carried out in 
accordance with the terms and conditions of the warrant.
    (b) other:
________________________________________________________________________
    6. Other: notification procedures are contained in Annex 6.
    Part B. To Be Provided and Updated by the Organization:
    1. Inspection frequency: ----------------
    2. Inspection intensity:
    (a) maximum estimated period of inspection (for planning purposes): 
--------
    (b) approximate inspection team size: ----
    (c) estimated volume and weight of equipment to be brought on-site: 
--------

                              Attachment 2

              Health and Safety Requirements and Procedures

    Part A. Basic Principles:
    1. Applicable health and safety regulations of the Organization, 
with agreed variations from strict implementation, if any:
________________________________________________________________________
________________________________________________________________________
    2. Health and safety regulations applicable at the facility:
    (a) federal regulations:
________________________________________________________________________
________________________________________________________________________
    (b) state regulations:
________________________________________________________________________
________________________________________________________________________
    (c) local regulations:
________________________________________________________________________
________________________________________________________________________
    (d) facility regulations:
________________________________________________________________________
________________________________________________________________________
    3. Health and safety requirements and regulations agreed between the 
inspected State Party and the Organization:
________________________________________________________________________
________________________________________________________________________
    Part B. Detection and Monitoring:
    1. Applicable specific safety standards for workplace chemical 
exposure limits and/or concentrations which should be observed during 
the inspection, if any:
________________________________________________________________________
________________________________________________________________________
    2. Procedures for detection and monitoring in accordance with the 
Organization's Health and Safety Policy, including data to be collected 
by, or provided to, the inspection team:
________________________________________________________________________
________________________________________________________________________
    Part C. Protection:
    1. Protective equipment to be provided by the Organization and 
agreed procedures for equipment certification and use, if required:
________________________________________________________________________
________________________________________________________________________
    2. Protective equipment to be provided by the inspected State Party, 
and agreed procedures, personnel training, and personnel qualification 
tests and certification required; and agreed procedures for use of the 
equipment:
________________________________________________________________________
________________________________________________________________________
    Part D. Medical Requirements:
    1. Applicable medical standards of the inspected State Party and, in 
particular, the inspected facility:
________________________________________________________________________
________________________________________________________________________
    2. Medical screening procedures for members of the inspection team:
________________________________________________________________________
________________________________________________________________________
    3. Agreed medical assistance to be provided by the inspected State 
Party:
________________________________________________________________________
________________________________________________________________________
    4. Emergency medical evacuation procedures:
________________________________________________________________________
________________________________________________________________________
    5. Agreed additional medical measures to be taken by the inspection 
team:
________________________________________________________________________
________________________________________________________________________
    6. Procedures for emergency response to chemical casualties of the 
inspection team:
________________________________________________________________________
________________________________________________________________________
    Part E. Modification of Inspection Activities:
    1. Modification of inspection activities due to health and safety 
reasons, and agreed alternatives to accomplish the inspection goals:
________________________________________________________________________
________________________________________________________________________

  Attachment 3--Specific Arrangements in Relation to the Protection of 
                Confidential Information at the Facility

    Part A. Inspected State Party's Procedures for Designating and 
Classifying Documents Provided to the Inspection Team: See Annex 3 for 
the Organization's Policy on Confidentiality and Annex 7 for the 
inspected State Party's Procedures for Information Control.

[[Page 162]]

    Part B. Specific Procedures for Access by the Inspection Team to 
Confidential Areas or Materials:
________________________________________________________________________
________________________________________________________________________
    Procedures in Relation to the Certification by the Inspection Team 
of the Receipt of Any Documents Provided by the Inspected Facility:
________________________________________________________________________
________________________________________________________________________
    Part C. Storage of Confidential Documents at the Inspected Facility:
    1. Procedures in relation to the storage of confidential documents 
or use of a dual control container on-site, if applicable: Information 
under restrictions provided for in the Confidentiality Annex and as such 
to be kept in the dual control container under joint seal shall be 
available to the inspection team leader and/or an inspector designated 
by him from the beginning of the pre-inspection briefing until the end 
of the debriefing upon completion of the inspection. If copies of 
information under dual control are permitted to be attached to the 
preliminary factual findings by the inspected State Party, they shall be 
made by the inspected State Party and retained under dual control until 
the debriefing. Should the medium on which such information is recorded 
become unusable, it shall be replaced without delay by the 
representative of the inspected State Party.
________________________________________________________________________
________________________________________________________________________
    2. The dual control container will be placed
________________________________________________________________________
    3. Information meeting the strict requirements for restriction 
pursuant to the Confidentiality Annex, and to be maintained in the dual 
control container located at the inspected facility between inspections 
is listed below:

----------------------------------------------------------------------------------------------------------------
                                                                                                  Reasons for
           Reference                 Type of data       Recorded media          Volume           restrictions/
                                                                                                    remarks
----------------------------------------------------------------------------------------------------------------
                                 ...................  ..................  ..................  ..................
                                 ...................  ..................  ..................  ..................
                                 ...................  ..................  ..................  ..................
----------------------------------------------------------------------------------------------------------------

    Part D. Procedures for the Removal Off-Site of Any Written 
Information, Data, and Other Material Gathered by the Inspection Team:
________________________________________________________________________
________________________________________________________________________
    Part E. Procedures for Providing the Representatives of the 
inspected State Party with Copies of Written Information, Inspector's 
Notebooks, Data and Other Material Gathered by the Inspection Team:
________________________________________________________________________
________________________________________________________________________
    Part F. Other Arrangements, If Any:
    1. Unless specified otherwise, all facility information shall be 
returned to the inspected State Party at the completion of the 
inspection. No copies of facility information shall be made in any 
manner by the inspection team or the Organization.
    2. Facility information shall not be released to the public, other 
States Parties, or the media without the specific permission of the 
inspected State Party, after consultation with the facility.
    3. Facility information shall not be transmitted, copied or retained 
electronically without the specific permission of the inspected State 
Party after consultation with the facility. All transmissions of 
information off-site shall be done in the presence of the inspected 
State Party.
    4. Information not relevant to the purpose of the inspection will be 
purged from documents, photographs, etc. prior to release to the 
inspection team.

 Attachment 4--Arrangements for the Inspection Team's Contacts with the 
                           Media or the Public

________________________________________________________________________
________________________________________________________________________

                   Attachment 5--Inspection Equipment

    Part A: List of Equipment:

----------------------------------------------------------------------------------------------------------------
                                                            Agreed procedures for use
                                --------------------------------------------------------------------------------
                                      Nature of                                                 Alternative for
  Item of approved inspection      restrictions(s)       Indication of     Special handling   meeting inspection
           equipment               (location, time,   reason(s) (safety,      or storage      requirement(s), if
                                  periods, etc.), if   confidentiality,      requirements     so required by the
                                         any                 etc.)                              inspection team
----------------------------------------------------------------------------------------------------------------
                                 ...................  ..................  ..................
                                 ...................  ..................  ..................
----------------------------------------------------------------------------------------------------------------

    Part B. Equipment which the inspected State Party Has Volunteered to 
Provide:
      

[[Page 163]]



----------------------------------------------------------------------------------------------------------------
                                                                Support to be provided,    Conditions (timing,
          Item of equipment              Procedures for use           if required             costs, if any)
----------------------------------------------------------------------------------------------------------------
                                      ........................  .......................  .......................
----------------------------------------------------------------------------------------------------------------

    Part C. Procedures for the Decontamination of Equipment:

------------------------------------------------------------------------
            Item of equipment                    Procedures for use
------------------------------------------------------------------------
                                           .............................
                                           .............................
------------------------------------------------------------------------

    Part D. Agreed On-Site Monitoring Instruments:
________________________________________________________________________
________________________________________________________________________
    Part E. Means of Communication between Inspection Team Sub-Teams:
________________________________________________________________________
________________________________________________________________________

   Request for and Certification of Equipment Available on Site To Be 
          Provided in Accordance With Paragraph 3 of Section 5

Date:___________________________________________________________________
Facility:_______________________________________________________________
Inspection number:______________________________________________________
Name of the authorized member of the inspection team:
________________________________________________________________________
Type and number of item(s) of equipment requested:
________________________________________________________________________
________________________________________________________________________
Approval of the request by inspected State Party:
________________________________________________________________________
Comments on the request by the inspected State Party:
________________________________________________________________________
________________________________________________________________________
Indication of the costs, if any, for the use of the equipment requested/
volunteered:
________________________________________________________________________
________________________________________________________________________
Certification of the authorized member of the inspection team that the 
requested item(s) of equipment have been provided:
________________________________________________________________________
Comments, if any, by the authorized member of the inspection team in 
regard to the equipment provided:
________________________________________________________________________
________________________________________________________________________
Name and signature of the authorized member of the inspection team:
________________________________________________________________________
Name and signature of the representative of the inspected State Party:
________________________________________________________________________

 Attachment 6--Information on the Facility Provided in Accordance With 
                                Section 6

    Part A. Topics of Information for the Pre-Inspection Briefing:
________________________________________________________________________
________________________________________________________________________
    1. Specification of the elements constituting the declared facility, 
including their physical location(s) (i.e., detail the areas, equipment, 
and computers), with indications as to which information may be 
transferred off-site:
________________________________________________________________________
________________________________________________________________________
    2. Procedures for unimpeded access within the declared facility: 
8
---------------------------------------------------------------------------

    \8\ List the areas, equipment, and computers, if any, that are not 
relevant to the inspection mandate or that contain confidential business 
information that does not need to be divulged in order to comply with 
the inspection mandate.
---------------------------------------------------------------------------

________________________________________________________________________
________________________________________________________________________
    3. Other:
________________________________________________________________________
________________________________________________________________________
    Part B. Any Information about the Facility that the inspected State 
Party Volunteers to Provide to the Inspection Team during the Pre-
Inspection Briefing with Indications as to which May Be Transferred Off-
Site:
________________________________________________________________________
________________________________________________________________________

                Attachment 7--Arrangements for Site Tour

    The inspected State Party may provide a site tour at the request of 
the inspection team. The inspected State Party may provide explanations 
to the inspection team during the site tour.
________________________________________________________________________
________________________________________________________________________

Attachment 8--Records Routinely Made Available to the Inspection Team at 
             the Facility (i.e., Identify Records and Data)

________________________________________________________________________
________________________________________________________________________

[[Page 164]]

      Attachment 9--Sampling and Analysis for Verification Purposes

    Part A. Agreed Sampling Points Chosen with Due Consideration to 
Existing Sampling Points Used by the Facility(s) Operator(s):
________________________________________________________________________
    Part B. Procedures for Taking Samples:
________________________________________________________________________
    Part C. Procedures for Sample Handling and Sample Splitting:
________________________________________________________________________
    Part D. Procedures for On-Site Sample Analysis, If Any:
________________________________________________________________________
________________________________________________________________________
    Part E. Procedures for Off-Site Analysis, If Any:
________________________________________________________________________
    Part F. Procedures for Transporting Samples:
________________________________________________________________________
    Part G. Arrangements in Regard to the Payment of Costs Associated 
with the Disposal or Removal by the inspected State Party of Hazardous 
Waste Generated during Sampling and On-Site Analysis during the 
Inspection:
________________________________________________________________________

               Attachment 10--Administrative Arrangements

    Part A. The Amenities Detailed Below Shall Be Provided to the 
Inspection Team by the inspected State Party, Subject to Payment as 
Indicated in Part B Below:
    1. International and local official communication (telephone, fax), 
including calls/faxes between site and headquarters:
________________________________________________________________________
 2. Vehicles:___________________________________________________________
    3. Working room, including adequate space for the storage of 
equipment:
________________________________________________________________________
 4. Lodging:____________________________________________________________
 5. Meals:______________________________________________________________
 6. Medical care:_______________________________________________________
    7. Interpretation Services:
 (a) number of interpreters:____________________________________________
 (b) estimated interpretation time:_____________________________________
 (c) languages:_________________________________________________________
    8. Other:
________________________________________________________________________
________________________________________________________________________
    Part B. Distribution of Costs for Provision of Amenities by the 
inspected State Party (check one option for each amenity provided as 
appropriate):

----------------------------------------------------------------------------------------------------------------
                                               To be paid by the      To be paid by the
                    To be paid directly by    inspection team on    inspected State Party
 Paragraphs 1-8 in  the Organization after       behalf of the         and subsequently      To be paid by the
   Part A above         the inspection        Organization during     reimbursed by the    inspected State Party
                                             the in-country period       Organization
----------------------------------------------------------------------------------------------------------------
                1   ......................  ......................  .....................  .....................
                2   ......................  ......................  .....................  .....................
                3   ......................  ......................  .....................  .....................
                4   ......................  ......................  .....................  .....................
                5   ......................  ......................  .....................  .....................
                6   ......................  ......................  .....................  .....................
                7   ......................  ......................  .....................  .....................
                8   ......................  ......................  .....................  .....................
----------------------------------------------------------------------------------------------------------------

    Part C. Other Arrangements. 1. Number of sub-teams (consisting of no 
less than two inspectors per sub-team) to be accommodated: ------

  Request for and Certification of Amenities To Be Provided or Arranged

Date:___________________________________________________________________
Facility:_______________________________________________________________
Inspection number:______________________________________________________
Category of amenities requested:________________________________________
________________________________________________________________________
Description of amenities requested:_____________________________________
________________________________________________________________________
Approval of the request by the inspected State Party:
________________________________________________________________________
Comments on the request by the inspected State Party:
________________________________________________________________________
________________________________________________________________________
Indication of the costs for the amenities requested:
________________________________________________________________________
________________________________________________________________________
Certification of the authorized member of the inspection team that the 
requested amenities have been provided:
________________________________________________________________________
Comments by the authorized member of the inspection team in regard to 
the quality of the amenities provided:
________________________________________________________________________
________________________________________________________________________
Name and signature of the authorized member of the inspection team:
________________________________________________________________________
Name and signature of the representative of the inspected State Party:
________________________________________________________________________

[[Page 165]]

       Attachment 11--Agreed Procedures for Conducting Interviews

________________________________________________________________________
________________________________________________________________________

            Attachment 12--Agreed Procedures for Photography

________________________________________________________________________
________________________________________________________________________

                                 Annexes

    Note: These annexes, inter alia, can be attached if requested by the 
inspected State Party.

Annex 1: Organization's Media and Public Relations Policy
Annex 2: Organization's Health and Safety Policy and Regulations
Annex 3: Organization's Policy on Confidentiality
Annex 4: Facility Declaration
Annex 5: Preliminary and Final Inspection Report Formats
Annex 6: Inspected State Party's Procedures for Inspection Notification
Annex 7: Inspected State Party's Procedures for Information Control

    Supplement No. 3 to Part 716--Schedule 2 Model Facility Agreement

Draft Facility Agreement between the Organization for the Prohibition of 
  Chemical Weapons and the Government of the United States of America 
   Regarding On-Site Inspections at the ------ Schedule 2 Plant Site 
                         Located at ------------

    The Organization for the Prohibition of Chemical Weapons, 
hereinafter referred to as ``Organization,'' and the Government of the 
United States of America, hereinafter referred to as ``inspected State 
Party,'' both constituting the Parties to this Agreement, have agreed on 
the following arrangements in relation to the conduct of inspections 
pursuant to paragraph 4 of Article VI of the Convention on the 
Prohibition of the Development, Production, Stockpiling and Use of 
Chemical Weapons and on their Destruction, hereinafter referred to as 
``the Convention,'' at (insert name of the plant site, its precise 
location, including the address), declared under paragraphs 7 and 8 of 
Article VI, hereinafter referred to as ``plant site'':

                      Section 1. General Provisions

    1. The purpose of this Agreement is to facilitate the implementation 
of the provisions of the Convention in relation to inspections conducted 
at the plant site pursuant to paragraph 4 of Article VI of the 
Convention, and in accordance with the obligations of the inspected 
State Party and the Organization under the Convention.
    2. Nothing in this Agreement shall be applied or interpreted in a 
way that is contradictory to the provisions of the Convention, including 
paragraph 1 of Article VII.1 In case of inconsistency between 
this Agreement and the Convention, the Convention shall prevail.
---------------------------------------------------------------------------

    \1\ Each State Party shall, in accordance with its constitutional 
processes, adopt the necessary measures to implement its obligations 
under this Convention.
---------------------------------------------------------------------------

    3. The Parties have agreed to apply for planning purposes the 
general factors contained in Attachment 1.
    4. The frequency and intensity of inspections at the plant site are 
given in Part B of Attachment 1 and reflect the risk assessment of the 
Organization conducted pursuant to paragraphs 18, 20 and 24 of Part VII 
of the Verification Annex.
    5. The inspection team shall consist of no more than ---- persons.
    6. The language for communication between the inspection team and 
the inspected State Party during inspections shall be English.
    7. The period of inspection shall not last more than ninety-six (96) 
hours, unless an extension has been agreed to by the inspected State 
Party and the inspection team.
    8. In case of any development due to circumstances brought about by 
unforeseen events or acts of nature, which could affect inspection 
activities at the plant site, the inspected State Party shall notify the 
Organization and the inspection team as soon as practically possible.
    9. In case of need for the urgent departure, emergency evacuation or 
urgent travel of inspector(s) from the territory of the inspected State 
Party, the inspection team leader shall inform the inspected State Party 
of such a need. The inspected State Party shall arrange without undue 
delay such departure, evacuation or travel. In all cases, the inspected 
State Party shall determine the means of transportation and routes to be 
taken. The costs of such departure, evacuation or travel of inspectors 
shall be borne by the Organization.
    10. Inspectors shall wear identification badges at all times when on 
the premises of the plant site.

                      Section 2. Health and Safety

    1. Health and safety matters during inspections are governed by the 
Convention, the Organization's Health and Safety Policy and Regulations, 
and applicable national, local and plant site safety and environmental 
regulations. The specific arrangements for implementing the relevant 
provisions of the Convention and the Organization's Health and Safety 
Policy in relation to inspections

[[Page 166]]

at the plant site are contained in Attachment 2.
    2. Pursuant to paragraph 1 of this section, all applicable health 
and safety regulations relevant to the conduct of the inspection at the 
plant site are listed in Attachment 2 and shall be made available for 
use by the inspection team at the plant site.
    3. In case of the need to modify any health-and safety-related 
arrangements at the plant site contained in Attachment 2 to this 
Agreement bearing on the conduct of inspections, the inspected State 
Party shall notify the Organization. Any such modification shall apply 
provisionally until the inspected State Party and the Organization have 
reached agreement on this issue. In case no agreement has been reached 
by the time of the completion of the inspection, the relevant 
information may be included in the preliminary factual findings. Any 
agreed modification shall be recorded in Attachment 2 to this Agreement 
in accordance with paragraph 2 of Section 12 of this Agreement.
    4. In the course of the pre-inspection briefing the inspection team 
shall be briefed by the representatives of the plant site on all health 
and safety matters which, in the view of those representatives, are 
relevant to the conduct of the inspection at the plant site, including:
    (a) the health and safety measures at the Schedule 2 plant(s) to be 
inspected and the likely risks that may be encountered during the 
inspection;
    (b) any additional health and safety or regulations that need to be 
observed at the plant site;
    (c) procedures to be followed in case of an accident or in case of 
other emergencies, including a briefing on emergency signals, routes and 
exits, and the location of emergency meeting points and medical 
facilities; and
    (d) specific inspection activities which must be limited within 
particular areas at the plant site, and in particular within those 
Schedule 2 plant(s) to be inspected under the inspection mandate, for 
reasons of health and safety.
    Upon request, the inspection team shall certify receipt of any such 
information if it is provided in written form.
    5. During the course of an inspection, the inspection team shall 
refrain from any action which by its nature could endanger the safety of 
the team, the plant site, or its personnel or could cause harm to the 
environment. Should the inspected State Party refuse certain inspection 
activities, it may explain the circumstances and safety considerations 
involved, and shall provide alternative means for accomplishing the 
inspection activities.
    6. In the case of emergency situations or accidents involving 
inspection team members while at the plant site, the inspection team 
shall comply with the plant site's emergency procedures and the 
inspected State Party shall to the extent possible provide medical and 
other assistance in a timely and effective manner with due regard to the 
rules of medical ethics if medical assistance is requested. Information 
on medical services and facilities to be used for this purpose is 
contained in Part D of Attachment 2. If the Organization undertakes 
other measures for medical support in regard to inspection team members 
involved in emergency situations or accidents, the inspected State Party 
will render assistance to such measures to the extent possible. The 
Organization will be responsible for the consequences of such measures.
    7. The inspected State party shall, to the extent possible, assist 
the Organization in carrying out any inquiry into an accident or 
incident involving a member of the inspection team.
    8. If, for health and safety reasons given by the inspected State 
Party, health and safety equipment of the inspected State Party is 
required to be used by the inspection team, the cost so incurred shall 
be borne by the inspected State Party.
    9. The inspection team may use its own approved health and safety 
equipment. If the inspected State Party determines it to be necessary, 
the inspected State Party shall conduct a fit test on masks brought with 
the inspection team. If the inspected State Party so requests on the 
basis of confirmed contamination or hazardous waste requirements or 
regulations, any such piece of equipment involved in the inspection 
activities will be left at the plant site at the end of the inspection. 
The inspection team reserves the right to destroy equipment left at the 
plant site or witness its destruction by agreed procedures. The 
inspected State Party will reimburse the Organization for the loss of 
the inspection team's equipment.
    10. In accordance with the Organization's Health and Safety Policy, 
the inspected State Party may provide available data based on detection 
and monitoring, to the agreed extent necessary to satisfy concerns that 
may exist regarding the health and safety of the inspection team.

                       Section 3. Confidentiality

    1. Matters related to confidentiality are governed by the 
Convention, including its Confidentiality Annex and paragraph 1 of 
Article VII, and the Organization's Policy on Confidentiality. The 
specific arrangements for implementing the provisions of the Convention 
and the Organization's Policy on Confidentiality in relation to the 
protection of confidential information at the plant site are contained 
in Attachment 3.
    2. Upon request, the inspected State Party will procure a container 
to be placed under joint seal to maintain documents that the

[[Page 167]]

inspection team, inspected State Party, or the plant site representative 
decides to keep as reference for future inspections. The inspected State 
Party shall be reimbursed by the Organization for the purchase of such 
container.
    3. All documents, including photographs, provided to the inspection 
team will be controlled as follows:
    (a) Information to be taken off-site. Information relevant to the 
finalization of the preliminary factual findings that the inspected 
State Party permits the inspection team to take off-site will be marked 
and numbered by the inspected State Party. In accordance with the 
inspected State Party's Procedures for Information Control, markings on 
the information will clearly state that the inspection team may take it 
off-site and will contain a classification pursuant to the 
Organization's Policy on Confidentiality at a level requested by the 
inspected State Party. The representative of the plant site will 
acknowledge the release of such information in writing prior to 
disclosure to the inspection team.
    (b) Information restricted for use on-site. Information that the 
inspected State Party permits the inspection team to use on-site during 
inspections but not take off-site will be marked and numbered by the 
inspected State Party. In accordance with the inspected State Party's 
Procedures for Information Control, markings on the information will 
clearly restrict its use on-site and will contain a classification 
pursuant to the Organization's Policy on Confidentiality at a level 
requested by the inspected State Party. The representative of the plant 
site will acknowledge the release of such information in writing prior 
to disclosure to the inspection team. Upon conclusion of the inspection, 
the inspection team shall return the information to the inspected State 
Party, and the plant site representative shall acknowledge receipt in 
writing. If so requested by the inspection team, the information can be 
placed in the joint sealed container for future reference.
    (c) Information restricted for use on-site and requiring direct 
supervision. Information that the inspected State Party permits the 
inspection team to use on-site only under direct supervision of the 
inspected State Party or the representative of the inspected plant site 
will be marked and numbered by the inspected State Party. In accordance 
with the inspected State Party's Procedures for Information Control, 
markings on the information will clearly restrict its use on-site under 
direct supervision and will contain a classification pursuant to the 
Organization's Policy on Confidentiality at a level requested by the 
inspected State Party. The representative of the plant site will 
acknowledge the release of such information in writing prior to 
disclosure to the inspection team. The inspection team shall return the 
information to the inspected State Party immediately upon completion of 
review and the plant site representative shall acknowledge receipt in 
writing. If so requested by the inspection team, the information can be 
placed in the joint sealed container for future reference.

                  Section 4. Media and Public Relations

    1. Inspection team media and public relations are governed by the 
Organization's Media and Public Relations Policy. The specific 
arrangements for the inspection team's contacts with the media or the 
public, if any, in relation to inspections of the plant site are 
contained in Attachment 4.

                     Section 5. Inspection Equipment

    1. As agreed between the inspected State Party and the Organization, 
the approved equipment listed in Part A of Attachment 5 and with which 
the inspected State Party has been given the opportunity to familiarize 
itself will, at the discretion of the Organization and on a routine 
basis, be used specifically for the Schedule 2 inspection. The equipment 
will be used in accordance with the Convention, the relevant decisions 
taken by the Conference of States Parties, and any agreed procedures 
contained in Attachment 5.
    2. The provisions of paragraph 1 above are without prejudice to 
paragraphs 27 to 29 of Part II of the Verification Annex.
    3. The items of equipment available on-site and not belonging to the 
Organization which the inspected State Party has volunteered to provide 
to the inspection team upon its request for use on-site during the 
conduct of inspections, together with any procedures for the use of such 
equipment, if required, any requested support which can be provided, and 
conditions for the provision of equipment are listed in Part B of 
Attachment 5. Prior to any use of such equipment, the inspection team 
may confirm that the performance characteristics of such equipment are 
consistent with those for similar Organization-approved equipment, or--
with respect to items of equipment which are not on the list of 
Organization-approved equipment--are consistent with the intended 
purpose for using such equipment.\2\
---------------------------------------------------------------------------

    \2\ I.e., the inspection team may confirm that the performance 
characteristics of such equipment meet the technical requirements 
necessary to support the inspection task intended to be accomplished.
---------------------------------------------------------------------------

    4. Requests from the inspection team for the inspected State Party 
during the inspection to provide equipment mentioned in paragraph 3 
above shall be made in writing by an authorized member of the inspection 
team using the form contained in Attachment 5. The same procedure will 
also apply to other requests of the inspection team in

[[Page 168]]

accordance with paragraph 30 of Part II of the Verification Annex.
    5. Agreed procedures for the decontamination of any equipment are 
contained in Part C of Attachment 5.

                  Section 6. Pre-Inspection Activities

    1. The inspection team shall be given a pre-inspection briefing by 
the representatives of the plant site in accordance with paragraph 37 of 
Part II of the Verification Annex. The pre-inspection briefing shall 
include:
    (a) information on the plant site as described in Attachment 6;
    (b) health and safety specifications described in Section 2 above 
and detailed in Attachment 2;
    (c) any changes to the above-mentioned information since the last 
inspection; and
    (d) information on administrative and logistical arrangements 
additional to those contained in Attachment 11, if any, that shall apply 
during the inspection, as contained in Section 9.
    2. Any information about the plant site that the inspected State 
Party has volunteered to provide to the inspection team during the pre-
inspection briefing with indications as to which information may be 
transferred off-site is referenced in Part B of Attachment 6.

                  Section 7. Conduct of the Inspection

                        7.1 Standing Arrangements

    1. The inspection period shall begin immediately upon completion of 
the pre-inspection briefing unless agreed otherwise.
    2. Upon conclusion of the pre-inspection briefing, the inspection 
team leader shall provide to the designated representative of the 
inspected State Party a preliminary inspection plan to facilitate the 
conduct of the inspection.
    3. Arrangements for the conduct of a site tour, if any, are 
contained in Attachment 7 to this Agreement.
    4. Before commencement of inspection activities, the inspection team 
leader shall inform the representative of the inspected State Party 
about the initial steps to be taken in implementing the inspection plan. 
The plan will be adjusted by the inspection team as circumstances 
warrant throughout the inspection process in consultation with the 
inspected State Party as to its implementability in regard to paragraph 
40 of Part II of the Verification Annex.\3\
---------------------------------------------------------------------------

    \3\ The activities of the inspection team shall be so arranged as to 
ensure the timely and effective discharge of its functions and the least 
possible inconvenience to the inspected State Party and disturbance to 
the plant site inspected. The inspection team shall avoid unnecessarily 
hampering or delaying the operation of the plant site and avoid 
affecting its safety. In particular, the inspection team shall not 
operate the plant site. If the inspection team considers that, to fulfil 
the mandate, particular operations should be carried out at the plant 
site, it shall request the designated representative of the plant site 
to have them performed.
---------------------------------------------------------------------------

    5. The inspection team leader shall inform the representative of the 
inspected State Party during the inspection in a timely manner about 
each subsequent step to be taken by the inspection team in implementing 
the inspection plan. Without prejudice to paragraph 40 of Part II of the 
Verification Annex, this shall be done in time to allow the inspected 
State Party to arrange for the necessary measures to be taken to provide 
access and support to the inspection team as appropriate without causing 
unnecessary delay in the conduct of inspection activities.
    6. At the beginning of the inspection, the inspection team shall 
have the right to confirm the precise location of the plant site 
utilizing visual and map reconnaissance, a site diagram, or other 
suitable techniques.
    7. The inspection team shall, upon request of the inspected State 
Party, communicate with the personnel of the plant site only in the 
presence of or through a representative of the inspected State Party.
    8. The inspected State Party shall, upon request, provide a 
securable work space for the inspection team, including adequate space 
for the storage of equipment. The inspection team shall have the right 
to seal its work space. For ease of inspection, the inspected State 
Party will work with the plant site representative to provide work space 
at the plant site, if possible.

     7.2 Access to and Inspection of Areas, Buildings and Structures

    1. The focus of the inspection shall be the declared Schedule 2 
plant(s) within the declared plant site as referenced in Attachment 8. 
If the inspection team requests access to other parts of the plant site, 
access to these areas shall be granted in accordance with the obligation 
to provide clarification pursuant to paragraph 51 of Part II and 
paragraph 25 of Part VII of the Verification Annex, and in accordance 
with Attachment 8.
    2. Pursuant to paragraph 45 of Part II of the Verification Annex, 
the inspection team shall have unimpeded access to the declared Schedule 
2 plant(s) in accordance with the relevant Articles and Annexes of the 
Convention and Attachments 8, 9, and 10. Areas of the declared plant(s) 
likely to be inspected are mentioned in paragraph 28 of Part VII of the 
Verification Annex. Pursuant to Section C of Part X of the Verification 
Annex, the inspection team shall have managed access to

[[Page 169]]

the other areas of the plant site. Procedures for access to these areas 
are contained in Attachment 8.

        7.3 Access to and Inspection of Documentation and Records

    1. The agreed list of the documentation and records to be routinely 
made available for inspection purposes, mentioned in paragraph 26 of 
Part VII of the Verification Annex, to the inspection team by the 
inspected State Party during an inspection, as well as arrangements with 
regard to access to such records for the purpose of protecting 
confidential information, are contained in Attachment 9. Such 
documentation and records will be provided upon request.
    2. Only those records placed in the custody of the inspection team 
that are attached to the preliminary factual findings in accordance with 
Section 3 may leave the premises. Those records placed in the custody of 
the inspection team that are not attached to the preliminary factual 
findings must be retained in the on-site container or returned to the 
inspected State Party.

                        7.4 Sampling and Analysis

    1. Without prejudice to paragraphs 52 to 58 of Part II of the 
Verification Annex, procedures for sampling and analysis for 
verification purposes as mentioned in paragraph 27 of Part VII of the 
Verification Annex are contained in Attachment 10 of this Agreement.
    2. Sampling and analysis, for inspection purposes, may be carried 
out to check whether undeclared scheduled chemicals are detected. Each 
such sample will be split into a minimum of four parts at the request of 
the inspection team in accordance with Part C of Attachment 10. One part 
shall be analyzed in a timely manner on-site. The second part of the 
split sample may be controlled by the inspection team for future 
reference and, if necessary, analysis off-site at laboratories 
designated by the Organization. That part of the sample may be destroyed 
at any time in the future upon the decision of the inspection team but 
in any case no later than 60 days after it was taken. The third part may 
be retained by the inspected State Party. The fourth part may be 
retained by the plant site.
    3. Pursuant to paragraph 52 of the Part II of the Verification 
Annex, representatives of the inspected State Party or plant site shall 
take samples at the request of the inspection team in the presence of 
inspectors. The inspected State Party will inform the inspection team of 
the authorized plant site representative's \4\ determination of whether 
the sample shall be taken by representatives of the plant site or the 
inspection team or other individuals present. If inspectors are granted 
the right to take samples themselves in accordance with paragraph 52 of 
Part II of the Verification Annex, the relevant advance agreement 
between the inspection team and the inspected State Party shall be in 
writing. The representatives of the inspected State Party and the 
inspected plant site shall have the right to be present during sampling. 
Agreed conditions and procedures for such sample collection are 
contained in Part B of Attachment 10 to this Agreement.
---------------------------------------------------------------------------

    \4\ The authorized plant site representative is the owner or the 
operator, occupant or agent in charge of the premises being inspected.
---------------------------------------------------------------------------

    4. Plant site sampling equipment shall as a rule be used for taking 
samples required for the purposes of the inspection. This is without 
prejudice to the right of the inspection team pursuant to paragraph 27 
of Part II of the Verification Annex to use its own approved sampling 
equipment in accordance with paragraph 1 of Section 5 and Parts A and B 
of Attachment 5 to this Agreement.
    5. Should the inspection team request that a sample be taken and the 
inspected State Party be unable to accede or agree to the request, the 
inspected State Party will make every reasonable effort to satisfy the 
inspection team's concerns by other means to enable the inspection team 
to fulfil its mandate. The inspected State Party will provide a written 
explanation for its inability to accede or agree to the request. Any 
such response shall be supported by relevant document(s). The 
explanation of the inspected State Party shall be included in the 
preliminary factual findings.
    6. In accordance with paragraph 53 of Part II of the Verification 
Annex, where possible, the analysis of samples shall be performed on-
site and the inspection team shall have the right to perform on-site 
analysis of samples using approved equipment brought by it for the 
splitting, preparation, handling, analysis, integrity and transport of 
samples. The assistance that will be provided by the inspected State 
Party and the analysis procedures to be followed are contained in Part D 
of Attachment 10 to this Agreement.
    7. The inspection team may request the inspected State Party to 
perform the analysis in the inspection team's presence. The inspection 
team shall have the right to be present during any sampling and analysis 
conducted by the inspected State Party.
    8. The results of such analysis shall be reported in writing as soon 
as possible after the sample is taken.
    9. The inspection team shall have the right to request repeat 
analysis or clarification in connection with ambiguities.

[[Page 170]]

    10. If at any time, and for any reason, on-site analysis is not 
possible, the inspection team has the right to have sample(s) analyzed 
off-site at Organization-designated laboratories. In selecting such 
designated laboratories for the off-site analysis, the Organization will 
give due regard to requirements of the inspected State Party.
    11. Transportation of samples will be in accordance with the 
procedures outlined in Part E of Attachment 10.
    12. If at any time, the inspected State Party or plant site 
representative determines that inspection team on-site analysis 
activities are not in accordance with the facility agreement or agreed 
analysis procedures, or otherwise pose a threat to safety or 
environmental regulations or laws, the inspected State Party, in 
consultation with the plant site representative, will cease these on-
site analysis activities pending resolution. If both parties cannot 
agree to proceed with the analysis, the inspection team will document 
this in its preliminary factual findings.
    13. Conditions and procedures for the disposal of hazardous 
materials generated during sampling and on-site analysis during the 
inspection are contained in Part F of Attachment 10 to this Agreement.

                     7.5 Arrangements for Interviews

    1. The inspection team shall have the right, subject to applicable 
United States legal protections for individuals, to interview any plant 
site personnel in the presence of representatives of the inspected State 
Party with the purpose of establishing relevant facts in accordance with 
paragraph 46 of Part II of the Verification Annex and inspected State 
Party's policy and procedures. Agreed procedures for conducting 
interviews are contained in Attachment 12.
    2. The inspection team will submit to the inspected State Party 
names and/or positions of those desired for interviews. The requested 
individual(s) will be made available to the inspection team no later 
than 24 hours after submission of the formal request, unless agreed 
otherwise. The inspection team may also be requested to submit questions 
in writing prior to conducting interviews. The specific timing and 
location of interviews will be determined with the plant site in 
coordination with the inspected State Party and consistent with adequate 
notification of the interviewees, and minimizing the operation impacts 
on the plant site and individuals to be interviewed.
    3. The inspected State Party may recommend to the inspection team 
that interviews be conducted in either ``panel'' or individual formats. 
At a minimum, interviews will be conducted with a member of the plant 
site staff and an inspected State Party representative. Legal counsel 
may also be required to be present by the inspected State Party. The 
interview may be interrupted for consultation between the interviewee, 
the plant site representative, the inspected State Party representative, 
and legal counsel.
    4. The inspected State Party will have the right to restrict the 
content of interviews to information directly related to the mandate or 
purpose of the inspection.
    5. Outside the interview process and in discharging their functions, 
inspectors shall communicate with personnel of the plant site only 
through the representative(s) of the inspected State Party.

                           7.6 Communications

    1. In accordance with paragraph 44 of Part II of the Verification 
Annex, the inspection team shall have the right to communicate with the 
headquarters of the Technical Secretariat. For this purpose they may use 
their own, duly certified approved equipment, in accordance with 
paragraph 1 of Section 5. The representative of the inspected plant site 
retains the right to control the use of communications equipment in 
specific areas, building or structures if such use would be incompatible 
with applicable safety or fire regulations.
    2. In case the inspection team and the inspected State Party agree 
to use any of the inspected State Party's communications equipment, the 
list of such equipment and the provisions for its use are contained in 
Part B of Attachment 5 to this Agreement.
    3. The agreed means of communication between inspection team sub-
teams in accordance with paragraph 44 of Part II of the Verification 
Annex are contained in Part D of Attachment 5.

                             7.7 Photographs

    1. In accordance with the provisions of paragraph 48 of Part II of 
the Verification Annex, the Confidentiality Annex and inspected State 
Party's policy and procedures, the inspection team shall have the right 
to have photographs taken at their request by the representatives of the 
inspected State Party or the inspected plant site. One camera of the 
instant development type furnished by the inspection team or the 
inspected State Party shall be used for taking identical photographs in 
sequence. Cameras furnished by the inspection team will remain either in 
their work space or equipment storage area except when carried by 
inspection team members for a specific inspection activity. Cameras will 
only be used for specified inspection purposes. Personal cameras are not 
allowed to be taken to the plant site.
    2. Pursuant to the Confidentiality Annex, the inspected State Party, 
in consultation with the plant site representative, shall have the right 
to determine that contents of the photographs conform to the stated 
purpose of the photographs. The inspection team

[[Page 171]]

shall determine whether photographs conform to those requested and, if 
not, repeat photographs shall be taken. Photographs that do not meet the 
satisfaction of both sides will be destroyed by the inspected State 
Party in the presence of the inspection team. The inspection team, the 
inspected State Party and the plant site, if so requested, shall each 
retain one copy of every photograph. The copies shall be signed, dated, 
and classified, in accordance with Section 3, and note the location and 
subject of the photograph and carry the same identification number. 
Agreed procedures for photography are contained in Attachment 13.
    3. The representative of the inspected plant site has the right to 
object to the use of photographic equipment in specific areas, buildings 
or structures if such use would be incompatible with safety or fire 
regulations given the characteristics of the chemicals stored in the 
area in question. Restrictions for use are contained in Parts A and/or B 
of Attachment 5 to this Agreement. If the objection is raised due to 
safety concerns, the inspected State Party will, if possible, furnish 
photographic equipment that meets the regulations. If the use of 
photographic equipment is not permissible at all in specific areas, 
buildings or structures for the reasons stated above, the inspected 
State Party shall provide a written explanation of its objection to the 
inspection team leader. The explanation, along with the inspection team 
leader's comments will be included in the inspection team's preliminary 
factual findings.

             Section 8. Debriefing and Preliminary Findings

    1. In accordance with paragraph 60 of Part II of the Verification 
Annex, upon completion of an inspection the inspection team shall meet 
with representatives of the inspected State Party and the personnel 
responsible for the inspection site to review the preliminary findings 
of the inspection team and to clarify any ambiguities. The inspection 
team shall provide to the representatives of the inspected State Party 
its preliminary findings in written form according to a standardized 
format, together with a list of any samples and copies of written 
information and data gathered and other material to be taken off-site. 
The document shall be signed by the head of the inspection team. In 
order to indicate that he has taken notice of the content of this 
document, the representative of the inspected State Party shall 
countersign the document. The meeting shall be completed not later than 
24 hours after the completion of the inspection.
    2. The document on preliminary findings shall also include, inter 
alia, the list of results of analysis, if conducted on-site, records of 
seals, and copies of photographs to be retained by the inspection team. 
It will be prepared in accordance with the preliminary findings format 
referenced in Annex 5. Any substantive changes to this format will be 
made only after consultation with the inspected State Party.
    3. Before the conclusion of the debriefing, the inspected State 
Party may provide comments and clarifications to the inspection team on 
any issue related to the conduct of the inspection. The inspection team 
shall provide to the representative of the inspected State Party its 
preliminary findings in written form sufficiently prior to the 
conclusion of the debriefing to permit the inspected State Party to 
prepare any comments and clarifications. The inspected State Party's 
written comments and clarifications shall be attached to the document on 
preliminary findings.
    4. The inspection team shall depart from the site upon the 
conclusion of the meeting on preliminary findings.

                 Section 9. Administrative Arrangements

    1. The inspected State Party shall provide or arrange for the 
provision of the amenities listed in detail in Attachment 11 to the 
inspection team in a timely manner throughout the duration of the 
inspection. The inspected State Party shall be reimbursed by the 
Organization for such costs incurred by the inspection team, unless 
agreed otherwise.
    2. Requests from the inspection team for the inspected State Party 
to provide or arrange amenities shall be made in writing by an 
authorized member of the inspection team \5\ using the form contained in 
Attachment 11. Requests shall be made as soon as the need for amenities 
has been identified. The provision of such requested amenities shall be 
certified in writing by the authorized member of the inspection team. 
Copies of all such certified requests shall be kept by both parties.
---------------------------------------------------------------------------

    \5\ The name of the authorized member(s) of the inspection team 
should be communicated to the inspected State Party no later than at the 
Point of Entry.
---------------------------------------------------------------------------

    3. The inspection team has the right to refuse extra amenities that 
in its view are not needed for the conduct of the inspection.

                         Section 10. Liabilities

    1. Any claim by the inspected State Party against the Organization 
or by the Organization against the inspected State Party in respect of 
any alleged damage or injury resulting from inspections at the plant 
site in accordance with this Agreement, without prejudice to paragraph 
22 of the Confidentiality Annex, shall be settled in accordance with 
international law and, as appropriate, with the provisions of Article 
XIV of the Convention.

[[Page 172]]

                    Section 11. Status of Attachments

    1. The Attachments form an integral part of this Agreement. Any 
reference to the Agreement includes the Attachments. However, in case of 
any inconsistency between this Agreement and any Attachment, the 
sections of the Agreement shall prevail.

            Section 12. Amendments, Modifications and Updates

    1. Amendments to the sections of this Agreement may be proposed by 
either Party and shall be agreed to and enter into force under the same 
conditions as provided for under paragraph 1 of Section 14.
    2. Modifications to the Attachments of this Agreement, other than 
Attachment 1 and Part B of Attachment 5, may be agreed upon at any time 
between the representative of the Organization and the representative of 
the inspected State Party, each being specifically authorized to do so. 
The Director-General shall inform the Executive Council about any such 
modifications. Each Party to this Agreement may revoke its consent to a 
modification not later than four weeks after it had been agreed upon. 
After this time period the modification shall take effect.
    3. The inspected State Party will update Part A of Attachment 1 and 
Part B of Attachment 5, and Attachment 6 as necessary for the effective 
conduct of inspections. The Organization will update Part B of 
Attachment 1 and Annex 5, subject to paragraph 2 of Section 8, as 
necessary for the effective conduct of inspections.

                   Section 13. Settlement of Disputes

    1. Any dispute between the Parties that may arise out of the 
application or interpretation of this Agreement shall be settled in 
accordance with Article XIV of the Convention.

                      Section 14. Entry into Force

    1. This Agreement shall enter into force after approval by the 
Executive Council and signature by the two Parties. If the inspected 
State Party has additional internal requirements, it shall so notify the 
Organization in writing by the date of signature. In such cases, this 
Agreement shall enter into force on the date that the inspected State 
Party gives the Organization written notification that its internal 
requirements for entry into force have been met.

                  Section 15. Duration and Termination.

    1. This Agreement shall cease to be in force when the provisions of 
paragraph 12 of Part VII of the Verification Annex no longer apply to 
this plant site, except if the continuation of the Agreement is agreed 
by mutual consent of the Parties.

    Done at ------ in ------ copies, in English, each being equally 
authentic.\6\
---------------------------------------------------------------------------

    \6\ The language(s) to be chosen by the inspected State Party from 
the languages of the Convention shall be the same as the language(s) 
referred to in paragraph 6 of Section 1 of this Agreement.
---------------------------------------------------------------------------

                               Attachments

    The following attachments shall be completed where applicable.

Attachment 1: General Factors for the Conduct of Inspections
Attachment 2: Health and Safety Requirements and Procedures
Attachment 3: Specific Arrangements in Relation to the Protection of 
Confidential Information at the Plant Site
Attachment 4: Arrangements for the Inspection Team's Contacts with the 
Media or the Public
Attachment 5: Inspection Equipment
Attachment 6: Information on the Plant Site Provided in Accordance with 
Section 6
Attachment 7: Arrangements for Site Tour
Attachment 8: Access to the Plant Site in Accordance with Section 7.2.
Attachment 9: Records Routinely Made Available to the Inspection Team at 
the Plant Site
Attachment 10: Sampling and Analysis for Verification Purposes
Attachment 11: Administrative Arrangements
Attachment 12: Agreed Procedures for Conducting Interviews
Attachment 13: Agreed Procedures for Photography

      Attachment 1--General Factors for the Conduct of Inspections

    Part A. To Be Provided and Updated by the inspected State Party:
    1. Plant site: --------
    (a) working hours: 7 -------- hrs to -------- hrs (local 
time) (days)
---------------------------------------------------------------------------

    \7\ All references to time use a 24 hour clock.
---------------------------------------------------------------------------

(b) working days:_______________________________________________________
(c) holidays or other non-working days:_________________________________
________________________________________________________________________
    2. Schedule 2 plant(s):
    (a) working hours, if applicable: -------- hrs to -------- hrs 
(days)
(b) working days:_______________________________________________________
(c) holidays or other non-working days:_________________________________
________________________________________________________________________
    3. Inspection activities which could/could not 8 be 
supported during non-working hours with notation of times and 
activities:
---------------------------------------------------------------------------

    \8\ Choose one option.
---------------------------------------------------------------------------

________________________________________________________________________
    4. Any other factors that could adversely affect the effective 
conduct of inspections:
    (a) inspection requests:

[[Page 173]]

    Should the plant site withhold consent to an inspection, the 
inspected State Party shall take all appropriate action under its law to 
obtain a search warrant from a United States magistrate judge. Upon 
receipt of a warrant, the inspected State Party will accede to the 
Organization's request to conduct an inspection. Such inspection will be 
carried out in accordance with the terms and conditions of the warrant.
    (b) other:
________________________________________________________________________
________________________________________________________________________
    5. Other: Notification procedures are contained in Annex 6.
    Part B. To Be Provided and Updated by the Organization:
1. Inspection frequency:________________________________________________
    2. Inspection intensity:
(a) maximum estimated period of inspection (for planning purposes): 
9____________________________________________________________
---------------------------------------------------------------------------

    \9\ Any figure indicated is without prejudice to paragraph 29 of 
Part VII of the Verification Annex.
---------------------------------------------------------------------------

(b) approximate inspection team size:___________________________________
(c) estimated volume and weight of equipment to be brought on-site:_____

       Attachment 2--Health and Safety Requirements and Procedures

    Part A. Basic Principles:
    1. Applicable health and safety regulations of the Organization, 
with agreed variations from strict implementation, if any:
________________________________________________________________________
    2. Health and safety regulations applicable at the plant site:
    (a) federal regulations:
________________________________________________________________________
    (b) state regulations:
________________________________________________________________________
    (c) local regulations:
________________________________________________________________________
    (d) plant site regulations:
________________________________________________________________________
    3. Health and safety requirements and regulations agreed between the 
inspected State Party and the Organization:
________________________________________________________________________
    Part B. Detection and Monitoring:
    1. Applicable specific safety standards for workplace chemical 
exposure limits and/or concentrations which should be observed during 
the inspection, if any:
________________________________________________________________________
    2. Procedures, if any, for detection and monitoring in accordance 
with the Organization's Health and Safety Policy, including data to be 
collected by, or provided to, the inspection team:
________________________________________________________________________
    Part C. Protection:
    1. Protective equipment to be provided by the Organization and 
agreed procedures for equipment certification and use, if required:
________________________________________________________________________
    2. Protective equipment to be provided by the inspected State Party, 
and agreed procedures, personnel training, and personnel qualification 
tests and certification required; and agreed procedures for use of the 
equipment:
________________________________________________________________________
    Part D. Medical Requirements:
    1. Applicable medical standards of the inspected State Party and, in 
particular, the inspected plant site:
________________________________________________________________________
    2. Medical screening procedures for members of the inspection team:
________________________________________________________________________
    3. Agreed medical assistance to be provided by the inspected State 
Party:
________________________________________________________________________
    4. Emergency medical evacuation procedures:
________________________________________________________________________
    5. Agreed additional medical measures to be taken by the inspection 
team:
________________________________________________________________________
    6. Procedures for emergency response to chemical casualties of the 
inspection team:
________________________________________________________________________
    Part E. Modification of Inspection Activities:
    1. Modification of inspection activities due to health and safety 
reasons, and agreed alternatives to accomplish the inspection goals:
________________________________________________________________________

  Attachment 3--Specific Arrangements in Relation to the Protection of 
               Confidential Information at the Plant Site

    Part A. Inspected State Party's Procedures for Designating and 
Classifying Documents Provided to the Inspection Team:
    See Annex 3 for the Organization's Policy on Confidentiality and 
Annex 7 for the inspected State Party's Procedures for Information 
Control.
    Part B. Specific Procedures for Access by the Inspection Team to 
Confidential Areas or Materials:
________________________________________________________________________
    Part C. Procedures in Relation to the Certification by the 
Inspection Team of the Receipt of Any Documents Provided by the 
Inspected Plant Site:
________________________________________________________________________
________________________________________________________________________
    Part D. Storage of Confidential Documents at the Inspected Plant 
Site:
    1. Procedures in relation to the storage of confidential documents 
or use of a dual control container on-site, if applicable:
    Information under restrictions provided for in the Confidentiality 
Annex and as such to be kept in the dual control container under joint 
seal shall be available to the inspection team leader and/or an 
inspector designated

[[Page 174]]

by him from the beginning of the pre-inspection briefing until the end 
of the debriefing upon completion of the inspection in accordance with 
Section 3. If copies of information under dual control are permitted to 
be attached to the preliminary factual findings by the inspected State 
Party, they shall be made by the inspected State Party and retained 
under dual control until the debriefing. Should the medium on which such 
information is recorded become unusable, it shall be replaced without 
delay by the representative of the inspected State Party.
 2. The dual control container will be placed___________________________
________________________________________________________________________
    3. Information meeting the strict requirements for restriction 
pursuant to the Confidentiality Annex, and to be maintained in the dual 
control container located at the inspected plant site between 
inspections is listed below:

----------------------------------------------------------------------------------------------------------------
                                                                                                  Reasons for
            Reference                Type of data       Recorded media          Volume           restrictions/
                                                                                                    remarks
----------------------------------------------------------------------------------------------------------------
 
 
 
----------------------------------------------------------------------------------------------------------------

    Part E. Procedures for the Removal Off-Site of Any Written 
Information, Data, and Other Materials Gathered by the Inspection Team:
________________________________________________________________________
    Part F. Procedures for Providing the Representatives of the 
inspected State Party with Copies of Written Information, Inspector's 
Notebooks, Data and Other Material Gathered by the Inspection Team:
________________________________________________________________________
    Part G. Other Arrangements, If Any:
    1. Unless specified otherwise, all plant site information shall be 
returned to the inspected State Party at the completion of the 
inspection. No copies of plant site information shall be made in any 
manner by the inspection team or the Organization.
    2. Plant site information shall not be released to the public, other 
States Parties, or the media without the specific permission of the 
inspected State Party, after consultation with the plant site.
    3. Plant site information shall not be transmitted, copied or 
retained electronically without the specific permission of the inspected 
State Party after consultation with the plant site. All transmissions of 
information off-site shall be done in the presence of the inspected 
State Party.
    4. Information not relevant to the purpose of the inspection will be 
purged from documents, photographs, etc. prior to release to the 
inspection team.

 Attachment 4--Arrangements for the Inspection Team's Contacts with the 
                           Media or the Public

                   Attachment 5--Inspection Equipment

    Part A: List of Equipment:

----------------------------------------------------------------------------------------------------------------
                                  Agreed procedures
                                       for use
                                --------------------    Indication of                           Alternative for
  Item of approved inspection         Nature of       reason(s) (safety,   Special handling   meeting inspection
           equipment               restrictions(s)     confidentiality,       or storage      requirement(s), if
                                  (location, time,          etc.)            requirements     so required by the
                                 periods, etc.), if                                             inspection team
                                         any
----------------------------------------------------------------------------------------------------------------
 
 
----------------------------------------------------------------------------------------------------------------

    Part B. Equipment which the inspected State Party Has Volunteered to 
Provide:

----------------------------------------------------------------------------------------------------------------
                                                                Support to be provided,    Conditions (timing,
          Item of equipment               Procedures for use          if required             costs, if any)
----------------------------------------------------------------------------------------------------------------
 
 
----------------------------------------------------------------------------------------------------------------

    Part C. Procedures for the Decontamination of Equipment:

[[Page 175]]



------------------------------------------------------------------------
      Item of equipment                    Procedures for use
------------------------------------------------------------------------
 
 
------------------------------------------------------------------------

    Part D. Means of Communication between Inspection Team Sub-Teams:
________________________________________________________________________

   Request for and Certification of Equipment Available on Site To Be 
          Provided in Accordance With Paragraph 3 of Section 5

Date:___________________________________________________________________
Plant Site:_____________________________________________________________
Inspection number:______________________________________________________
Name of the authorized member of the inspection team:___________________
Type and number of item(s) of equipment requested:______________________
Approval of the request by inspected State Party:_______________________
Comments on the request by the inspected State Party:___________________
Indication of the costs, if any, for the use of the equipment requested/
volunteered:
________________________________________________________________________
Certification of the authorized member of the inspection team that the 
requested item(s) of equipment have been provided:
________________________________________________________________________
Comments, if any, by the authorized member of the inspection team in 
regard to the equipment provided:
________________________________________________________________________
Name and signature of the authorized member of the inspection team:_____
________________________________________________________________________
Name and signature of the representative of the inspected State Party:__
________________________________________________________________________

Attachment 6--Information on the Plant Site Provided in Accordance With 
                                Section 6

Part A. Topics of Information for the Pre-Inspection Briefing:
________________________________________________________________________
    Part B. Any Information about the Plant Site that the inspected 
State Party Volunteers to Provide to the Inspection Team during the Pre-
Inspection Briefing and which May Be Transferred Off-Site:
________________________________________________________________________

                Attachment 7--Arrangements for Site Tour

    The inspected State Party, in consultation with the plant site, may 
provide a site tour at the request of the inspection team. Such tour 
shall take no more than 2 hours. If a site tour is conducted, the 
inspected State Party may provide explanations to the inspection team 
during the site tour.

  Attachment 8--Access to the Plant Site in Accordance With Section 7.2

    Part A. Areas of the Declared Plant Site to which Inspectors Are 
Granted Access (i.e., detail the areas, equipment, and computers):
    1. Declared Plant:10, 11
---------------------------------------------------------------------------

    \10\ Plant means a relatively self-contained area, structure or 
building containing one or more units with auxiliary and associated 
infrastructure, such as:
    11 Areas to be inspected may include:
    (a) small administrative section;
    (b) storage/handling areas for feedstock and products;
    (c) effluent/waste handling/treatment area;
    (d) control/analytical laboratory;
    (e) first aid service/related medical section;
    (f) records associated with the movement into, around and from the 
site, of declared chemicals and their feedstock or product chemicals 
formed from them, as appropriate.
    (a) areas where feed chemicals (reactants) are delivered or stored;
    (b) areas where manipulative processes are performed upon the 
reactants prior to addition to the reaction vessels;
    (c) feed lines as appropriate from the areas referred to in 
subparagraph (a) or subparagraph (b) to the reaction vessels together 
with any associated valves, flow meters, etc.;
    (d) the external aspect of the reaction vessels and ancillary 
equipment;
    (e) lines from the reaction vessels leading to long-or short-term 
storage or to equipment further processing the declared Schedule 2 
chemicals;
    (f) control equipment associated with any of the items under 
subparagraphs (a) to (e);
    (g) equipment and areas for waste and effluent handling;
    (h) equipment and areas for disposition of chemicals not up to 
specification.
---------------------------------------------------------------------------

    2. Declared Plant Site: 12
---------------------------------------------------------------------------

    \12\ Plant Site means the local integration of one or more plants, 
with any intermediate administrative levels, which are under one 
operational control, and includes common infrastructure, such as:
    (a) administration and other offices;
    (b) repair and maintenance shops;
    (c) medical center;
    (d) utilities;
    (e) central analytical laboratory;
    (f) research and development laboratories;
    (g) central effluent and waste treatment area; and
    (h) warehouse storage.

---------------------------------------------------------------------------

[[Page 176]]

    Part B. Arrangements with Regard to the Scope of the Inspection 
Effort in Agreed Areas Referenced in Part A: 13
---------------------------------------------------------------------------

    \13\ List the areas, equipment, and computers, if any, that are not 
relevant to the inspection mandate or that contain confidential business 
information that does not need to be divulged in order to comply with 
the inspection mandate.
---------------------------------------------------------------------------

________________________________________________________________________

Attachment 9--Records Routinely Made Available to the Inspection Team at 
                      the Plant Site: 14
---------------------------------------------------------------------------

    \14\ Some illustrative examples of records and data to be detailed 
are given below. The actual list will be dependent on the specifics of 
the inspection site. Information about the format and language in which 
records are kept at the plant site should be mentioned. It is understood 
that confidential information not related to the implementation of the 
Convention, such as prices, will be excluded by the State Party from 
scrutiny.
    (a) inventory and accountancy records in relation to the production, 
processing or consumption of the declared Schedule 2 chemicals and their 
storage or transportation on to or off the site;
    (b) operational records for the unit(s) producing, processing or 
consuming Schedule 2 chemicals (units) (batch cards, log books);
    (c) Schedule 2 plant(s) dispatch records within the plant site and 
off-site dispatches;
    (d) Schedule 2 plant(s) maintenance schedule records;
    (e) Schedule 2 plant(s) waste disposal records;
    (f) Schedule 2 plant(s) (unit) calibration records;
    (g) Schedule 2 plant(s) sales reports, as appropriate;
    (h) sales or transfers, whether to another industry, trader, or 
other destination, and if possible, of final product types;
    (i) data on direct exports/imports and to/from which States;
    (j) other shipments, including specification of these other 
purposes; and (k) other.
---------------------------------------------------------------------------

     Attachment 10--Sampling and Analysis for Verification Purposes

    Part A. Agreed Sampling Points Chosen with Due Consideration to 
Existing Sampling Points Used by the Plant(s) Operator(s):
________________________________________________________________________
    Part B. Procedures for Taking Samples:
________________________________________________________________________
    Part C. Procedures for Sample Handling and Sample Splitting:
________________________________________________________________________
    Part D. Procedures for Sample Analysis:
________________________________________________________________________
    Part E. Procedures for Transporting Samples:
________________________________________________________________________
    Part F. Arrangements in Regard to the Payment of Costs Associated 
with the Disposal or Removal by the inspected State Party of Hazardous 
Waste Generated during Sampling and On-Site Analysis during the 
Inspection:
________________________________________________________________________

               Attachment 11--Administrative Arrangements

    Part A. The Amenities Detailed Below Shall Be Provided to the 
Inspection Team by the inspected State Party, Subject to Payment as 
Indicated in Part B Below:

1. International and local official communication (telephone, fax), 
including calls/faxes between site and headquarters:
________________________________________________________________________
2. Vehicles:____________________________________________________________
3. Working room, including adequate space for the storage of equipment:
________________________________________________________________________
4. Lodging:_____________________________________________________________
5. Meals:_______________________________________________________________
6. Medical care:________________________________________________________
7. Interpretation Services:
(a) number of interpreters:_____________________________________________
(b) estimated interpretation time:______________________________________
(c) languages:__________________________________________________________
8. Other:
________________________________________________________________________
    Part B. Distribution of Costs for Provision of Amenities by the 
inspected State Party (check one option for each amenity provided as 
appropriate):

----------------------------------------------------------------------------------------------------------------
                                             To be paid by the       To be paid by the
                  To be paid directly by    inspection team on     inspected State Party
 Paragraphs 1-8   the Organization after       behalf of the         and subsequently        To be paid by the
in Part A above       the inspection        Organization during      reimbursed by the     inspected State Party
                                           the in-country period       Organization
----------------------------------------------------------------------------------------------------------------
             1
             2
             3
             4
             5
             6
             7
             8
----------------------------------------------------------------------------------------------------------------


[[Page 177]]

    Part C. Other Arrangements.
    1. Number of sub-teams (consisting of no less than two inspectors 
per sub-team) to be accommodated: ------------

  Request for and Certification of Amenities to be Provided or Arranged

Date:___________________________________________________________________
Plant site:_____________________________________________________________
Inspection number:______________________________________________________
Category of amenities requested:________________________________________
Description of amenities requested:_____________________________________
Approval of the request by the inspected State Party:___________________
Comments on the request by the inspected State Party:
________________________________________________________________________
Indication of the costs for the amenities requested:____________________
Certification of the authorized member of the inspection team that the 
requested amenities have been provided:
________________________________________________________________________
Comments by the authorized member of the inspection team in regard to 
the quality of the amenities provided:
________________________________________________________________________
Name and signature of the authorized member of the inspection team:
________________________________________________________________________
Name and signature of the representative of the inspected State Party:
________________________________________________________________________

       Attachment 12--Agreed Procedures for Conducting Interviews

________________________________________________________________________
________________________________________________________________________

            Attachment 13--Agreed Procedures for Photography

                                 Annexes

    Note: These annexes, inter alia, can be attached if requested by the 
inspected State Party
Annex 1: Organization's Media and Public Relations Policy
Annex 2: Organization's Health and Safety Policy and Regulations
Annex 3: Organization's Policy on Confidentiality
Annex 4: Plant Site Declaration
Annex 5: Preliminary and Final Inspection Report Formats
Annex 6: Inspected State Party's Procedures for Inspection Notification
Annex 7: Inspected State Party's Procedures for Information Control



PART 717_CLARIFICATION OF POSSIBLE NON-COMPLIANCE WITH THE CONVENTION; 
CHALLENGE INSPECTION PROCEDURES--Table of Contents




Sec.
717.1 Clarification procedures; challenge inspection requests pursuant 
          to Article IX of the Convention.
717.2 Challenge inspections.
717.3 Samples.
717.4 Report of inspection-related costs.

    Authority: 22 U.S.C. 6701 et seq., 2681; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73801, Dec. 30, 1999, unless otherwise noted.



Sec. 717.1  Clarification procedures; challenge inspection requests 
pursuant to Article IX of the Convention.

    (a) Article IX of the Convention sets forth procedures for 
clarification, between States Parties, of issues about compliance with 
the Convention. If States Parties are unable to resolve such issues 
through consultation between themselves or through the Organization for 
the Prohibition of Chemical Weapons (OPCW), a State Party may request 
the OPCW to conduct an on-site challenge inspection of any facility or 
location in the territory or in any other place under the jurisdiction 
or control of any other State Party. Such an on-site challenge 
inspection request shall be for the sole purpose of clarifying and 
resolving any questions concerning possible non-compliance with the 
Convention.
    (b) Any person or facility subject to the CWCR (parts 710 through 
722 of this subchapter) must, within five working days, provide 
information required by the Department of Commerce pursuant to an 
Article IX clarification request from another State Party, or the OPCW, 
concerning possible non-compliance with the reporting, declaration, 
notification, or inspection requirements set forth in parts 712 through 
716 of this subchapter.



Sec. 717.2  Challenge inspections.

    Any person or facility subject to the CWCR (see Sec. 710.2 of this 
subchapter), whether or not required to submit declarations or reports, 
may be subject to a challenge inspection by the OPCW

[[Page 178]]

concerning possible non-compliance with the requirements of the 
Convention. The Department of Commerce will host and escort the 
international Inspection Team for all challenge inspections of persons 
or facilities subject to the CWCR concerning possible non-compliance 
with the requirements set forth in parts 712 through 716 of this 
subchapter.
    (a) Warrants. In instances where consent is not provided by the 
owner, operator, occupant or agent in charge of the facility or 
location, the Department of Commerce will assist the Department of 
Justice in seeking a criminal warrant as provided by the Act. The 
existence of a facility agreement does not in any way limit the right of 
the operator of the facility to withhold consent to a challenge 
inspection request.
    (b) Notification of challenge inspection. Challenge inspections may 
be made only upon issuance of written notice by the United States 
National Authority (USNA) to the owner and to the operator, occupant or 
agent in charge of the premises. The Department of Commerce will provide 
Host Team notification to the inspection point of contact if such 
notification is deemed appropriate. If the United States is unable to 
provide actual written notice to the owner, operator, or agent in 
charge, the Department of Commerce, or if the Department of Commerce is 
unable, another appropriate agency, may post notice prominently at the 
plant, plant site or other facility or location to be inspected.
    (1) Timing. The OPCW will notify the USNA of a challenge inspection 
not less than 12 hours before the planned arrival of the Inspection Team 
at the U.S. point of entry. Written notice will be provided to the owner 
and to the operator, occupant, or agent in charge of the premises at any 
appropriate time determined by the USNA after receipt of notification 
from the OPCW Technical Secretariat.
    (2)(i) Content of notice. The notice shall include all appropriate 
information provided by the OPCW to the United States National Authority 
concerning:
    (A) The type of inspection;
    (B) The basis for the selection of the facility or locations for the 
type of inspection sought;
    (C) The time and date that the inspection will begin and the period 
covered by the inspection;
    (D) The names and titles of the inspectors; and
    (E) All appropriate evidence or reasons provided by the requesting 
State Party for seeking the inspection.
    (ii) In addition to appropriate information provided by the OPCW in 
its notification to the USNA, the Department of Commerce's Host Team 
notification to the facility or plant site will state whether an advance 
team is available to assist the site in preparation for the inspection. 
If an advance team is available, facilities that request advance team 
assistance are not required to reimburse the U.S. Government for costs 
associated with these activities.
    (c) Period of inspection. Challenge inspections will not exceed 84 
hours, unless extended by agreement between the Inspection Team and the 
Host Team Leader.
    (d) Scope and conduct of inspections. (1) General. Each inspection 
shall be limited to the purposes described in this section and conducted 
in the least intrusive manner, consistent with the effective and timely 
accomplishment of its purpose as provided in the Convention.
    (2) Scope of inspections. If an owner, operator, occupant, or agent 
in charge of a facility or location consents to a challenge inspection, 
the inspection will be conducted in accordance with the provisions of 
Article IX and applicable provisions of the Verification Annex of the 
Convention. If consent is not granted, the inspection will be conducted 
in accordance with a criminal warrant, as provided by the Act, and in 
accordance with the provisions of Article IX and applicable provisions 
of the Verification Annex of the Convention. A challenge inspection will 
also be conducted in accordance with a facility agreement, if a facility 
agreement has been concluded for the subject facility, to the extent the 
terms of the facility agreement are relevant to the challenge inspection 
request.

[[Page 179]]

    (3) Hours of inspections. Consistent with the provisions of the 
Convention, the Host Team will ensure, to the extent possible, that each 
inspection is commenced, conducted, and concluded during ordinary 
working hours, but no inspection shall be prohibited or otherwise 
disrupted from commencing, continuing or concluding during other hours.
    (4) Health and safety regulations and requirements. In carrying out 
their activities, the Inspection Team and Host Team shall observe 
federal, state, and local health and safety regulations and health and 
safety requirements established at the inspection site, including those 
for the protection of controlled environments within a facility and for 
personal safety.



Sec. 717.3  Samples.

    The owner, operator, occupant or agent in charge of a facility or 
location must provide a sample, as provided for in the Convention and 
consistent with requirements set forth by the Director of the United 
States National Authority in 22 CFR part 103.



Sec. 717.4  Report of inspection-related costs.

    Pursuant to section 309(b)(5) of the Act, any facility that has 
undergone any inspections pursuant to this subchapter during a given 
calendar year must report to BIS within 90 days of an inspection on its 
total costs related to that inspection. Although not required, such 
reports should identify categories of costs separately if possible, such 
as personnel costs (production-line, administrative, legal), costs of 
producing records, and costs associated with shutting down chemical 
production or processing during inspections, if applicable. This 
information should be reported to BIS on company letterhead at the 
address given in Sec. 716.6(d) of this subchapter, with the following 
notation:

    ``ATTN: Report of Inspection-related Costs.''



PART 718_CONFIDENTIAL BUSINESS INFORMATION--Table of Contents




Sec.
718.1 Definition.
718.2 Identification of confidential business information.
718.3 Disclosure of confidential business information.

Supplement No. 1 to Part 718--Confidential Business Information Declared 
          or Reported

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73802, Dec. 30, 1999, unless otherwise noted.



Sec. 718.1  Definition.

    The Chemical Weapons Convention Implementation Act of 1998 (``the 
Act'') defines confidential business information as information included 
in categories specifically identified in sections 103(g)(1) and 
304(e)(2) of the Act and other trade secrets as follows:
    (a) Financial data;
    (b) Sales and marketing data (other than shipment data);
    (c) Pricing data;
    (d) Personnel data;
    (e) Research data;
    (f) Patent data;
    (g) Data maintained for compliance with environmental or 
occupational health and safety regulations;
    (h) Data on personnel and vehicles entering and personnel passenger 
vehicles exiting the facility;
    (i) Any chemical structure;
    (j) Any plant design, process, technology or operating method;
    (k) Any operating requirement, input, or result that identifies any 
type or quantity of chemicals used, processed or produced;
    (l) Any commercial sale, shipment or use of a chemical; or
    (m) Information that qualifies as a trade secret under 5 U.S.C. 
552(b)(4) (Freedom of Information Act), provided such trade secret is 
obtained from a U.S. person or through the U.S. Government.



Sec. 718.2  Identification of confidential business information.

    (a) General. Certain confidential business information submitted to 
BIS in declarations and reports does not need

[[Page 180]]

to be specifically identified and marked by the submitter, as described 
in paragraph (b) of this section. Other confidential business 
information submitted to BIS in declarations and reports and 
confidential business information provided to the Host Team during 
inspections must be identified by the inspected facility so that the 
Host Team can arrange appropriate marking and handling.
    (b) Confidential business information contained in declarations and 
reports. (1) BIS has identified those data fields on the declaration and 
report forms that request ``confidential business information'' as 
defined by the Act. These data fields are identified in the table 
provided in Supplement No. 1 to this part.
    (2) You must specifically identify in a cover letter submitted with 
your declaration or report any additional information on a declaration 
or report form (i.e., information not provided in one of the data fields 
listed in the table included in Supplement No. 1 to this part), 
including information provided in attachments to Form A or Form B, that 
you believe is confidential business information, as defined by the Act, 
and must describe how disclosure would likely result in competitive 
harm.

    Note to paragraph (b): BIS has also determined that descriptions of 
Schedule 1 facilities submitted with Initial Declarations as attachments 
to Form A contain confidential business information, as defined by the 
Act.

    (c) Confidential business information contained in notifications. 
Information contained in advance notifications of exports and imports of 
Schedule 1 chemicals is not subject to the confidential business 
information provisions of the Act. You must identify information in your 
notifications of Schedule 1 imports that you consider to be privileged 
and confidential, and describe how disclosure would likely result in 
competitive harm. See Sec. 718.3(b) for provisions on disclosure to the 
public of such information by the U.S. Government.
    (d) Confidential business information related to inspections 
disclosed to, reported to, or otherwise acquired by, the U.S. 
Government. (1) During inspections, certain confidential business 
information, as defined by the Act, may be disclosed to the Host Team. 
Facilities being inspected are responsible for identifying confidential 
business information to the Host Team, so that if it is disclosed to the 
Inspection Team, appropriate marking and handling can be arranged, in 
accordance with the provisions of the Convention (see Sec. 
718.3(c)(1)(ii)). Confidential business information not related to the 
purpose of an inspection or not necessary for the accomplishment of an 
inspection, as determined by the Host Team, may be removed from sight, 
shrouded, or otherwise not disclosed.
    (2) Before or after inspections, confidential business information 
related to an inspection that is contained in any documents or that is 
reported to, or otherwise acquired by, the U.S. Government, such as 
facility information for pre-inspection briefings, facility agreements, 
and inspection reports, must be identified by the facility so that it 
may be appropriately marked and handled. If the U.S. Government creates 
derivative documents from such documents or reported information, they 
will also be marked and handled as confidential business information.



Sec. 718.3  Disclosure of confidential business information.

    (a) General. Confidentiality of information will be maintained by 
BIS consistent with the non-disclosure provisions of the Act, the Export 
Administration Regulations (15 CFR parts 730 through 799), the 
International Traffic in Arms Regulations (22 CFR parts 120 through 
130), and applicable exemptions under the Freedom of Information Act, as 
appropriate.
    (b) Disclosure of confidential business information contained in 
notifications. Information contained in advance notifications of exports 
and imports of Schedule 1 chemicals is not subject to the confidential 
business information provisions of the Act. Disclosure of such 
information will be in accordance with the provisions of the relevant 
statutory and regulatory authorities as follows:
    (1) Exports of Schedule 1 chemicals. Confidentiality of all 
information contained in these notifications will be maintained 
consistent with the non-

[[Page 181]]

disclosure provisions of the Export Administration Regulations (15 CFR 
parts 730 through 799), the International Traffic in Arms Regulations 
(22 CFR parts 120 through 130), and applicable exemptions under the 
Freedom of Information Act, as appropriate; and
    (2) Imports of Schedule 1 chemicals. Confidentiality of information 
contained in these notifications will be maintained pursuant to 
applicable exemptions under the Freedom of Information Act.
    (c) Disclosure of confidential business information pursuant to 
Sec. 404(b) of the Act. (1) Disclosure to the Organization for the 
Prohibition of Chemical Weapons (OPCW). (i) As provided by Section 
404(b)(1) of the Act, the U.S. Government will disclose or otherwise 
provide confidential business information to the Technical Secretariat 
of the OPCW or to other States Parties to the Convention, in accordance 
with provisions of the Convention, particularly with the provisions of 
the Annex on the Protection of Confidential Information (Confidentiality 
Annex).
    (ii) Convention provisions. (A) The Convention provides that States 
Parties may designate information submitted to the Technical Secretariat 
as confidential, and requires the OPCW to limit access to, and prevent 
disclosure of, information so designated, except that the OPCW may 
disclose certain confidential information submitted in declarations to 
other States Parties if requested. The OPCW has developed a 
classification system whereby States Parties may designate the 
information they submit in their declarations as ``restricted,'' 
``protected,'' or ``highly protected,'' depending on the sensitivity of 
the information. Other States Parties are obligated, under the 
Convention, to store and restrict access to information which they 
receive from the OPCW in accordance with the level of confidentiality 
established for that information.
    (B) OPCW inspectors are prohibited, under the terms of their 
employment contracts and pursuant to the Confidentiality Annex of the 
Convention, from disclosing to any unauthorized persons, for five years 
after termination of their employment, any confidential information 
coming to their knowledge or into their possession in the performance of 
their official duties.
    (iii) U.S. Government designation of information to the Technical 
Secretariat. It is the policy of the U.S. Government to designate all 
facility information it provides to the Technical Secretariat in 
declarations, reports and Schedule 1 notifications as ``protected.'' It 
is the policy of the U.S. Government to designate confidential business 
information that it discloses to Inspection Teams during inspections as 
``protected'' or ``highly protected,'' depending on the sensitivity of 
the information. The Technical Secretariat is responsible for storing 
and limiting access to any confidential business information contained 
in a document according to its established procedures.
    (2) Disclosure to Congress. Section 404(b)(2) of the Act provides 
that the U.S. Government must disclose confidential business information 
to any committee or subcommittee of Congress with appropriate 
jurisdiction upon the written request of the chairman or ranking 
minority member of such committee or subcommittee. No such committee or 
subcommittee, and no member and no staff member of such committee or 
subcommittee, may disclose such information or material except as 
otherwise required or authorized by law.
    (3) Disclosure to other Federal agencies for law enforcement actions 
and disclosure in enforcement proceedings under the Act. Section 
404(b)(3) of the Act provides that the U.S. Government must disclose 
confidential business information to other Federal agencies for 
enforcement of the Act or any other law, and must disclose such 
information when relevant in any proceeding under the Act. Disclosure 
will be made in such manner as to preserve confidentiality to the extent 
practicable without impairing the proceeding. Section 719.14(b) of this 
subchapter provides that all hearings will be closed, unless the 
Administrative Law Judge for good cause shown determines otherwise. 
Section 719.20 of this subchapter provides that parties may request that 
the administrative law judge segregate and restrict access to 
confidential business information contained in material in

[[Page 182]]

the record of an enforcement proceeding.
    (4) Disclosure to the public; national interest determination. 
Section 404(c) of the Act provides that confidential business 
information, as defined by the Act, that is in the possession of the 
U.S. Government, is exempt from public disclosure in response to a 
Freedom of Information Act request, except when such disclosure is 
determined to be in the national interest.
    (i) National interest determination. The United States National 
Authority (USNA), in coordination with the CWC interagency group, shall 
determine on a case-by-case basis if disclosure of confidential business 
information in response to a Freedom of Information Act request is in 
the national interest.
    (ii) Notification of intent to disclose pursuant to a national 
interest determination. The Act provides for notification to the 
affected person of intent to disclose confidential business information 
based on the national interest, unless such notification of intent to 
disclose is contrary to national security or law enforcement needs. If, 
after coordination with the agencies that constitute the CWC interagency 
group, the USNA does not determine that such notification of intent to 
disclose is contrary to national security or law enforcement needs, the 
USNA will notify the person that submitted the information and the 
person to whom the information pertains of the intent to disclose the 
information.

Supplement No. 1 to Part 718--Confidential Business Information Declared 
                               or Reported

------------------------------------------------------------------------
                                                  Fields containing
                                                confidential business
                                                     information
------------------------------------------------------------------------
Schedule 1 Forms:
    Certification Form....................  None.
    Form 1-1..............................  None.
    Form 1-2..............................  All fields.
    Form 1-2A.............................  All fields.
    Form 1-2B.............................  All fields.
    Form 1-3..............................  All fields.
    Form 1-4..............................  All fields.
Schedule 2 Forms:
    Certification Form....................  None.
    Form 2-1..............................  None.
    Form 2-2..............................  Questions 2-2.8.
    Form 2-3..............................  All fields.
    Form 2-3A.............................  All fields.
    Form 2-3B.............................  All fields.
    Form 2-3C.............................  All fields.
    Form 2-4..............................  All fields.
Schedule 3 Forms:
    Certification Form....................  None.
    Form 3-1..............................  None.
    Form 3-2..............................  None.
    Form 3-3..............................  All fields.
    Form 3-4..............................  All fields.
Unscheduled Discrete Organic Chemicals
 Forms:
    Certification Form....................  None.
    Form UDOC.............................  None.
Forms A and B and attachments (all          Case-by-case; must be
 Schedules and UDOCs).                       identified by submitter.
------------------------------------------------------------------------
* This table lists those data fields on the Declaration and Report Forms
  that request ``confidential business information'' (CBI) as defined by
  the Act (sections 103(g) and 304(e)(2)). As provided by section 404(a)
  of the Act, CBI is exempt from disclosure in response to a Freedom of
  Information Act (FOIA) request under sections 552(b)(3) and 552(b)(4)
  (5 U.S.C.A. 552(b)(3)-(4)), unless a determination is made, pursuant
  to section 404(c) of the Act, that such disclosure is in the national
  interest. Other FOIA exemptions to disclosure may also apply. You must
  identify CBI provided in Form A and/or Form B attachments, and provide
  the reasons supporting your claim of confidentiality, except that
  Schedule 1 facility technical descriptions submitted with initial
  declarations are always considered to include CBI. If you believe that
  information you are submitting in a data field marked ``none'' in the
  Table is CBI, as defined by the Act, you must identify the specific
  information and provide the reasons supporting your claim of
  confidentiality in a cover letter.



PART 719_ENFORCEMENT--Table of Contents




Sec.
719.1 Scope and definitions.
719.2 Violations of the Act subject to administrative and criminal 
          enforcement proceedings.
719.3 Violations of the IEEPA subject to judicial enforcement 
          proceedings.
719.4 Violations and sanctions under the Act not subject to proceedings 
          under this subchapter.
719.5 Initiation of administrative proceedings.
719.6 Request for hearing and answer.
719.7 Representation.
719.8 Filing and service of papers other than the NOVA.
719.9 Summary decision.
719.10 Discovery.
719.11 Subpoenas.
719.12 Matters protected against disclosure.
719.13 Prehearing conference.
719.14 Hearings.
719.15 Procedural stipulations.
719.16 Extension of time.
719.17 Post-hearing submissions.
719.18 Decisions.
719.19 Settlement.
719.20 Record for decision.
719.21 Payment of final assessment.
719.22 Reporting a violation.

    Authority: 22 U.S.C. 6701 et seq.; 50 U.S.C. 1601 et seq.; 50 U.S.C. 
1701 et seq.; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 
13128, 64 FR 36703.

[[Page 183]]


    Source: 64 FR 73804, Dec. 30, 1999, unless otherwise noted.



Sec. 719.1  Scope and definitions.

    (a) Scope. This part 719 describes the various sanctions that apply 
to violations of the Act and this subchapter. It also establishes 
detailed administrative procedures for certain violations of the Act. 
The three categories of violations are as follows:
    (1) Violations of the Act subject to administrative and criminal 
enforcement proceedings. This CWCR sets forth in Sec. 719.2 violations 
for which the statutory basis is the Act. The Department of Commerce 
investigates these violations and, for administrative proceedings, 
prepares charges, provides legal representation to the U.S. Government, 
negotiates settlements, and makes recommendations to officials of the 
Department of State with respect to the initiation and resolution of 
proceedings. The administrative procedures applicable to these 
violations are found in Sec. Sec. 719.5 through 719.22 of this part. 
The Department of State gives notice of initiation of administrative 
proceedings and issues orders imposing penalties pursuant to 22 CFR part 
103, subpart C.
    (2) Violations of the International Emergency Economic Powers Act 
(IEEPA) subject to judicial enforcement proceedings. Section 719.3 sets 
forth violations of the Chemical Weapons Convention for which the 
statutory basis is the IEEPA. The Department of Commerce refers these 
violations to the Department of Justice for civil or criminal judicial 
enforcement.
    (3) Violations and sanctions under the Act not subject to 
proceedings under this subchapter. Section 719.4 sets forth violations 
and sanctions under the Act that are not violations of this subchapter 
and that are not subject to proceedings under this subchapter. This 
section is included solely for informational purposes. The Department of 
Commerce may assist in investigations of these violations, but has no 
authority to initiate any enforcement action under this subchapter.

    Note to paragraph (a): This part 719 does not apply to violations of 
the export requirements imposed pursuant to the Chemical Weapons 
Convention and set forth in the Export Administration Regulations (EAR) 
(15 CFR parts 730 through 799) and in the International Traffic in Arms 
Regulations (ITAR) (22 CFR parts 120 through 130).

    (b) Definitions. The following are definitions of terms as used only 
in parts 719 and 720. For definitions of terms applicable to parts 710 
through 722 of this subchapter, see part 710 of this subchapter.
    The Act. The Chemical Weapons Convention Implementation Act of 1998 
(22 U.S.C. 6701-6777).
    Assistant Secretary for Export Enforcement. The Assistant Secretary 
for Export Enforcement, Bureau of Industry and Security, United States 
Department of Commerce.
    Final decision. A decision or order assessing a civil penalty, or 
otherwise disposing of or dismissing a case, which is not subject to 
further administrative review, but which may be subject to collection 
proceedings or judicial review in an appropriate Federal court as 
authorized by law.
    IEEPA. The International Emergency Economic Powers Act, as amended 
(50 U.S.C. 1701-1706).
    Office of Chief Counsel. The Office of Chief Counsel for Industry 
and Security, United States Department of Commerce.
    Report. For purposes of parts 719 and 720 of this subchapter, the 
term ``report'' means any declaration, report, or notification required 
under parts 712 through 715 of this subchapter.
    Respondent. Any person named as the subject of a letter of intent to 
charge, or a Notice of Violation and Assessment (NOVA) and proposed 
order.
    Under Secretary for Industry and Security. The Under Secretary for 
Industry and Security, U.S. Department of Commerce, who shall 
concurrently hold the title of Under Secretary for Export 
Administration.

[64 FR 73804, Dec.30, 1999, as amended at 67 FR 20631, Apr. 26, 2002; 67 
FR 45633, July 10, 2002]



Sec. 719.2  Violations of the Act subject to administrative and criminal 
enforcement proceedings.

    (a) Violations. (1) Refusal to permit entry or inspection. No person 
may willfully fail or refuse to permit entry or

[[Page 184]]

inspection, or disrupt, delay or otherwise impede an inspection, 
authorized by the Act.
    (2) Failure to establish or maintain records. No person may 
willfully fail or refuse:
    (i) To establish or maintain any record required by the Act or this 
subchapter; or
    (ii) To submit any report, notice, or other information to the 
United States Government in accordance with the Act or this subchapter; 
or
    (iii) To permit access to or copying of any record that is exempt 
from disclosure under the Act or this subchapter.
    (b) Civil penalties. (1) Civil penalty for refusal to permit entry 
or inspection. Any person that is determined to have willfully failed or 
refused to permit entry or inspection, or to have disrupted, delayed or 
otherwise impeded an authorized inspection, as set forth in paragraph 
(a)(1) of this section, shall pay a civil penalty in an amount not to 
exceed $25,000 for each violation. Each day the violation continues 
constitutes a separate violation.
    (2) Civil penalty for failure to establish or maintain records. Any 
person that is determined to have willfully failed or refused to 
establish or maintain any record or submit any report, notice, or other 
information required by the Act or this subchapter, or to permit access 
to or copying of any record exempt from disclosure under the Act or this 
subchapter as set forth in paragraph (a)(2) of this section, shall pay a 
civil penalty in an amount not to exceed $5,000 for each violation.
    (c) Criminal penalty. Any person that knowingly violates the Act by 
willfully failing or refusing to permit entry or inspection authorized 
by the Act; or by willfully disrupting, delaying or otherwise impeding 
an inspection authorized by the Act; or by willfully failing or refusing 
to establish or maintain any required record, or to submit any required 
report, notice, or other information; or by willfully failing or 
refusing to permit access to or copying of any record exempt from 
disclosure under the Act or CWCR, shall, in addition to or in lieu of 
any civil penalty that may be imposed, be fined under Title 18 of the 
United States Code, be imprisoned for not more than one year, or both.
    (d) Denial of export privileges. Any person in the United States or 
any U.S. national may be subject to a denial of export privileges after 
notice and opportunity for hearing pursuant to part 720 of this 
subchapter if that person has been convicted under Title 18, section 229 
of the United States Code.



Sec. 719.3  Violations of the IEEPA subject to judicial enforcement 
proceedings.

    (a) Violations. (1) Import restrictions involving Schedule 1 
chemicals. Except as otherwise provided in Sec. 712.1 of this 
subchapter, no person may import any Schedule 1 chemical (See Supplement 
No. 1 to part 712 of this subchapter) unless:
    (i) The import is from a State Party;
    (ii) The import is for research, medical, pharmaceutical, or 
protective purposes;
    (iii) The import is in types and quantities strictly limited to 
those that can be justified for such purposes; and
    (iv) The importing person has notified the Department of Commerce 45 
calendar days prior to the import pursuant to Sec. 712.4 of this 
subchapter.
    (2) Import restrictions involving Schedule 2 chemicals. Except as 
otherwise provided in Sec. 713.1 of this subchapter, no person may, on 
or after April 29, 2000, import any Schedule 2 chemical (see Supplement 
No. 1 to part 713 of this subchapter) from any destination other than a 
State Party.
    (b) Civil penalty. A civil penalty not to exceed $11,000 may be 
imposed in accordance with this part on any person for each violation of 
this section.1
---------------------------------------------------------------------------

    \1\ The maximum civil penalty allowed under the International 
Emergency Economic Powers Act is $11,000 for any violation committed on 
or after October 23, 1996 (15 CFR 6.4(a)(3)).
---------------------------------------------------------------------------

    (c) Criminal penalty. Whoever willfully violates paragraph (a)(1) or 
(2) of this section shall, upon conviction, be fined not more than 
$50,000, or, if a natural person, imprisoned for not more than ten 
years, or both; and any officer, director, or agent of any corporation 
who knowingly participates in

[[Page 185]]

such violation may be punished by like fine, imprisonment, or 
both.2
---------------------------------------------------------------------------

    \2\ Alternatively, sanctions may be imposed under 18 U.S.C. 3571, a 
criminal code provision that establishes a maximum criminal fine for a 
felony that is the greatest of: (1) the amount provided by the statute 
that was violated; (2) an amount not more than $250,000 for an 
individual, or not more than $500,000 for an organization; or (3) an 
amount based on gain or loss from the offense.
---------------------------------------------------------------------------



Sec. 719.4  Violations and sanctions under the Act not subject to 
proceedings under this subchapter.

    (a) Criminal penalties for development or use of a chemical weapon. 
Any person who violates 18 U.S.C. 229 shall be fined, or imprisoned for 
any term of years, or both. Any person who violates 18 U.S.C. 299 and by 
whose action the death of another person is the result shall be punished 
by death or imprisoned for life.
    (b) Civil penalty for development or use of a chemical weapon. The 
Attorney General may bring a civil action in the appropriate United 
States district court against any person who violates 18 U.S.C. 229 and, 
upon proof of such violation by a preponderance of the evidence, such 
person shall be subject to pay a civil penalty in an amount not to 
exceed $100,000 for each such violation.
    (c) Criminal forfeiture. (1) Any person convicted under section 
229A(a) of Title 18 of the United States Code shall forfeit to the 
United States irrespective of any provision of State law:
    (i) Any property, real or personal, owned, possessed, or used by a 
person involved in the offense;
    (ii) Any property constituting, or derived from, and proceeds the 
person obtained, directly or indirectly, as the result of such 
violation; and
    (iii) Any of the property used in any manner or part, to commit, or 
to facilitate the commission of, such violation.
    (2) In lieu of a fine otherwise authorized by section 229A(a) of 
Title 18 of the United States Code, a defendant who derived profits or 
other proceeds from an offense may be fined not more than twice the 
gross profits or other proceeds.
    (d) Injunction. (1) The United States may, in a civil action, obtain 
an injunction against:
    (i) The conduct prohibited under section 229 or 229C of Title 18 of 
the United States Code; or
    (ii) The preparation or solicitation to engage in conduct prohibited 
under section 229 or 229D of Title 18 of the United States Code.
    (2) In addition, the United States may, in a civil action, restrain 
any violation of section 306 or 405 of the Act, or compel the taking of 
any action required by or under the Act or the Convention.



Sec. 719.5  Initiation of administrative proceedings.

    (a) Request for Notice of Violation and Assessment (NOVA). The 
Director of the Office of Export Enforcement, Bureau of Industry and 
Security, may request that the Secretary of State initiate an 
administrative enforcement proceeding under this Sec. 719.5 and 22 CFR 
103.7. If the request is in accordance with applicable law, the 
Secretary of State will initiate an administrative enforcement 
proceeding by issuing a NOVA. The Office of Chief Counsel shall serve 
the NOVA as directed by the Secretary of State.
    (b) Letter of intent to charge. The Director of the Office of Export 
Enforcement, Bureau of Industry and Security, may notify a respondent by 
letter of the intent to charge. This letter of intent to charge will 
advise a respondent that the Department of Commerce has conducted an 
investigation and intends to recommend that the Secretary of State issue 
a NOVA. The letter of intent to charge will be accompanied by a draft 
NOVA and proposed order, and will give the respondent a specified period 
of time to contact BIS to discuss settlement of the allegations set 
forth in the draft NOVA. An administrative enforcement proceeding is not 
initiated by a letter of intent to charge. If the respondent does not 
contact BIS within the specified time, or if the respondent requests it, 
BIS will make its request for initiation of an administrative 
enforcement proceeding to the Secretary of State in accordance with 
paragraph (a) of this section.

[[Page 186]]

    (c) Content of NOVA. The NOVA shall constitute a formal complaint, 
and will set forth the basis for the issuance of the proposed order. It 
will set forth the alleged violation(s) and the essential facts with 
respect to the alleged violation(s), reference the relevant statutory, 
regulatory or other provisions, and state the amount of the civil 
penalty to be assessed. The NOVA will inform the respondent of the right 
to request a hearing pursuant to Sec. 719.6, inform the respondent that 
failure to request such a hearing shall result in the proposed order 
becoming final and unappealable on signature of the Secretary of State, 
and provide payment instructions. A copy of the regulations that govern 
the administrative proceedings will accompany the NOVA.
    (d) Proposed order. A proposed order shall accompany every NOVA, 
letter of intent to charge, and draft NOVA. It will briefly set forth 
the substance of the alleged violation(s) and the statutory, regulatory 
or other provisions violated. It will state the amount of the civil 
penalty to be assessed.
    (e) Notice. Notice of the intent to charge or of the initiation of 
formal proceedings shall be given to the respondent (or respondent's 
agent for service of process, or attorney) by sending relevant 
documents, via first class mail, facsimile, or by personal delivery.



Sec. 719.6  Request for hearing and answer.

    (a) Time to answer. If the respondent wishes to contest the NOVA and 
proposed order issued by the Secretary of State, the respondent must 
request a hearing in writing within 15 days from the date of the NOVA. 
If the respondent requests a hearing, the respondent must answer the 
NOVA within 30 days from the date of the request for hearing. The 
request for hearing and answer must be filed with the Administrative Law 
Judge (ALJ), along with a copy of the NOVA and proposed order, and 
served on the Office of Chief Counsel, and any other address(es) 
specified in the NOVA, in accordance with Sec. 719.8.
    (b) Content of answer. The respondent's answer must be responsive to 
the NOVA and proposed order, and must fully set forth the nature of the 
respondent's defense(s). The answer must specifically admit or deny each 
separate allegation in the NOVA; if the respondent is without knowledge, 
the answer will so state and will operate as a denial. Failure to deny 
or controvert a particular allegation will be deemed an admission of 
that allegation. The answer must also set forth any additional or new 
matter the respondent believes supports a defense or claim of 
mitigation. Any defense or partial defense not specifically set forth in 
the answer shall be deemed waived, and evidence thereon may be refused, 
except for good cause shown.
    (c) English required. The request for hearing, answer, and all other 
papers and documentary evidence must be submitted in English.
    (d) Waiver. The failure of the respondent to file a request for a 
hearing and an answer within the times provided constitutes a waiver of 
the respondent's right to appear and contest the allegations set forth 
in the NOVA and proposed order. If no hearing is requested and no answer 
is provided, the proposed order will be signed and become final and 
unappealable.



Sec. 719.7  Representation.

    A respondent individual may appear and participate in person, a 
corporation by a duly authorized officer or employee, and a partnership 
by a partner. If a respondent is represented by counsel, counsel shall 
be a member in good standing of the bar of any State, Commonwealth or 
Territory of the United States, or of the District of Columbia, or be 
licensed to practice law in the country in which counsel resides, if not 
the United States. The U.S. Government will be represented by the Office 
of Chief Counsel. A respondent personally, or through counsel or other 
representative who has the power of attorney to represent the 
respondent, shall file a notice of appearance with the ALJ, or, in cases 
where settlement negotiations occur before any filing with the ALJ, with 
the Office of Chief Counsel.



Sec. 719.8  Filing and service of papers other than the NOVA.

    (a) Filing. All papers to be filed with the ALJ shall be addressed 
to ``CWC

[[Page 187]]

Administrative Enforcement Proceedings'' at the address set forth in the 
NOVA, or such other place as the ALJ may designate. Filing by United 
States mail (first class postage prepaid), by express or equivalent 
parcel delivery service, via facsimile, or by hand delivery, is 
acceptable. Filing from a foreign country shall be by airmail or via 
facsimile. A copy of each paper filed shall be simultaneously served on 
all parties.
    (b) Service. Service shall be made by United States mail (first 
class postage prepaid), by express or equivalent parcel delivery 
service, via facsimile, or by hand delivery of one copy of each paper to 
each party in the proceeding. The Department of State is a party to 
cases under this subchapter, but will be represented by the Office of 
Chief Counsel. Therefore, service on the government party in all 
proceedings shall be addressed to Office of Chief Counsel for Industry 
and Security, U.S. Department of Commerce, 14th Street and Constitution 
Avenue, N.W., Room H-3839, Washington, D.C. 20230, or faxed to (202) 
482-0085. Service on a respondent shall be to the address to which the 
NOVA and proposed order was sent, or to such other address as the 
respondent may provide. When a party has appeared by counsel or other 
representative, service on counsel or other representative shall 
constitute service on that party.
    (c) Date. The date of filing or service is the day when the papers 
are deposited in the mail or are delivered in person, by delivery 
service, or by facsimile. Refusal by the person to be served, or by the 
person's agent or attorney, of service of a document or other paper will 
be considered effective service of the document or other paper as of the 
date of such refusal.
    (d) Certificate of service. A certificate of service signed by the 
party making service, stating the date and manner of service, shall 
accompany every paper, other than the NOVA and proposed order, filed and 
served on the parties.
    (e) Computation of time. In computing any period of time prescribed 
or allowed by this part, the day of the act, event, or default from 
which the designated period of time begins to run is not to be included. 
The last day of the period so computed is to be included unless it is a 
Saturday, a Sunday, or a legal holiday (as defined in Rule 6(a) of the 
Federal Rules of Civil Procedure), in which case the period runs until 
the end of the next day which is neither a Saturday, a Sunday, nor a 
legal holiday. Intermediate Saturdays, Sundays, and legal holidays are 
excluded from the computation when the period of time prescribed or 
allowed is 7 days or less.

[64 FR 73804, Dec. 30, 1999, as amended at 67 FR 45633, July 10, 2002]



Sec. 719.9  Summary decision.

    The ALJ may render a summary decision disposing of all or part of a 
proceeding on the motion of any party to the proceeding, provided that 
there is no genuine issue as to any material fact and the party is 
entitled to summary decision as a matter of law.



Sec. 719.10  Discovery.

    (a) General. The parties are encouraged to engage in voluntary 
discovery regarding any matter, not privileged, which is relevant to the 
subject matter of the pending proceeding. The provisions of the Federal 
Rules of Civil Procedure relating to discovery apply to the extent 
consistent with this part and except as otherwise provided by the ALJ or 
by waiver or agreement of the parties. The ALJ may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense. These orders may 
include limitations on the scope, method, time and place of discovery, 
and provisions for protecting the confidentiality of classified or 
otherwise sensitive information, including Confidential Business 
Information (CBI) as defined by the Act.
    (b) Interrogatories and requests for admission or production of 
documents. A party may serve on any party interrogatories, requests for 
admission, or requests for production of documents for inspection and 
copying, and a party concerned may apply to the ALJ for such enforcement 
or protective order as that party deems warranted with respect to such 
discovery. The service of a discovery request shall be made at least 20 
days before the scheduled date

[[Page 188]]

of the hearing unless the ALJ specifies a shorter time period. Copies of 
interrogatories, requests for admission and requests for production of 
documents and responses thereto shall be served on all parties and a 
copy of the certificate of service shall be filed with the ALJ. Matters 
of fact or law of which admission is requested shall be deemed admitted 
unless, within a period designated in the request (at least 10 days 
after service, or within such additional time as the ALJ may allow), the 
party to whom the request is directed serves upon the requesting party a 
sworn statement either denying specifically the matters of which 
admission is requested or setting forth in detail the reasons why the 
party to whom the request is directed cannot truthfully either admit or 
deny such matters.
    (c) Depositions. Upon application of a party and for good cause 
shown, the ALJ may order the taking of the testimony of any person by 
deposition and the production of specified documents or materials by the 
person at the deposition. The application shall state the purpose of the 
deposition and set forth the facts sought to be established through the 
deposition.
    (d) Enforcement. The ALJ may order a party to answer designated 
questions, to produce specified documents or things or to take any other 
action in response to a proper discovery request. If a party does not 
comply with such an order, the ALJ may make a determination or enter any 
order in the proceeding as the ALJ deems reasonable and appropriate. The 
ALJ may strike related charges or defenses in whole or in part or may 
take particular facts relating to the discovery request to which the 
party failed or refused to respond as being established for purposes of 
the proceeding in accordance with the contentions of the party seeking 
discovery. In addition, enforcement by any district court of the United 
States in which venue is proper may be sought as appropriate.



Sec. 719.11  Subpoenas.

    (a) Issuance. Upon the application of any party, supported by a 
satisfactory showing that there is substantial reason to believe that 
the evidence would not otherwise be available, the ALJ may issue 
subpoenas to any person requiring the attendance and testimony of 
witnesses and the production of such books, records or other documentary 
or physical evidence for the purpose of the hearing, as the ALJ deems 
relevant and material to the proceedings, and reasonable in scope. 
Witnesses shall be paid the same fees and mileage that are paid to 
witnesses in the courts of the United States. In case of contempt, 
challenge or refusal to obey a subpoena served upon any person pursuant 
to this paragraph, any district court of the United States, in which 
venue is proper, has jurisdiction to issue an order requiring any such 
person to comply with such subpoena. Any failure to obey such order of 
the court is punishable by the court as a contempt thereof.
    (b) Service. Subpoenas issued by the ALJ may be served by any of the 
methods set forth in Sec. 719.8(b).
    (c) Timing. Applications for subpoenas must be submitted at least 10 
days before the scheduled hearing or deposition, unless the ALJ 
determines, for good cause shown, that extraordinary circumstances 
warrant a shorter time.



Sec. 719.12  Matters protected against disclosure.

    (a) Protective measures. The ALJ may limit discovery or introduction 
of evidence or issue such protective or other orders as in the ALJ's 
judgment may be needed to prevent undue disclosure of classified or 
sensitive documents or information, including Confidential Business 
Information as defined by the Act. Where the ALJ determines that 
documents containing classified or sensitive matter must be made 
available to a party in order to avoid prejudice, the ALJ may direct the 
other party to prepare an unclassified and nonsensitive summary or 
extract of the documents. The ALJ may compare the extract or summary 
with the original to ensure that it is supported by the source document 
and that it omits only so much as must remain undisclosed. The summary 
or extract may be admitted as evidence in the record.
    (b) Arrangements for access. If the ALJ determines that the summary 
procedure outlined in paragraph (a) of this

[[Page 189]]

section is unsatisfactory, and that classified or otherwise sensitive 
matter must form part of the record in order to avoid prejudice to a 
party, the ALJ may provide the parties opportunity to make arrangements 
that permit a party or a representative to have access to such matter 
without compromising sensitive information. Such arrangements may 
include obtaining security clearances or giving counsel for a party 
access to sensitive information and documents subject to assurances 
against further disclosure, including a protective order, if necessary.



Sec. 719.13  Prehearing conference.

    (a) On the ALJ's own motion, or on request of a party, the ALJ may 
direct the parties to participate in a prehearing conference, either in 
person or by telephone, to consider:
    (1) Simplification of issues;
    (2) The necessity or desirability of amendments to pleadings;
    (3) Obtaining stipulations of fact and of documents to avoid 
unnecessary proof; or (4) Such other matters as may expedite the 
disposition of the proceedings.
    (b) The ALJ may order the conference proceedings to be recorded 
electronically or taken by a reporter, transcribed and filed with the 
ALJ.
    (c) If a prehearing conference is impracticable, the ALJ may direct 
the parties to correspond with the ALJ to achieve the purposes of such a 
conference.
    (d) The ALJ will prepare a summary of any actions agreed on or taken 
pursuant to this section. The summary will include any written 
stipulations or agreements made by the parties.



Sec. 719.14  Hearings.

    (a) Scheduling. Upon receipt of a written and dated request for a 
hearing, the ALJ shall, by agreement with all the parties or upon notice 
to all parties of at least 30 days, schedule a hearing. All hearings 
will be held in Washington, D.C., unless the ALJ determines, for good 
cause shown, that another location would better serve the interest of 
justice.
    (b) Hearing procedure. Hearings will be conducted in a fair and 
impartial manner by the ALJ. All hearings will be closed, unless the ALJ 
for good cause shown determines otherwise. The rules of evidence 
prevailing in courts of law do not apply, and all evidentiary material 
deemed by the ALJ to be relevant and material to the proceeding and not 
unduly repetitious will be received and given appropriate weight, except 
that any evidence of settlement which would be excluded under Rule 408 
of the Federal Rules of Evidence is not admissible. Witnesses will 
testify under oath or affirmation, and shall be subject to cross-
examination.
    (c) Testimony and record. (1) A verbatim record of the hearing and 
of any other oral proceedings will be taken by reporter or by electronic 
recording, and filed with the ALJ. If any party wishes to obtain a 
written copy of the transcript, that party shall pay the costs of 
transcription. The parties may share the costs if both wish a 
transcript.
    (2) Upon such terms as the ALJ deems just, the ALJ may direct that 
the testimony of any person be taken by deposition and may admit an 
affidavit or declaration as evidence, provided that any affidavits or 
declarations have been filed and served on the parties sufficiently in 
advance of the hearing to permit a party to file and serve an objection 
thereto on the grounds that it is necessary that the affiant or 
declarant testify at the hearing and be subject to cross-examination.
    (d) Failure to appear. If a party fails to appear in person or by 
counsel at a scheduled hearing, the hearing may nevertheless proceed. 
The party's failure to appear will not affect the validity of the 
hearing or any proceeding or action taken thereafter.



Sec. 719.15  Procedural stipulations.

    Unless otherwise ordered and subject to Sec. 719.16, a written 
stipulation agreed to by all parties and filed with the ALJ will modify 
the procedures established by this part.



Sec. 719.16  Extension of time.

    The parties may extend any applicable time limitation by stipulation 
filed with the ALJ before the time limitation expires, or the ALJ may, 
on the ALJ's own initiative or upon application by any party, either 
before or

[[Page 190]]

after the expiration of any applicable time limitation, extend the time, 
except that the requirement that a hearing be demanded within 15 days, 
and the requirement that a final agency decision be made within 30 days, 
may not be modified.



Sec. 719.17  Post-hearing submissions.

    All parties shall have the opportunity to file post-hearing 
submissions that may include findings of fact and conclusions of law, 
supporting evidence and legal arguments, exceptions to the ALJ's rulings 
or to the admissibility of evidence, and proposed orders and 
settlements.



Sec. 719.18  Decisions.

    (a) Initial decision. After considering the entire record in the 
case, the ALJ will issue an initial decision based on a preponderance of 
the evidence. The decision will include findings of fact, conclusions of 
law, and a decision based thereon as to whether the respondent has 
violated the Act If the ALJ finds that the evidence of record is 
insufficient to sustain a finding that a violation has occurred with 
respect to one or more allegations, the ALJ shall order dismissal of the 
allegation(s) in whole or in part, as appropriate. If the ALJ finds that 
one or more violations have been committed, the ALJ shall issue an order 
imposing administrative sanctions.
    (b) Factors considered in assessing penalties. In determining the 
amount of a civil penalty, the ALJ shall take into account the nature, 
circumstances, extent and gravity of the violation(s), and, with respect 
to the respondent, the respondent's ability to pay the penalty, the 
effect of a civil penalty on the respondent's ability to continue to do 
business, the respondent's history of prior violations, the respondent's 
degree of culpability, the existence of an internal compliance program, 
and such other matters as justice may require.
    (c) Certification of initial decision. The ALJ shall immediately 
certify the initial decision and order to the Executive Director of the 
Office of Legal Adviser, U.S. Department of State, 2201 C Street, N.W., 
Room 5519, Washington, D.C. 20520, to the Office of Chief Counsel at the 
address in Sec. 719.8, and to the respondent, by personal delivery or 
overnight mail.
    (d) Review of initial decision. The initial decision shall become 
the final agency decision and order unless, within 30 days, the 
Secretary of State modifies or vacates it, with or without conditions, 
in accordance with 22 CFR 103.8.



Sec. 719.19  Settlement.

    (a) Settlements before issuance of a NOVA. When the parties have 
agreed to a settlement of the case, the Director of the Office of Export 
Enforcement will recommend the settlement to the Secretary of State, 
forwarding a proposed settlement agreement and order, which, in 
accordance with 22 CFR 103.9(a), the Secretary of State will sign if the 
recommended settlement is in accordance with applicable law.
    (b) Settlements following issuance of a NOVA. The parties may enter 
into settlement negotiations at any time during the time a case is 
pending before the ALJ. If necessary, the parties may extend applicable 
time limitations or otherwise request that the ALJ stay the proceedings 
while settlement negotiations continue. When the parties have agreed to 
a settlement of the case, the Office of Chief Counsel will recommend the 
settlement to the Secretary of State, forwarding a proposed settlement 
agreement and order, which, in accordance with 22 CFR 103.9(b), the 
Assistant Secretary will sign if the recommended settlement is in 
accordance with applicable law.
    (c) Settlement scope. Any respondent who agrees to an order imposing 
any administrative sanction does so solely for the purpose of resolving 
the claims in the administrative enforcement proceeding brought under 
this part. This reflects the fact that the government officials involved 
have neither the authority nor the responsibility for initiating, 
conducting, settling, or otherwise disposing of criminal proceedings. 
That authority and responsibility are vested in the Attorney General and 
the Department of Justice.
    (d) Finality. Cases that are settled may not be reopened or 
appealed.

[[Page 191]]



Sec. 719.20  Record for decision.

    (a) The record. The transcript of hearings, exhibits, rulings, 
orders, all papers and requests filed in the proceedings, and, for 
purposes of any appeal under Sec. 719.18 or under 22 CFR 103.8, the 
decision of the ALJ and such submissions as are provided for under Sec. 
719.18 or 22 CFR 103.8 will constitute the record and the exclusive 
basis for decision. When a case is settled, the record will consist of 
any and all of the foregoing, as well as the NOVA or draft NOVA, 
settlement agreement, and order.
    (b) Restricted access. On the ALJ's own motion, or on the motion of 
any party, the ALJ may direct that there be a restricted access portion 
of the record for any material in the record to which public access is 
restricted by law or by the terms of a protective order entered in the 
proceedings. A party seeking to restrict access to any portion of the 
record is responsible, prior to the close of the proceeding, for 
submitting a version of the document(s) proposed for public availability 
that reflects the requested deletion. The restricted access portion of 
the record will be placed in a separate file and the file will be 
clearly marked to avoid improper disclosure and to identify it as a 
portion of the official record in the proceedings. The ALJ may act at 
any time to permit material that becomes declassified or unrestricted 
through passage of time to be transferred to the unrestricted access 
portion of the record.
    (c) Availability of documents. (1) Scope. All NOVAs and draft NOVAs, 
answers, settlement agreements, decisions and orders disposing of a case 
will be made available for public inspection in the BIS Freedom of 
Information Records Inspection Facility, U.S. Department of Commerce, 
Room H-6624, 14th Street and Pennsylvania Avenue, N.W., Washington, D.C. 
20230. The complete record for decision, as defined in paragraphs (a) 
and (b) of this section will be made available on request.
    (2) Timing. The record for decision will be available only after the 
final administrative disposition of a case. Parties may seek to restrict 
access to any portion of the record under paragraph (b) of this section.



Sec. 719.21  Payment of final assessment.

    (a) Time for payment. Full payment of the civil penalty must be made 
within 30 days of the date upon which the final order becomes effective, 
or within the time specified in the order. Payment shall be made in the 
manner specified in the NOVA.
    (b) Enforcement of order. The government party may, through the 
Attorney General, file suit in an appropriate district court if 
necessary to enforce compliance with a final order issued under these 
CWCR (this subchapter). This suit will include a claim for interest at 
current prevailing rates from the date payment was due or ordered.
    (c) Offsets. The amount of any civil penalty imposed by a final 
order may be deducted from any sum(s) owed by the United States to a 
respondent.



Sec. 719.22  Reporting a violation.

    If a person learns that a violation of the Convention, the Act, or 
this subchapter has occurred or may occur, that person may notify: 
Office of Export Enforcement, Bureau of Industry and Security, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., Room 
H-4520, Washington, D.C. 20230; Tel: (202) 482-1208; Facsimile: (202) 
482-0964.



PART 720_DENIAL OF EXPORT PRIVILEGES--Table of Contents




Sec.
720.1 Denial of export privileges for convictions under 18 U.S.C. 229.
720.2 Initiation of administrative action denying export privileges.
720.3 Final decision on administrative action denying export privileges.
720.4 Effect of denial.

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73809, Dec. 30, 1999, unless otherwise noted.



Sec. 720.1  Denial of export privileges for convictions under 
18 U.S.C. 229.

    Any person in the United States or any U.S. national may be denied 
export privileges after notice and opportunity for hearing if that 
person has been convicted under Title 18, Section 229 of the United 
States Code of knowingly:

[[Page 192]]

    (a) Developing, producing, otherwise acquiring, transferring 
directly or indirectly, receiving, stockpiling, retaining, owning, 
possessing, or using, or threatening to use, a chemical weapon; or
    (b) Assisting or inducing, in any way, any person to violate 
paragraph (a) of this section, or attempting or conspiring to violate 
paragraph (a) of this section.



Sec. 720.2  Initiation of administrative action denying export 
privileges.

    (a) Notice. BIS will notify any person convicted of Section 229, 
Title 18, United States Code, of BIS's intent to deny that person's 
export privileges. The notification letter shall reference the person's 
conviction, specify the number of years for which BIS intends to deny 
export privileges, set forth the statutory and regulatory authority for 
the action, state whether the denial order will be standard or non-
standard pursuant to Supplement No. 1 to Part 764 of the Export 
Administration Regulations (15 CFR parts 730 through 799), and provide 
that the person may request a hearing before the Administrative Law 
Judge within 30 days from the date of the notification letter.
    (b) Waiver. The failure of the notified person to file a request for 
a hearing within the time provided constitutes a waiver of the person's 
right to contest the denial of export privileges that BIS intends to 
impose.
    (c) order of Assistant Secretary. If no hearing is requested, the 
Assistant Secretary for Export Enforcement will order that export 
privileges be denied as indicated in the notification letter.



Sec. 720.3  Final decision on administrative action denying export 
privileges.

    (a) Hearing. Any hearing that is granted by the ALJ shall be 
conducted in accordance with the procedures set forth in Sec. 719.14 of 
this subchapter.
    (b) Initial decision and order. After considering the entire record 
in the proceeding, the ALJ will issue an initial decision and order, 
based on a preponderance of the evidence. The ALJ may consider factors 
such as the seriousness of the criminal offense that is the basis for 
conviction, the nature and duration of the criminal sanctions imposed, 
and whether the person has undertaken any corrective measures. The ALJ 
may dismiss the proceeding if the evidence is insufficient to sustain a 
denial of export privileges, or may issue an order imposing a denial of 
export privileges for the length of time the ALJ deems appropriate. An 
order denying export privileges may be standard or non-standard, as 
provided in Supplement No. 1 to part 764 of the Export Administration 
Regulations (15 CFR parts 730 through 799). The initial decision and 
order will be served on each party, and will be published in the Federal 
Register as the final decision of the Department of Commerce 30 days 
after service, unless an appeal is filed in accordance with paragraph 
(c) of this section.
    (c) Grounds for appeal. (1) A party may, within 30 days of the ALJ's 
initial decision and order, petition the Under Secretary for Export 
Administration for review of the initial decision and order. A petition 
for review must be filed with the Office of Under Secretary for Export 
Administration, Department of Commerce, 14th Street and Constitution 
Avenue, N.W., Washington, D.C. 20230, and shall be served on the Office 
of Chief Counsel for Industry and Security or on the respondent. 
Petitions for review may be filed only on one or more of the following 
grounds:
    (i) That a necessary finding of fact is omitted, erroneous or 
unsupported by substantial evidence of record;
    (ii) That a necessary legal conclusion or finding is contrary to 
law;
    (iii) That prejudicial procedural error occurred; or
    (iv) That the decision or the extent of sanctions is arbitrary, 
capricious or an abuse of discretion.
    (2) The appeal must specify the grounds on which the appeal is based 
and the provisions of the order from which the appeal was taken.
    (d) Appeal procedure. The Under Secretary for Export Administration 
normally will not hold hearings or entertain oral arguments on appeals. 
A full written statement in support of the appeal must be filed with the 
appeal and

[[Page 193]]

be simultaneously served on all parties, who shall have 30 days from 
service to file a reply. At his/her discretion, the Under Secretary may 
accept new submissions, but will not ordinarily accept those submissions 
filed more than 30 days after the filing of the reply to the appellant's 
first submission.
    (e) Decisions. The Under Secretary's decision will be in writing and 
will be accompanied by an order signed by the Under Secretary for Export 
Administration giving effect to the decision. The order may either 
dispose of the case by affirming, modifying or reversing the order of 
the ALJ, or may refer the case back to the ALJ for further proceedings. 
Any order that imposes a denial of export privileges will be published 
in the Federal Register.

[64 FR 73809, Dec. 30, 1999, as amended at 67 FR 45633, July 10, 2002]



Sec. 720.4  Effect of denial.

    Any person denied export privileges pursuant to this part shall be 
considered a ``person denied export privileges'' for purposes of the 
Export Administration Regulations (15 CFR parts 730 through 799). The 
name and address of the denied person will be published on the Denied 
Persons List found in Supplement 2 to part 764 of the Export 
Administration Regulations (15 CFR parts 730 through 799).



PART 721_INSPECTION OF RECORDS AND RECORDKEEPING--Table of Contents




Sec.
721.1 Inspection of records.
721.2 Recordkeeping.
721.3 Destruction or disposal of records.

    Authority: 22 U.S.C. 6701 et seq.; E.O. 13128, 64 FR 36703.

    Source: 64 FR 73810, Dec. 30, 1999, unless otherwise noted.



Sec. 721.1  Inspection of records.

    Upon request by the Department of Commerce or any other agency of 
competent jurisdiction, you must permit access to and copying of any 
record relating to compliance with the requirements of this subchapter. 
This requires that you make available the equipment and, if necessary, 
knowledgeable personnel for locating, reading, and reproducing any 
record.



Sec. 721.2  Recordkeeping.

    (a) General. Each facility required to submit a declaration, report 
or notification under parts 712 through 715 of this subchapter must 
retain all supporting materials and documentation used by a unit, plant, 
facility and plant site to prepare such declaration, report or 
notification to determine production, processing, consumption, export or 
import of chemicals.
    (b) Five year retention period. All supporting materials and 
documentation required to be kept under paragraph (a) of this section 
must be retained for five years from the due date of the applicable 
declaration, report, or notification, or for five years from the date of 
submission of the applicable declaration, report or notification, 
whichever is later. Due dates for declarations, reports and 
notifications are provided in parts 712 through 715 of this subchapter.
    (c) Location of records. If a facility is subject to inspection 
under part 716 of this subchapter, records retained under this section 
must be maintained at the facility or must be accessible electronically 
at the facility for purposes of inspection of the facility by Inspection 
Teams. If a facility is not subject to inspection under part 716 of this 
subchapter, records retained under this section may be maintained either 
at the facility subject to a declaration, report, or notification 
requirement, or at a remote location, but all records must be accessible 
to any authorized agent, official or employee of the U.S. Government 
under Sec. 721.1.
    (d) Reproduction of original records. (1) You may maintain 
reproductions instead of the original records provided all of the 
requirements of paragraph (b) of this section are met.
    (2) If you must maintain records under this part, you may use any 
photostatic, miniature photographic, micrographic, automated archival 
storage, or other process that completely, accurately, legibly and 
durably reproduces the original records (whether on paper, microfilm, or 
through electronic

[[Page 194]]

digital storage techniques). The process must meet all of the following 
requirements, which are applicable to all systems:
    (i) The system must be capable of reproducing all records on paper.
    (ii) The system must record and be able to reproduce all marks, 
information, and other characteristics of the original record, including 
both obverse and reverse sides (unless blank) of paper documents in 
legible form.
    (iii) When displayed on a viewer, monitor, or reproduced on paper, 
the records must exhibit a high degree of legibility and readability. 
For purposes of this section, legible and legibility mean the quality of 
a letter or numeral that enable the observer to identify it positively 
and quickly to the exclusion of all other letters or numerals. Readable 
and readability mean the quality of a group of letters or numerals being 
recognized as complete words or numbers.
    (iv) The system must preserve the initial image (including both 
obverse and reverse sides, unless blank, of paper documents) and record 
all changes, who made them and when they were made. This information 
must be stored in such a manner that none of it may be altered once it 
is initially recorded.
    (v) You must establish written procedures to identify the 
individuals who are responsible for the operation, use and maintenance 
of the system.
    (vi) You must keep a record of where, when, by whom, and on what 
equipment the records and other information were entered into the 
system.
    (3) Requirements applicable to a system based on digital images. For 
systems based on the storage of digital images, the system must provide 
accessibility to any digital image in the system. The system must be 
able to locate and reproduce all records according to the same criteria 
that would have been used to organize the records had they been 
maintained in original form.
    (4) Requirements applicable to a system based on photographic 
processes. For systems based on photographic, photostatic, or miniature 
photographic processes, the records must be maintained according to an 
index of all records in the system following the same criteria that 
would have been used to organize the records had they been maintained in 
original form.



Sec. 721.3  Destruction or disposal of records.

    If the Department of Commerce or other authorized U.S. government 
agency makes a formal or informal request for a certain record or 
records, such record or records may not be destroyed or disposed of 
without the written authorization of the requesting entity.

                   PART 722_INTERPRETATIONS [RESERVED]

    Note: This part is reserved for interpretations of parts 710 through 
721 and also for applicability of decisions by the Organization for the 
Prohibition of Chemical Weapons (OPCW).

                        PARTS 723-729 [RESERVED]

[[Page 195]]



             SUBCHAPTER C_EXPORT ADMINISTRATION REGULATIONS





PART 730_GENERAL INFORMATION--Table of Contents




Sec.
730.1 What these regulations cover.
730.2 Statutory authority.
730.3 Dual use exports.
730.4 Other control agencies and departments.
730.5 Coverage of more than exports.
730.6 Control purposes.
730.7 License requirements and exceptions.
730.8 How to proceed and where to get help.
730.9 How the Bureau of Industry and Security is organized.
730.10 Advisory information.

Supplement No. 1 to Part 730--Information Collection Requirements Under 
          the Paperwork Reduction Act: OMB Control Numbers
Supplement No. 2 to Part 730--Technical Advisory Committees
Supplement No. 3 to Part 730--Other U.S. Government Departments and 
          Agencies With Export Control Responsibilities

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 
U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 287c; 
22 U.S.C. 2151 note, Pub. L. 108-175; 22 U.S.C. 3201 et seq.; 22 U.S.C. 
6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 
U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. 
L. 106-387; Sec. 221, Pub. L. 107-56; E.O. 11912, 41 FR 15825, 3 CFR, 
1976 Comp., p. 114; E.O. 12002, 42 FR 35623, 3 CFR, 1977 Comp., p. 133; 
E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12214, 45 FR 
29783, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 58 FR 33181, 3 CFR, 1993 
Comp., p. 608; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p. 179; E.O. 
12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 899; 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. 12981, 60 FR 62981, 3 CFR, 1995 Comp., p. 419; E.O. 13020, 61 
FR 54079, 3 CFR, 1996 Comp. p. 219; 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; E.O. 13338, 69 FR 26751, May 13, 2004; Notice 
of October 29, 2003, 68 FR 62209, 3 CFR, 2003 Comp., p. 347; Notice of 
August 6, 2004, 69 FR 48763 (August 10, 2004).

    Source: 61 FR 12734, Mar. 25, 1996, unless otherwise noted.



Sec. 730.1  What these regulations cover.

    In this part, references to the Export Administration Regulations 
(EAR) are references to 15 CFR chapter VII, subchapter C. The EAR are 
issued by the United States Department of Commerce, Bureau of Industry 
and Security (BIS) under laws relating to the control of certain 
exports, reexports, and activities. In addition, the EAR implement 
antiboycott law provisions requiring regulations to prohibit specified 
conduct by United States persons that has the effect of furthering or 
supporting boycotts fostered or imposed by a country against a country 
friendly to United States. Supplement No. 1 to part 730 lists the 
control numbers assigned to information collection requirements under 
the EAR by the Office of Management and Budget pursuant to the Paperwork 
Reduction Act of 1995.



Sec. 730.2  Statutory authority.

    The EAR have been designed primarily to implement the Export 
Administration Act of 1979, as amended, 50 U.S.C. app. 2401-2420 (EAA). 
There are numerous other legal authorities underlying the EAR. These are 
listed in the Federal Register documents promulgating the EAR and at the 
beginning of each part of the EAR in the Code of Federal Regulations 
(CFR). From time to time, the President has exercised authority under 
the International Emergency Economic Powers Act with respect to the EAR 
(50 U.S.C. 1701-1706 (IEEPA)). The EAA is not permanent legislation, and 
when it has lapsed, Presidential executive orders under IEEPA have 
directed and authorized the continuation in force of the EAR.



Sec. 730.3  Dual use exports.

    The convenient term dual use is sometimes used to distinguish the 
types of items covered by the EAR from those that are covered by the 
regulations of certain other U.S. government departments and agencies 
with export licensing responsibilities. In general, the term dual use 
serves to

[[Page 196]]

distinguish EAR-controlled items that can be used both in military and 
other strategic uses (e.g., nuclear) and commercial applications. In 
general, the term dual use serves to distinguish EAR-controlled items 
that can be used both in military and other strategic uses and in civil 
applications from those that are weapons and military related use or 
design and subject to the controls of the Department of State or subject 
to the nuclear related controls of the Department of Energy or the 
Nuclear Regulatory Commission. Note, however, that although the short-
hand term dual use may be employed to refer to the entire scope of the 
EAR, the EAR also apply to some items that have solely civil uses.



Sec. 730.4  Other control agencies and departments.

    In addition to the departments and agencies mentioned in Sec. 730.3 
of this part, other departments and agencies have jurisdiction over 
certain narrower classes of exports and reexports. These include the 
Department of Treasury's Office of Foreign Assets Control (OFAC), which 
administers controls against certain countries that are the object of 
sanctions affecting not only exports and reexports, but also imports and 
financial dealings. For your convenience, Supplement No. 3 to part 730 
identifies other departments and agencies with regulatory jurisdiction 
over certain types of exports and reexports. This is not a comprehensive 
list, and the brief descriptions are only generally indicative of the 
types of controls administered and/or enforced by each agency.



Sec. 730.5  Coverage of more than exports.

    The core of the export control provisions of the EAR concerns 
exports from the United States. You will find, however, that some 
provisions give broad meaning to the term ``export'', apply to 
transactions outside of the United States, or apply to activities other 
than exports.
    (a) Reexports. Commodities, software, and technology that have been 
exported from the United States are generally subject to the EAR with 
respect to reexport. Many such reexports, however, may go to many 
destinations without a license or will qualify for an exception from 
licensing requirements.
    (b) Foreign products. In some cases, authorization to export 
technology from the United States will be subject to assurances that 
items produced abroad that are the direct product of that technology 
will not be exported to certain destinations without authorization from 
BIS.
    (c) Scope of ``exports''. Certain actions that you might not regard 
as an ``export'' in other contexts do constitute an export subject to 
the EAR. The release of technology to a foreign national in the United 
States through such means as demonstration or oral briefing is deemed an 
export. Other examples of exports under the EAR include the return of 
foreign equipment to its country of origin after repair in the United 
States, shipments from a U.S. foreign trade zone, and the electronic 
transmission of non-public data that will be received abroad.
    (d) U.S. person activities. To counter the proliferation of weapons 
of mass destruction, the EAR restrict the involvement of ``United States 
persons'' anywhere in the world in exports of foreign-origin items, or 
in providing services or support, that may contribute to such 
proliferation. The EAR also restrict technical assistance by U.S. 
persons with respect to encryption commodities or software.

[61 FR 12734, Mar. 25, 1996, as amended at 61 FR 68577, Dec. 30, 1996]



Sec. 730.6  Control purposes.

    The export control provisions of the EAR are intended to serve the 
national security, foreign policy, nonproliferation, and short supply 
interests of the United States and, in some cases, to carry out its 
international obligations. Some controls are designed to restrict access 
to dual use items by countries or persons that might apply such items to 
uses inimical to U.S. interests. These include controls designed to stem 
the proliferation of weapons of mass destruction and controls designed 
to limit the military and terrorism support capability of certain 
countries. The effectiveness of many of the controls under the EAR is 
enhanced by

[[Page 197]]

their being maintained as part of multilateral control arrangements. 
Multilateral export control cooperation is sought through arrangements 
such as the Nuclear Suppliers Group, the Australia Group, and the 
Missile Technology Control Regime. The EAR also include some export 
controls to protect the United States from the adverse impact of the 
unrestricted export of commodities in short supply.



Sec. 730.7  License requirements and exceptions.

    A relatively small percentage of exports and reexports subject to 
the EAR require an application to BIS for a license. Many items are not 
on the Commerce Control List (CCL) (Supplement No. 1 to Sec. 774.1 of 
the EAR), or, if on the CCL, require a license to only a limited number 
of countries. Other transactions may be covered by one or more of the 
License Exceptions in the EAR. In such cases no application need be made 
to BIS.



Sec. 730.8  How to proceed and where to get help.

    (a) How the EAR are organized. The Export Administration Regulations 
(EAR) are structured in a logical manner. In dealing with the EAR you 
may find it helpful to be aware of the overall organization of these 
regulations. In order to determine what the rules are and what you need 
to do, review the titles and the introductory sections of the parts of 
the EAR.
    (1) How do you go about determining your obligations under the EAR? 
Part 732 of the EAR provides steps you may follow to determine your 
obligations under the EAR. You will find guidance to enable you to tell 
whether or not your transaction is subject to the EAR and, if it is, 
whether it qualifies for a License Exception or must be authorized 
through issuance of a license.
    (2) Are your items or activities subject to the EAR at all? Part 734 
of the EAR defines the items and activities that are subject to the EAR. 
Note that the definition of ``items subject to the EAR'' includes, but 
is not limited to, items listed on the Commerce Control List in part 774 
of the EAR.
    (3) If subject to the EAR, what do the EAR require? Part 736 of the 
EAR lists all the prohibitions that are contained in the EAR. Note that 
certain prohibitions (General Prohibitions One through Three) apply to 
items as indicated on the CCL, and others (General Prohibitions Four 
through Ten) prohibit certain activities and apply to all items subject 
to the EAR unless otherwise indicated.
    (4) Do you need a license for your item or activity? What policies 
will BIS apply if you do need to submit license application? The EAR 
have four principal ways of describing license requirements:
    (i) The EAR may require a license to a country if your item is 
listed on the CCL and the Country Chart in part 738 of the EAR tells 
that a license is required to that country. Virtually all Export Control 
Classification Numbers (ECCN) on the CCL are covered by the Country 
Chart in part 738 of the EAR. That part identifies the limited number of 
entries that are not included on the Chart. These ECCNs will state the 
specific countries that require a license or refer you to a self-
contained section, i.e., Short Supply in part 754 of the EAR, or 
Embargoes in part 746 of the EAR. If a license is required, you should 
consult part 740 of the EAR which describes the License Exception that 
may be available for items on the CCL. Part 742 of the EAR describes the 
licensing policies that BIS will apply in reviewing an application you 
file. Note that part 754 of the EAR on short supply controls and part 
746 on embargoes are self-contained parts that include the available 
exceptions and licensing policy.
    (ii) A license requirement may be based on the end-use or end-user 
in a transaction, primarily for proliferation reasons. Part 744 of the 
EAR describes such requirements and relevant licensing policies and 
includes both restrictions on items and restrictions on the activities 
of U.S. persons.
    (iii) A license is required for virtually all exports to embargoed 
destinations, such as Cuba. Part 746 of the EAR describes all the 
licensing requirements, license review policies and License Exceptions 
that apply to such destinations. If your transaction involves one of 
these countries, you should first look at this part. This part also 
describes controls that may be

[[Page 198]]

maintained under the EAR to implement UN sanctions.
    (iv) In addition, under Sec. Sec. 736.2(b)(9) and (10) of the EAR, 
you may not engage in a transaction knowing a violation is about to 
occur or violate any orders, terms, and conditions under the EAR. Part 
764 of the EAR describes prohibited transactions with a person denied 
export privileges or activity that violates the terms or conditions of a 
denial order.
    (5) How do you file a license application and what will happen to 
the application once you do file it? What if you need authorization for 
multiple transactions? Parts 748 and 750 of the EAR provide information 
on license submission and processing. Part 752 of the EAR provides for a 
Special Comprehensive License that authorizes multiple transactions. If 
your application is denied, part 756 of the EAR provides rules for 
filing appeals.
    (6) How do you clear shipments with the U.S. Customs Service? Part 
758 of the EAR describes the requirements for clearance of exports.
    (7) Where do you find the rules on restrictive trade practices and 
boycotts? Part 760 of the EAR deals with restrictive trade practices and 
boycotts.
    (8) Where are the rules on recordkeeping and enforcement? Part 762 
of the EAR sets out your recordkeeping requirements, and parts 764 and 
766 of the EAR deal with violations and enforcement proceedings.
    (9) What is the effect of foreign availability? Part 768 of the EAR 
provides rules for determining foreign availability of items subject to 
controls.
    (10) Do the EAR provide definitions and interpretations? Part 770 of 
the EAR contains interpretations and part 772 of the EAR lists 
definitions used.
    (b) Why the EAR are so detailed. Some people will find the great 
length of the EAR and their extensive use of technical terms 
intimidating. BIS believes, however, that such detail and precision can 
and does serve the interests of the public. The detailed listing of 
technical parameters in the CCL establishes precise, objective criteria. 
This should, in most cases, enable you to ascertain the appropriate 
control status. Broader, more subjective criteria would leave exporters 
and reexporters more dependent upon interpretations and rulings by BIS 
officials. Moreover, much of the detail in the CCL is derived from 
multilaterally adopted lists, and the specificity serves to enhance the 
uniformity and effectiveness of international control practices and to 
promote a ``level playing field''. The detailed presentation of such 
elements as licensing and export clearance procedures enables you to 
find in one place what you need to know to comply with pertinent 
requirements. Of special importance is the detailed listing of License 
Exception criteria, as these will enable you to determine quickly, and 
with confidence, that you may proceed with a transaction without delay. 
Finally, some of the detail results from the need to draft the EAR with 
care in order to avoid loop-holes and to permit effective enforcement.
    (c) Where to get help. Throughout the EAR you will find information 
on offices you can contact for various purposes and types of 
information. General information including; assistance in understanding 
the EAR, information on how to obtain forms, electronic services, 
publications, and information on training programs offered by BIS, is 
available from the Office of Exporter Services at the following 
locations:

Exporter Counselling Division, U.S. Department of Commerce, 14th and 
Pennsylvania Avenue, N.W., Room H1099D, Washington, D.C., 20230, 
Telephone number: (202) 482-4811, Facsimile number: (202) 482-3617
 and
Western Regional Office, U.S. Department of Commerce, 3300 Irvine 
Avenue, Suite 345, Newport Beach, California 92660, Telephone number: 
(714) 660-0144, Facsimile number: (714) 660-9347
 and
U.S. Export Assistance Center, Bureau of Industry and Security, 152 
North Third Street, Suite 550, San Jose, California 95112-5591, 
Telephone number: (408) 998-7402, Facsimile number: (408) 998-7470.

[61 FR 12734, Mar. 25, 1996, as amended at 69 FR 5687, Feb. 6, 2004]



Sec. 730.9  How the Bureau of Industry and Security is organized.

    Functionally, the Bureau of Industry and Security is divided into 
two branches, Export Administration and Export Enforcement. Also, BIS 
manages a number of Technical Advisory

[[Page 199]]

Committees consisting of industry and government representatives which 
advise and assist BIS and other agencies with respect to actions 
designed to implement the EAR.
    (a) Export Administration. Export Administration implements and 
administers the export controls reflected in the EAR. Export 
Administration consists of five offices located in Washington D.C. and 
two field offices in California under the supervision of the Assistant 
Secretary for Export Administration:
    (1) The Office of Nuclear and Missile Technology Controls is 
responsible for policy and technical issues and license applications 
related to the Nuclear Suppliers Group and the Missile Technology 
Control Regime. This office has responsibility for items associated with 
those regimes, and missile and nuclear related exports and reexports 
subject to the Enhanced Proliferation Control Initiative.
    (2) The Office Chemical/Biological Controls and Treaty Compliance is 
responsible for implementing multilateral export controls under the 
Australia Group. This office has licensing responsibility for items 
associated with the Australia Group and related exports and reexports 
subject to the Enhanced Proliferation Control Initiative.
    (3) The Office of Strategic Trade and Foreign Policy Controls is 
responsible for implementing multilateral export controls dealing with 
conventional arms and related dual use items. This office is also 
responsible for computer export control policies, and implements U.S. 
foreign policy controls (e.g., crime control, anti-terrorism, and 
regional stability). It also has licensing responsibility for items 
controlled for national security and foreign policy reasons.
    (4) The Office of Exporter Services is responsible for the Special 
Comprehensive License, processing and routing all license applications, 
and preparing responses to requests for advisory opinions and commodity 
classifications. This office also provides counselling to exporters and 
reexporters, conducts educational seminars for the business community, 
maintains the Export Administration Regulations, and coordinates the 
operations of two field offices listed in Sec. 730.8(c) of this part.
    (5) The Office of Strategic Industries and Economic Security 
implements programs to ensure the continued health of the U.S. defense 
industrial base, facilitating diversification of U.S. defense related 
industries into civilian markets, and promoting the conversion of 
military enterprises. This office is also responsible for analyzing the 
economic impact of U.S. export controls on industrial competitiveness.
    (b) Export Enforcement. Export Enforcement implements the 
enforcement provisions of the EAR, including part 760 of the EAR 
(Restrictive Trade Practices and Boycotts). This office also conducts 
outreach programs to assist members of the public in understanding their 
obligation under EAR. The Office of Export Enforcement is organized into 
three offices under the supervision of the Assistant Secretary for 
Export Enforcement.
    (1) The Office of Export Enforcement (OEE) is comprised of an office 
in Washington, D.C. and eight field offices. OEE is staffed with 
criminal investigators and analysts. This office investigates 
allegations of violations and supports administrative and criminal 
enforcement proceedings. The addresses and telephone numbers of the 
eight field offices are listed in Sec. 764.5(c)(7) of the EAR.
    (2) The Office of Enforcement Support (OES) is located in 
Washington, D.C. OES supports BIS's preventive enforcement efforts, 
including conducting pre-license checks and post-shipment verifications. 
OES also provides administrative and analytical support for OEE.
    (3) The Office of Antiboycott Compliance administers and enforces 
the provisions of part 760 of the EAR (Restrictive Trade Practices and 
Boycotts). It investigates and prepares cases on alleged violations of 
this part.
    (c) Technical Advisory Committees. (1) The Technical Advisory 
Committees (TACs) provide advice and assistance to BIS from U.S. 
industry regarding the creation and implementation of export controls. 
For further information regarding establishment of TACs and other 
information, see Supplement No.

[[Page 200]]

2 to part 730. Existing TACs include the following:
    (i) The Information Systems TAC;
    (ii) The Materials TAC;
    (iii) The Materials Processing Equipment TAC;
    (iv) The Regulations and Procedures TAC;
    (v) The Sensors and Instrumentation TAC; and
    (vi) The Transportation and Related Equipment TAC.
    (2) For more information. For information on attending a TAC meeting 
or on becoming a TAC member, please contact Ms. Lee Ann Carpenter, 
Director, TAC Unit, OAS-EA/BIS, Room 3886C, U.S. Department of Commerce, 
Washington, DC 20230; Telephone number: (202) 482-2583. FAX number: 
(202) 501-8024.

[61 FR 12734, Mar. 25, 1996, as amended at 62 FR 25452, May 9, 1997]



Sec. 730.10  Advisory information.

    The general information in this part is just that--general. To 
achieve brevity, so as to give you a quick overview, the information in 
this part is selective, incomplete, and not expressed with regulatory 
precision. The controlling language is the language of succeeding parts 
of the EAR and of any other laws or regulations referred to or 
applicable. The content of this part is not to be construed as modifying 
or interpreting any other language or as in any way, limiting the 
authority of BIS, any of its components or any other government 
department or agency. You should not take any action based solely on 
what you read in this part.

Supplement No. 1 to Part 730--Information Collection Requirements Under 
            the Paperwork Reduction Act: OMB Control Numbers

    This supplement lists the control numbers assigned to the 
information collection requirements for the Bureau of Industry and 
Security by the Office of Management and Budget (OMB), pursuant to the 
Paperwork Reduction Act of 1995. This supplement complies with the 
requirements of section 3506(c)(1)(B)(i) of the Paperwork Reduction Act 
requiring agencies to display current control numbers assigned by the 
Director of OMB for each agency information collection requirement.

------------------------------------------------------------------------
                                            15 CFR part or section where
          Current OMB control No.            collections of information
                                             are identified or described
------------------------------------------------------------------------
0694-0001.................................  Sec. 748.12(d) of the EAR.
0694-0004.................................  Part 768 of the EAR.
0694-0008.................................  Sec. 748.13, Supplement
                                             No. 5 to part 748 of the
                                             EAR.
0694-0009.................................  Sec. 748.10(e) of the EAR.
0694-0012.................................  Part 760 and Sec. 762.2(b)
                                             of the EAR.
0694-0013.................................  Part 774 of the EAR.
0694-0015.................................  Sec. 773.3 of the EAR.
0694-0016.................................  Sec. Sec. 748.13 and
                                             762.2(b) of the EAR.
0694-0017.................................  Sec. 748.10 of the EAR.
0694-0021.................................  Sec. Sec. 748.11 and
                                             762.2(b) of the EAR.
0694-0023.................................  Sec. Sec. 740.3(d) and
                                             740.4(c) of the EAR.
0694-0025.................................  Sec. Sec. 754.4 and
                                             762.2(b) of the EAR.
0694-0026.................................  Sec. 754.3 of the EAR.
0694-0027.................................  Sec. 754.2 of the EAR.
0694-0029.................................  Sec. 740.4(a) of the EAR.
0694-0030.................................  Supplement No. 2 to part
                                             748, paragraph (p) of the
                                             EAR.
0694-0031.................................  Sec. 750.9 of the EAR.
0694-0032.................................  Sec. 748.4(d)(2) of the
                                             EAR.
0694-0033.................................  Sec. Sec. 740.7(b) and
                                             762.2(b) of the EAR.
0694-0038.................................  Sec. 758.6(e)(2) of the
                                             EAR.
0694-0040.................................  Sec. Sec. 758.5(c)(2) and
                                             758.8 of the EAR.
0694-0047.................................  Supplement No. 2 to part
                                             748, paragraph (o)(2) of
                                             the EAR.
0694-0048.................................  Sec. 748.3 of the EAR.
0694-0050.................................  Sec. 752.5(c)(5) of the
                                             EAR.
0694-0051.................................  Sec. 750.10 of the EAR.
0694-0058.................................  Sec. Sec. 762.2(b) and
                                             764.5 of the EAR.
0694-0064.................................  Sec. Sec. 748.9 and
                                             762.2(b) of the EAR.
0694-0065.................................  Sec. 754.4(c) of the EAR
                                             of the EAR.
0694-0073.................................  Sec. 742.12, Supplement
                                             No. 3 to part 742, and Sec.
                                               762.2(b) of the EAR.
0694-0078.................................  Supplement No. 1 to part 774
                                             of the EAR.
0694-0086.................................  Supplement No. 1 to part 774
                                             of the EAR.
0694-0088.................................  Parts 746, 748, and 752;
                                             Sec. 762.2(b) of the EAR.
0694-0089.................................  Part 752 and Sec. 762.2(b)
                                             of the EAR.
0694-0093.................................  Sec. Sec. 748.10 and
                                             762.2(b) of the EAR.
0694-0094.................................  Part 758 of the EAR of the
                                             EAR.
0694-0095.................................  Sec. Sec. 740.7(a)(3)(ii)
                                             and 758.1(d) of the EAR.
0694-0096.................................  Part 760, Sec. 762.6(a) of
                                             the EAR.
0694-0097.................................  Sec. Sec. 752.15(b),
                                             758.6, and 762.2(b) of the
                                             EAR.
0694-0102.................................  Sec. Sec. 754.6 and 754.7
                                             of the EAR.
0694-0101.................................  Sec. 734.4 of the EAR.
0694-0100.................................  Supplement No. 1 to part
                                             730.
0607-0001.................................  Sec. 758.2(m) of the EAR.
0607-0018.................................  Sec. Sec. 740.1(d),
                                             740.3(a)(3), 752.7(b), Sec.
                                               752.15(a) of the EAR.
                                            Sec. Sec. 754.2(h) and
                                             (i), 754.4(c) 758.1, Sec.
                                             Sec. 758.2(m) and 758.3
                                             of the EAR.
0607-0152.................................  Sec. Sec. 740.1(d),
                                             740.3(a)(3), 752.7(b), Sec.
                                              Sec. 752.15(a) of the
                                             EAR.
                                            Sec. Sec. 754.2(h) and
                                             (i), 754.4(c), 758.1, Sec.
                                             Sec. 758.2(m), and 758.3
                                             of the EAR.
------------------------------------------------------------------------

       Supplement No. 2 to Part 730--Technical Advisory Committees

    (a) Purpose. The purpose of this supplement is to describe the 
procedures and criteria for the establishment and operation of Technical 
Advisory Committees.

[[Page 201]]

    (b) Technical advisory committees. Any producer of articles, 
materials, or supplies, including technology, software, and other 
information, that are subject to export controls, or are being 
considered for such controls because of their significance to the 
national security of the United States, may request the Secretary of 
Commerce to establish a technical advisory committee, under the 
provisions of section 5(h) of the Export Administration Act of 1979, as 
amended (EAA) to advise and assist the Department of Commerce and other 
appropriate U.S. Government agencies or officials with respect to 
questions involving technical matters; worldwide availability and actual 
utilization of production technology; licensing procedures that affect 
the level of export controls applicable to a clearly defined grouping of 
articles, materials, or supplies, including technology, software, or 
other information; and exports and reexports subject to all controls 
that the United States maintains including proposed revisions of any 
such controls. If producers of articles, materials, or supplies, 
including technology, software, and other information, that are subject 
to export controls because of their significance to the national 
security of the United States, wish a trade association or other 
representative to submit a written request on their behalf for the 
appointment to a TAC, such request shall be submitted in accordance with 
paragraph (b)(4) of this supplement.
    (1) Form and substance of requests. Each request for the appointment 
of a TAC shall be submitted in writing to: Assistant Secretary for 
Export Administration, P.O. Box 273, Washington, DC 20044.
    The request shall include:
    (i) A description of the articles, materials, or supplies including 
technology and software, in terms of a clear, cohesive grouping (citing 
the applicable Export Control Classification Numbers where practical);
    (ii) A statement of the reasons for requesting the appointment of a 
TAC; and
    (iii) Any information in support of any contention that may be made 
that the request meets the criteria described in paragraph (b)(2) of 
this supplement.
    (2) Consideration of request for establishment of a TAC. The 
Department of Commerce will review all requests for the establishment of 
a TAC to determine if the following criteria are met:
    (i) That a substantial segment of the industry producing the 
specified articles, materials, or supplies including technology desires 
such a committee; and
    (ii) That the evaluation of such articles, materials, or supplies 
including technology and software for export control purposes is 
difficult because of questions involving technical matters, worldwide 
availability and actual utilization of production and software 
technology, or licensing procedures.
    (3) Requests by a substantial segment of an industry. In determining 
whether or not a substantial segment of any industry has requested the 
appointment of a TAC, the Department of Commerce will consider:
    (i) The number of persons or firms requesting the establishment of a 
TAC for a particular grouping of commodities, software and technology in 
relation to the total number of U.S. producers of such items; and
    (ii) The volume of annual production by such persons or firms of 
each item in the grouping in relation to the total U.S. production. 
Generally, a substantial segment of an industry (for purposes of this 
supplement) shall consist of:
    (A) Not less than 30 percent of the total number of U.S. producers 
of the items concerned; or
    (B) Three or more U.S. producers who produce a combined total of not 
less than 30 percent of the total U.S. annual production, by dollar 
value of the items concerned; or
    (C) Not less than 20 percent of the total number of U.S. producers 
of the items concerned, provided that the total of their annual 
production thereof is not less than 20 percent of the total U.S. annual 
production, by dollar value.
    (iii) If it is determined that a substantial segment of the industry 
concerned has requested the establishment of a TAC concerning a specific 
grouping of items that the Department of Commerce determines difficult 
to evaluate for export control purposes, BIS will establish and use the 
TAC requested.
    (4) Requests from trade associations or other representatives. 
Requests from trade associations or other representatives of U.S. 
producers for the establishment of a TAC must comply with the provisions 
of paragraphs (b) (1) through (3) of this supplement. In addition, in 
order to assist BIS in determining whether the criteria described in 
paragraph (b)(3) of this supplement have been met, a trade association 
or other representative submitting a request for the establishment of a 
TAC should include the following information:
    (i) The total number of firms in the particular industry;
    (ii) The total number of firms in the industry that have authorized 
the trade association or other representative to act in their behalf in 
this matter;
    (iii) The approximate amount of total U.S. annual production by 
dollar value of the items concerned produced by those firms that have 
authorized the trade association or other representative to act in their 
behalf; and
    (iv) A description of the method by which authorization to act on 
behalf of these producers was obtained.

[[Page 202]]

    (5) Nominations for membership on TACs. When the Department of 
Commerce determines that the establishment of a TAC is warranted, it 
will request nominations for membership on the committee among the 
producers of the items and from any other sources that may be able to 
suggest well-qualified nominees.
    (6) Selection of industry members of committee. Industry members of 
a TAC will be selected by the Department of Commerce from a list of the 
nominees who have indicated their availability for service on the 
committee. To the extent feasible, the Department of Commerce will 
select a committee balanced to represent all significant facets of the 
industry involved, taking into consideration such factors as the size of 
the firms, their geographical distribution, and their product lines. No 
industry representative shall serve on a TAC for more than four 
consecutive years. The membership of a member who is absent from four 
consecutive meetings shall be terminated.
    (7) Government members. Government members of a TAC will be selected 
by the Department of Commerce from the agencies having an interest in 
the subject matter concerned.
    (8) Invitation to serve on committee. Invitations to serve on a TAC 
will be sent by letter to the selected nominees.
    (9) Election of Chair. The Chair of each TAC shall be elected by a 
vote of the majority of the members of the committee present and voting.
    (c) Charter. (1) No TAC established pursuant to this supplement 
shall meet or take any action until an advisory committee charter has 
been filed with the Assistant Secretary for Export Administration of the 
Department of Commerce and with the standing committees of the Senate 
and of the House of Representatives having legislative jurisdiction over 
the Department. Such charter shall contain the following information:
    (i) The committee's official designation;
    (ii) The committee's objectives and the scope of its activities;
    (iii) The period of time necessary for the committee to carry out 
its purposes;
    (iv) The agency or official to whom the committee reports;
    (v) The agency responsible for providing the necessary support for 
the committee;
    (vi) A description of the duties for which the committee is 
responsible, and, if such duties are not solely advisory, a 
specification of the authority for such functions;
    (vii) The estimated annual operating costs in dollars and years for 
such committee;
    (viii) The estimated number and frequency of committee meetings;
    (ix) The committee's termination date, if less than two years from 
the date of the committee's establishment; and
    (x) The date the charter is filed.
    (d) Meetings. (1) Each TAC established under the provisions of the 
EAA and paragraph (b) of this supplement shall meet at least once every 
three months at the call of its Chair unless it is specifically 
determined by the Chair, in consultation with other members of the 
committee, that a particular meeting is not necessary.
    (2) No TAC may meet except at the call of its Chair.
    (3) Each meeting of a TAC shall be conducted in accordance with an 
agenda approved by a designated Federal government employee.
    (4) No TAC shall conduct a meeting in the absence of a designated 
Federal government employee who shall be authorized to adjourn any 
advisory committee meeting, whenever the Federal government employee 
determines adjournment to be in the public interest.
    (e) Public notice. Notice to the public of each meeting of a TAC 
will be issued at least 20 days in advance and will be published in the 
Federal Register. The notice will include the time and place of the 
meeting and the agenda.
    (f) Public attendance and participation. (1) Any member of the 
public who wishes to do so may file a written statement with any TAC 
before or after any meeting of a committee.
    (2) A request for an opportunity to deliver an oral statement 
relevant to matters on the agenda of a meeting of a TAC will be granted 
to the extent that the time available for the meeting permits. A 
committee may establish procedures requiring such persons to obtain 
advance approval for such participation.
    (3) Attendance at meetings of TACs will be open to the public unless 
it is determined pursuant to section 10(d) of the Federal Advisory 
Committee Act to be necessary to close all, or some portion, of the 
meeting to the public. A determination that a meeting or portion thereof 
be closed to the public may be made if all or a specific portion of a 
meeting of a TAC is concerned with matters described in section 552(b) 
of Title 5, U.S.C.
    (4) Participation by members of the public in open TAC meetings or 
questioning of committee members or other participants shall not be 
permitted except in accordance with procedures established by the 
committee.
    (5) Every effort will be made to accommodate all members of the 
public who wish to attend.
    (g) Minutes. (1) Detailed minutes of each meeting of each TAC will 
be kept and will contain a record of the persons present, a complete and 
accurate description of the matters discussed and conclusions reached, 
and copies of all reports received, issued, or approved by the TAC.
    (2) The accuracy of all the minutes will be certified to by the TAC 
Chair.

[[Page 203]]

    (h) Records. (1) Subject to section 552 of Title 5, U.S.C. and 
Department of Commerce Administrative Order 205-12, ``Public 
Information,'' and ``Public Information'' regulations issued by the 
Department of Commerce that are contained in 15 CFR part 4, Subtitle A, 
the records, reports, transcripts, minutes, appendices, working papers, 
draft, studies, agenda, or other documents that were made available to 
or prepared for or by each TAC will be available for public inspection 
and copying.
    (2) Each TAC will prepare once each year a report describing its 
membership, functions, activities, and such related matters as would be 
informative to the public consistent with the policy of section 552(b) 
of Title 5, U.S.C.
    (3)(i) Requests for records should be addressed to: Bureau of 
Industry and Security, Freedom of Information, Records Inspection 
Facility, U.S. Department of Commerce, Room 4513, Washington, DC 20230, 
Telephone (202) 482-2593.
    (ii) Rules concerning the use of the Records Inspection Facility are 
contained in 15 CFR part 4, Subtitle A, or may be obtained from this 
facility.
    (i) Compensation. If the Department of Commerce deems it 
appropriate, a member of a TAC may be reimbursed for travel, 
subsistence, and other necessary expenses incurred in connection with 
the member's duties.
    (j) Scope of advisory committee functions. All TACs are limited to 
the functions described in their charters.
    (k) Duration of committees. Each TAC will terminate at the end of 
two years from the date the committee was established or two years from 
the effective date of its most recent extension, whichever is later. 
Committees may be continued only for successive two-year periods by 
appropriate action taken by the authorized officer of the Department of 
Commerce prior to the date on which such advisory committee would 
otherwise terminate. TACs may be extended or terminated only after 
consultation with the committee.
    (l) Miscellaneous. (1) TACs established in accordance with paragraph 
(b) of this supplement must conform to the provisions of the Federal 
Advisory Committee Act (Pub. L. 92-463), Office of Management and Budget 
Circular A-63 (Revision of March 1974), ``Advisory Committee 
Management,'' Department of Commerce Administrative Order 205-12, 
``Public Information,'' the applicable provisions of the EAA, and any 
other applicable Department of Commerce regulations or procedures 
affecting the establishment or operation of advisory committees.
    (2) Whenever the Department of Commerce desires the advice or 
assistance of a particular segment of an industry with respect to any 
export control problem for which the service of a TAC, as described in 
paragraph (b) of this supplement is either unavailable or impracticable, 
an advisory committee may be established pursuant to the provisions of 
section 9 of the Federal Advisory Committee Act. Such committees will be 
subject to the requirements of the Federal Advisory Committee Act, OMB 
Circular A-63 (Revision of March 1974), ``Advisory Committee 
Management,'' Department of Commerce Administrative Order 205-12, 
``Public Information,'' and any other applicable Department of Commerce 
regulations or procedures affecting the establishment or operation of 
advisory committees.
    (3) Nothing in the provisions of this supplement shall be construed 
to restrict in any manner the right of any person or firm to discuss any 
export control matter with the Department of Commerce or to offer advice 
or information on export control matters. Similarly, nothing in these 
provisions shall be construed to restrict the Department of Commerce in 
consulting any person or firm relative to any export control matter.

  Supplement No. 3 to Part 730--Other U.S. Government Departments and 
              Agencies With Export Control Responsibilities

    Note: The departments and agencies identified with an asterisk 
control exports for foreign policy or national security reasons and, in 
certain cases, such controls may overlap with the controls described in 
the EAR (see part 734 of the EAR).

                  Defense Services and Defense Articles

* Department of State, Directorate of Defense Trade Controls, Tel. (703) 
875-6644, Fax: (703) 875-6647.
    22 CFR parts 120 through 130.

                     Drugs, Chemicals and Precursors

Drug Enforcement Administration, International Chemical Control Unit, 
Tel. (202) 307-7202, Fax: (202) 307-8570.
    21 CFR parts 1311 through 1313.
Controlled Substances: Drug Enforcement Administration, International 
Drug Unit, Tel. (202) 307-2414, Fax: (202) 307-8570.
    21 CFR 1311 through 1313.
Drugs and Biologics: Food and Drug Administration, Import/Export, Tel. 
(301) 594-3150, Fax: (301) 594-0165.
    21 U.S.C. 301 et seq.
Investigational drugs permitted: Food and Drug Administration, 
International Affairs, Tel. (301) 443-4480, Fax: (301) 443-0235.
    21 CFR 312.1106.

             Fish and Wildlife Controls; Endangered Species

    Department of the Interior, Chief Office of Management Authority, 
Tel. (703) 358-2093, Fax: (703) 358-2280.
    50 CFR 17.21, 17.22, 17.31, 17.32.

[[Page 204]]

                Foreign Assets and Transactions Controls

* Department of Treasury, Office of Foreign Assets Control, Licensing, 
Tel. (202) 622-2480, Fax: (202) 622-1657.
    31 CFR parts 500 through 590.

                             Medical Devices

Food and Drug Administration, Office of Compliance, Tel. (301) 594-4699, 
Fax: (301) 594-4715.
    21 U.S.C. 301 et seq.

                     Natural Gas and Electric Power

Department of Energy, Office of Fuels Programs, Tel. (202) 586-9482, 
Fax: (202) 586-6050.
    10 CFR 205.300 through 205.379 and part 590.

                     Nuclear Materials and Equipment

* Nuclear Regulatory Commission, Office of International Programs, Tel. 
(301) 415-2344, Fax: (301) 415-2395.
    10 CFR part 110.

Nuclear Technologies and Services Which Contribute to the Production of 
  Special Nuclear Material (Snm). Technologies Covered Include Nuclear 
 Reactors, Enrichment, Reprocessing, Fuel Fabrication, and Heavy Water 
                               Production.

Department of Energy Office of Export Control Policy & Cooperation (NA-
24) Tel. (202) 586-2331, Fax (202) 586-1348.
    10 CFR part 810.

                        Ocean Freight Forwarders

Federal Maritime Commission, Office of Freight Forwarders, Tel. (202) 
523-5843, Fax: (202) 523-5830.
    46 CFR part 510.

                     Patent Filing Data Sent Abroad

* Department of Commerce, Patent and Trademark Office, Licensing and 
Review; Tel. (703) 308-1722, Fax: (703) 305-3603, 3604.
    37 CFR part 5.

     U.S. Flagged or U.S. Manufactured Vessels Over 1,000 Gross Tons

U.S. Maritime Administration, Division of Vessel Transfer and Disposal, 
Tel. (202) 366-5821, Fax: (202) 366-3889.
    46 CFR part 221.

[61 FR 12734, Mar. 25, 1996, as amended at 65 FR 38149, June 19, 2000; 
69 FR 5687, Feb. 6, 2004]



PART 732_STEPS FOR USING THE EAR--Table of Contents




Sec.
732.1 Steps overview.
732.2 Steps regarding scope of the EAR.
732.3 Steps regarding the ten general prohibitions.
732.4 Steps regarding License Exceptions.
732.5 Steps regarding Shipper's Export Declaration or Automated Export 
          System record, Destination Control Statements, and 
          recordkeeping.
732.6 Steps for other requirements.

Supplement No. 1 to Part 732--Export Control Decision Tree
Supplement No. 2 to Part 732--Am I subject to the EAR?
Supplement No. 3 to Part 732--BIS's ``Know Your Customer'' Guidance and 
          Red Flags

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 
13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 
3 CFR, 2001 Comp., p. 783; Notice of August 7, 2003, 68 FR 47833, 3 CFR, 
2003 Comp., p. 328.

    Source: 61 FR 12740, Mar. 25, 1996, unless otherwise noted.



Sec. 732.1  Steps overview.

    (a)(1) Introduction. In this part, references to the EAR are 
references to 15 CFR chapter VII, subchapter C. This part is intended to 
help you determine your obligations under the EAR by listing logical 
steps in Sec. 732.2 through Sec. 732.5 of this part that you can take 
in reviewing these regulations. A flow chart describing these steps is 
contained in Supplement No. 1 to part 732. By cross-references to the 
relevant provisions of the EAR, this part describes the suggested steps 
for you to determine applicability of the following:
    (i) The scope of the EAR (part 734 of the EAR);
    (ii) Each of the general prohibitions (part 736 of the EAR);
    (iii) The License Exceptions (part 740 of the EAR); and
    (iv) Other requirements such as clearing your export with the U.S. 
Customs Service, keeping records, and completing and documenting license 
applications.
    (2) These steps describe the organization of the EAR, the 
relationship among the provisions of the EAR, and the appropriate order 
for you to consider the various provisions of the EAR.
    (b) Facts about your transaction. The following five types of facts 
determine your obligations under the EAR and will be of help to you in 
reviewing these steps:

[[Page 205]]

    (1) What is it? What an item is, for export control purposes, 
depends on its classification, which is its place on the Commerce 
Control List (see part 774 of the EAR).
    (2) Where is it going? The country of ultimate destination for an 
export or reexport also determines licensing requirements (see parts 738 
and 774 of the EAR concerning the Country Chart and the Commerce Control 
List).
    (3) Who will receive it? The ultimate end-user of your item cannot 
be a bad end-user. See General Prohibition Four (Denial Orders) in Sec. 
736.2(b)(4) and parts 744 and 764 of the EAR for a reference to the list 
of persons you may not deal with.
    (4) What will they do with it? The ultimate end-use of your item 
cannot be a bad end-use. See General Prohibition Five (End-Use End-User) 
in Sec. 736.2(b)(5) and part 744 of the EAR for general end-use and 
end-user restrictions.
    (5) What else do they do? Conduct such as contracting, financing, 
and freight forwarding in support of a proliferation project (as 
described in Sec. 744.6 of the EAR) may prevent you from dealing with 
someone.
    (c) Are your items and activities subject to the EAR? You should 
first determine whether your commodity, software, or technology is 
subject to the EAR (see part 734 of the EAR concerning scope), and Steps 
1 through 6 help you do that. For exports from the United States, only 
Steps 1 and 2 are relevant. If you already know that your item or 
activity is subject to the EAR, you should go on to consider the ten 
general prohibitions in part 736 of the EAR. If your item or activity is 
not subject to the EAR, you have no obligations under the EAR and may 
skip the remaining steps.
    (d) Does your item or activity require a license under one or more 
of the ten general prohibitions? (1) Brief summary of the ten general 
prohibitions. The general prohibitions are found in part 736 of the EAR 
and referred to in these steps. They consist, very briefly, of the 
following:
    (i) General Prohibition One (Exports and Reexports): Export and 
reexport of controlled items to listed countries.
    (ii) General Prohibition Two (Parts and Components Reexports): 
Reexport and export from abroad of foreign-made items incorporating more 
than a de minimis amount of controlled U.S. content.
    (iii) General Prohibition Three (Foreign-produced Direct Product 
Reexports): Reexport and export from abroad of the foreign-produced 
direct product of U.S. technology and software.
    (iv) General Prohibition Four (Denial Orders): Engaging in actions 
prohibited by a denial order.
    (v) General Prohibition Five (End-Use End-User): Export or reexport 
to prohibited end-user or end-users.
    (vi) General Prohibition Six (Embargo): Export or reexport to 
embargoed destinations.
    (vii) General Prohibition Seven (U.S. Person Proliferation 
Activity): Support of proliferation activities.
    (viii) General Prohibition Eight (In-Transit): In-transit shipments 
and items to be unladen from vessels and aircraft.
    (ix) General Prohibition Nine (Orders, Terms and Conditions): 
Violation of any orders, terms, or conditions.
    (x) General Prohibition Ten (Knowledge Violation to Occur): 
Proceeding with transactions with knowledge that a violation has 
occurred or is about to occur.
    (2) Controls on items on the Commerce Control List (CCL). If your 
item or activity is subject to the EAR, you should determine whether any 
one or more of the ten general prohibitions require a license for your 
export, reexport, or activity. Steps 7 through 11 refer to 
classification of your item on the Commerce Control List (CCL) (part 774 
of the EAR) and how to use the Country Chart (Supplement No. 1 to part 
738 of the EAR) to determine whether a license is required based upon 
the classification of your item. These steps refer to General 
Prohibitions One (Exports and Reexports), Two (Parts and Components 
Reexports), and Three (Foreign-Produced Direct Product Reexports) for 
all countries except: Cuba and Iran. For these countries, you may skip 
Steps 7 through 11 and go directly to Step 12.
    (3) Controls on activities. Steps 12 through 18 refer to General 
Prohibitions Four through Ten. Those general

[[Page 206]]

prohibitions apply to all items subject to the EAR, not merely those 
items listed on the CCL in part 774 of the EAR. For example, they refer 
to the general prohibitions for persons denied export privileges, 
prohibited end-uses and end-users, countries subject to a comprehensive 
embargoed (e.g., Cuba and Iran), prohibited activities of U.S. persons 
in support of proliferation of weapons of mass destruction, prohibited 
unlading of shipments, compliance with orders, terms and conditions, and 
activities when a violation has occurred or is about to occur.
    (4) General prohibitions. If none of the ten general prohibitions 
applies, you should skip the steps concerning License Exceptions and for 
exports from the United States, review Steps 27 through 29 concerning 
Shipper's Export Declarations to be filed with the U.S. Customs Service, 
Destination Control Statements for export control documents, and 
recordkeeping requirements.
    (e) Is a License Exception available to overcome the license 
requirement? If you decide by reviewing the CCL in combination with the 
Country Chart that a license is required for your destination, you 
should determine whether a License Exception will except you from that 
requirement. Steps 20 through 24 help you determine whether a License 
Exception is available. Note that generally License Exceptions are not 
available to overcome General Prohibitions Four through Ten. However, 
selected License Exceptions for embargoed destinations are specified in 
part 746 of the EAR and License Exceptions for short supply controls are 
specified in part 754 of the EAR. If a License Exception is available 
and the export is from the United States, you should review Steps 26 
through 28 concerning Shipper's Export Declarations to be filed with the 
U.S. Customs Service, Destination Control Statements for export control 
documents and recordkeeping requirements. If a License Exception is not 
available, go on to Steps 25 through 29.
    (f) How do you apply for a license? If you must file a license 
application, you should review the requirements of part 748 of the EAR 
as suggested by Step 26. Then you should review Steps 27 through 29 
concerning Shipper's Export Declarations to be filed with the U.S. 
Customs Service, Destination Control Statements for export control 
documents, and recordkeeping requirements.

[61 FR 12740, Mar. 25, 1996, as amended at 62 FR 25453, May 9, 1997; 65 
FR 38150, June 19, 2000; 69 FR 23628, Apr. 29, 2004; 69 FR 46074, July 
30, 2004]



Sec. 732.2  Steps regarding scope of the EAR.

    Steps 1 though 6 are designed to aid you in determining the scope of 
the EAR. A flow chart describing these steps is contained in Supplement 
No. 2 to part 732.
    (a) Step 1: Items subject to the exclusive jurisdiction of another 
Federal agency. This step is relevant for both exports and reexports. 
Determine whether your item is subject to the exclusive jurisdiction of 
another Federal Agency as provided in Sec. 734.3 of the EAR.
    (1) If your item is subject to the exclusive jurisdiction of another 
Federal agency, comply with the regulations of that agency. You need not 
comply with the EAR and may skip the remaining steps.
    (2) If your item is not subject to the exclusive jurisdiction of 
another federal agency, then proceed to Step 2 in paragraph (b) of this 
section.
    (b) Step 2: Publicly available technology and software. This step is 
relevant for both exports and reexports. Determine if your technology or 
software is publicly available as defined and explained at part 734 of 
the EAR. Supplement No. 1 to part 734 of the EAR contains several 
practical examples describing publicly available technology and software 
that is outside the scope of the EAR. The examples are illustrative, not 
comprehensive. Note that encryption software controlled for EI reasons 
under ECCN 5D002 on the Commerce Control List (refer to Supplement No.1 
to part 774 of the EAR) shall be subject to the EAR even if publicly 
available. Accordingly, the provisions of the EAR concerning the public 
availability of items are not applicable to encryption items controlled 
for ``EI'' reasons under ECCN 5D002.

[[Page 207]]

    (1) If your technology or software is publicly available, and 
therefore outside the scope of the EAR, you may proceed with the export 
or reexport if you are not a U.S. person subject to General Prohibition 
Seven. If you are a U.S. person, go to Step 15 at Sec. 732.3(j) of this 
part. If you are a U.S. person and General Prohibition Seven concerning 
proliferation activity of U.S. persons does not apply, then you may 
proceed with the export or reexport of your publicly available 
technology or software. Note that all U.S. persons are subject to the 
provisions of General Prohibition Seven.
    (2) If your technology or software is not publicly available and you 
are exporting from the United States, skip to Step 7 in Sec. 732.3(b) 
of this part concerning the general prohibitions.
    (3) If you are exporting items from a foreign country, you should 
then proceed to Step 3 in paragraph (c) of this section and the other 
steps concerning the scope of the EAR.
    (c) Step 3: Reexport of U.S.-origin items. This step is appropriate 
only for reexporters. For an item in a foreign country, you should 
determine whether the item is of U.S. origin. If it is of U.S.-origin, 
skip to Step 7 in Sec. 732.3(b) of this part. If it is not of U.S. 
origin, then proceed to Step 4 in paragraph (d) of this section.
    (d) Step 4: Foreign-made items incorporating less than the de 
minimis level of U.S. parts, components, and materials. This step is 
appropriate only for items that are made outside the United States and 
not currently in the United States. Special requirements and 
restrictions apply to items that incorporate U.S. origin encryption 
items (see Sec. 734.4(a)(2) and (b) of the EAR).
    (1) For an item made in a foreign country, you should determine 
whether controlled U.S.-origin parts, components, or materials are 
incorporated as provided in Sec. 734.4 of the EAR. Also, determine the 
value of the U.S.-origin controlled content as provided in Supplement 
No. 2 to part 734 of the EAR.
    (2) To determine the value of the U.S.-origin controlled content, 
you should classify the U.S.-origin content on the CCL, determine those 
items that would require a license from BIS for reexport to the ultimate 
destination of the foreign-made product if such parts, components, or 
materials were reexported to that destination in the form received, and 
divide the total value of the controlled U.S. parts, components, and 
materials incorporated into the foreign-made item by the sale price of 
the foreign-made item.
    (3) If no U.S. parts, components, or materials are incorporated or 
if the incorporated U.S. parts, components, and materials are below the 
de minimis level described in Sec. 734.4 of the EAR, then the foreign-
made item is not subject to the EAR by reason of the parts and 
components rule, the classification of a foreign-made item is irrelevant 
in determining the scope of the EAR, and you should skip Step 4 and go 
on to consider Step 6 regarding the foreign-produced direct product 
rule.
    (4) If controlled parts, components, or materials are incorporated 
and are above the de minimis level, then you should go on to Step 5.
    (e) Step 5: Foreign-made items incorporating more than the de 
minimis level of U.S. parts, components, or materials. This step is 
appropriate only for foreign-made items incorporating certain U.S. 
parts. If the incorporated U.S. parts exceed the relevant de minimis 
level, then your export from abroad is subject to the EAR. You then 
should skip to Step 7 at Sec. 732.3 of this part and consider the steps 
regarding all other general prohibitions, License Exceptions, and other 
requirements.
    (f) Step 6: Foreign-made items produced with certain U.S. technology 
for export to specified destinations. This step is appropriate for 
foreign-made items in foreign countries.
    (1) If your foreign-produced item is described in an entry on the 
CCL and the Country Chart requires a license to your export or reexport 
destination for national security reasons, you should determine whether 
your item is subject to General Prohibition Three (Foreign-Produced 
Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is 
subject to the EAR if it is captured by General Prohibition Three 
(Foreign-Produced Direct Product Reexports), and that prohibition 
applies if your transaction meets each of the following conditions:

[[Page 208]]

    (i) Country scope of prohibition. Your export or reexport 
destination for the direct product is Cuba or a destination in Country 
Group D:1 (see Supplement No. 1 to part 740 of the EAR) (reexports of 
foreign-produced direct products exported to other destinations are not 
subject to General Prohibition Three);
    (ii) Scope of technology or software used to create direct products 
subject to the prohibition. Technology or software that was used to 
create the foreign-produced direct product, and such technology or 
software that was subject to the EAR and required a written assurance as 
a supporting document for a license or as a precondition for the use of 
License Exception TSR in Sec. 740.6 of the EAR (reexports of foreign-
produced direct products created with other technology and software are 
not subject to General Prohibition Three); and
    (iii) Scope of direct products subject to the prohibition. The 
foreign-produced direct products are subject to national security 
controls as designated on the proper ECCN of the Commerce Control List 
in part 774 of the EAR (reexports of foreign-produced direct products 
not subject to national security controls are not subject to General 
Prohibition Three).
    (2) License Exceptions. Each License Exception described in part 740 
of the EAR overcomes this General Prohibition Three if all terms and 
conditions of a given License Exception are met by the exporter or 
reexporter.
    (3) Subject to the EAR. If your item is captured by the foreign-
produced direct product control at General Prohibition Three, then your 
export from abroad is subject to the EAR. You should next consider the 
steps regarding all other general prohibitions, License Exceptions, and 
other requirements. If your item is not captured by General Prohibition 
Three, then your export from abroad is not subject to the EAR. You have 
completed the steps necessary to determine whether your transaction is 
subject to the EAR, and you may skip the remaining steps. Note that in 
summary, items in foreign countries are subject to the EAR when they 
are:
    (i) U.S.-origin commodities, software and technology unless 
controlled for export exclusively by another Federal agency or unless 
publicly available;
    (ii) Foreign-origin commodities, software, and technology that are 
within the scope of General Prohibition Two (Parts and Components 
Reexports), or General Prohibition Three (Foreign-Produced Direct 
Product Reexports). (However, such foreign-made items are also outside 
the scope of the EAR if they are controlled for export exclusively by 
another Federal agency or publicly available.)

[61 FR 12740, Mar. 25, 1996, as amended at 61 FR 64274, Dec. 4, 1996; 61 
FR 68577, Dec. 30, 1996; 62 FR 25453, May 9, 1997; 63 FR 50520, Sept. 
22, 1998; 65 FR 38150, June 19, 2000; 65 FR 62604, Oct. 19, 2000; 67 FR 
38860, June 6, 2002; 69 FR 23628, Apr. 29, 2004; 69 FR 71359, Dec. 9, 
2004]



Sec. 732.3  Steps regarding the ten general prohibitions.

    (a) Introduction. If your item or activity is subject to the scope 
of the EAR, you should then consider each of the ten general 
prohibitions listed in part 736 of the EAR. General Prohibitions One 
((Exports and Reexports), Two (Parts and Components Reexports), and 
Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2(b) (1), 
(2), and (3) of the EAR) are product controls that are shaped and 
limited by parameters specified on the CCL and Country Chart. General 
Prohibitions Four through Ten are prohibitions on certain activities 
that are not allowed without authorization from BIS, and these 
prohibitions apply to all items subject to the EAR unless otherwise 
specified (Sec. 736.2(b) (4) through (10) of the EAR).
    (b) Step 7: Classification. (1) You should classify your items in 
the relevant entry on the CCL, and you may do so on your own without the 
assistance of BIS. You are responsible for doing so correctly, and your 
failure to correctly classify your items does not relieve you of the 
obligation to obtain a license when one is required by the EAR.
    (2) You have a right to request the applicable classification of 
your item

[[Page 209]]

from BIS, and BIS has a duty to provide that classification to you. For 
further information on how to obtain classification assistance from BIS, 
see part 748 of the EAR.
    (3) For items subject to the EAR but not listed on the CCL, the 
proper classification is EAR99. This number is a ``basket'' for items 
not specified under any CCL entry and appears at the end of each 
Category on the CCL.
    (c) Step 8: Country of ultimate destination. You should determine 
the country of ultimate destination. The country of destination 
determines the applicability of several general prohibitions, License 
Exceptions, and other requirements. Note that part 754 of the EAR 
concerning short supply controls is self-contained and is the only 
location in the EAR that contains both the prohibitions and exceptions 
applicable to short supply controls.
    (d) Step 9: Reason for control and the Country Chart. (1) Reason for 
control and column identifier within the Export Control Classification 
Number (ECCN). Once you have determined that your item is controlled by 
a specific ECCN, you must use information contained in the ``License 
Requirements'' section of that ECCN in combination with the Country 
Chart to decide whether a license is required under General Prohibitions 
One, Two, or Three to a particular destination. The CCL and the Country 
Chart are taken together to define these license requirements. The 
applicable ECCN will indicate the reason or reasons for control for 
items within that ECCN. For example, ECCN 6A007 is controlled for 
national security, missile technology, and anti-terrorism reasons.
    (2) Reason for control within the Country Chart. With each of the 
applicable Country Chart column identifiers noted in the correct ECCN, 
turn to the Country Chart. Locate the correct Country Chart column 
identifier on the horizontal axis, and determine whether an ``X'' is 
marked in the cell next to the destination in question. Consult Sec. 
738.4 of the EAR for comprehensive instructions on using the Country 
Chart and a detailed example.
    (i) An ``X'' in the cell or cells for the relevant country and 
reason(s) for control column indicates that a license is required for 
General Prohibitions One (Exports and Reexports in the Form Received), 
Two (Parts and Components Reexports), and Three (Foreign-Produced Direct 
Product Reexports). (See Sec. 736.2 (b)(1), (b)(2), and (b)(3) of the 
EAR).
    (ii) If one or more cells have an ``X'' in the relevant column, a 
license is required unless you qualify for a License Exception described 
in part 740 of the EAR. If a cell does not contain an ``X'' for your 
destination in one or more relevant columns, a license is not required 
under the CCL and the Country Chart.
    (iii) Additional controls may apply to your export. You must go on 
to steps 12 through 18 described in paragraphs (g) to (m) of this 
section to determine whether additional limits described in General 
Prohibition Two (Parts and Components Reexports) and General Prohibition 
Three (Foreign-Produced Direct Product Reexports ) apply to your 
proposed transaction. If you are exporting an item from the United 
States, you should skip Step 10 and Step 11. Proceed directly to Step 12 
in paragraph (g) of this section.
    (3) License requirements not on the Country Chart. There are two 
instances where the Country Chart cannot be used to determine if a 
license is required. Items controlled for short supply reasons are not 
governed by the Country Chart. Part 754 of the EAR contains license 
requirements and License Exceptions for items subject to short supply 
controls. A limited number of ECCNs contained on the CCL do not identify 
a Country Chart column identifier. In these instances, the ECCN states 
whether a license is required and for which destinations. See Sec. 
738.3(a) of the EAR for a list of the ECCNs for which you do not need to 
consult the Country Chart to determine licensing requirements.
    (4) Destinations subject to embargo provisions. The Country Chart 
does not apply to Cuba and Iran; and for those countries you should 
review the embargo provisions at part 746 of the EAR and may skip this 
step concerning the Country Chart. For Iraq and Rwanda, the Country 
Chart provides for certain license requirements, and part 746 of

[[Page 210]]

the EAR provides additional requirements.
    (5) Items subject to the EAR but not on the CCL. Items subject to 
the EAR that are not on the CCL are properly classified EAR99. For such 
items, you may skip this step and proceed directly with Step 12 in 
paragraph (g) of this section.
    (e) Step 10: Foreign-made items incorporating U.S.-origin items and 
the de minimis rule. (1) Parts and components rule. The following 
considerations are appropriate for items abroad and are the same steps 
necessary to determine whether a foreign-made item incorporating U.S. 
parts, components, or materials is subject to the EAR. If your foreign-
made item is described in an entry on the CCL and the Country Chart 
requires a license to your export or reexport destination, you should 
determine whether the controlled U.S.-origin commodities, software, or 
technology incorporated into the foreign-made item exceeds the de 
minimis level applicable to the ultimate destination of the foreign-made 
item, as follows:
    (i) A 10% de minimis level to embargoed and terrorist-supporting 
countries; or
    (ii) A 25% de minimis level to all other countries.
    (2) Guidance for calculations. For guidance on how to calculate the 
U.S.-controlled content, refer to Supplement No. 2 to part 734 of the 
EAR. Note that under certain rules issued by the Office of Foreign 
Assets Control, certain exports from abroad by U.S.-owned or controlled 
entities may be prohibited notwithstanding the de minimis provisions of 
the EAR. In addition, the de minimis exclusions from the parts and 
components rule do not relieve U.S. persons of the obligation to refrain 
from supporting the proliferation of weapons of mass-destruction and 
missiles as provided in General Prohibition Seven (U.S. Person 
Proliferation Activity) described in Sec. 736.2(b)(7) of the EAR. Note 
that foreign-made items that incorporate U.S.-origin items controlled 
for ``EI'' reasons under ECCN 5A002, 5D002 or 5E002 on the Commerce 
Control List (Supplement No.1 to Part 774 of the EAR) are subject to the 
EAR even if they incorporate less than the de minimis level of U.S. 
content. However, exporters may, as part of a review request, ask that 
certain 5A002 and 5D002 parts, components and software also be made 
eligible for de minimis treatment (see Sec. 734.4(b) of the EAR).
    (f) Step 11: Foreign-produced direct product. The following 
considerations are appropriate for items abroad and are the same 
considerations necessary to determine whether a foreign-produced direct 
product is subject to the EAR under Step 6 in Sec. 732.2(f) of this 
part.
    (1) If your foreign-produced item is described in an entry on the 
CCL and the Country Chart requires a license to your export or reexport 
destination for national security reasons, you must determine whether 
your item is subject to General Prohibition Three (Foreign-Produced 
Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is 
subject to this general prohibition if your transaction meets each of 
the following conditions:
    (i) Country scope of prohibition. Your export or reexport 
destination for the direct product is Cuba or a destination in Country 
Group D:1 (see Supplement No. 1 to part 740 of the EAR) (reexports of 
foreign-produced direct products exported to other destinations are not 
subject to General Prohibition Three described in Sec. 736.2(b)(3) of 
the EAR);
    (ii) Scope of technology or software used to create direct products 
subject to the prohibition. Technology or software that was used to 
create the foreign-produced direct product, and such technology or 
software that was subject to the EAR and required a written assurance as 
a supporting document for a license or as a precondition for the use of 
License Exception TSR in Sec. 740.6 of the EAR (reexports of foreign-
produced direct products created with other technology and software are 
not subject to General Prohibition Three); and
    (iii) Scope of direct products subject to the prohibition. The 
foreign-produced direct products are controlled for national security 
reasons indicated in an ECCN on the CCL (reexports of foreign-produced 
direct products not subject to national security controls are not 
subject to General Prohibition Three).
    (2) License Exceptions. Each License Exception described in part 740 
of the EAR overcomes General Prohibition

[[Page 211]]

Three (Foreign-Produced Direct Product Reexports) if all terms and 
conditions of a given License Exception are met by the exporter or 
reexporter.
    (g) Step 12: Persons denied export privileges. (1) Determine whether 
your transferee, ultimate end-user, any intermediate consignee, or any 
other party to a transaction is a person denied export privileges (see 
part 764 of the EAR). It is a violation of the EAR to engage in any 
activity that violates the terms or conditions of a denial order. 
General Prohibition Four (Denial Orders) applies to all items subject to 
the EAR, i.e., both items on the CCL and within EAR99.
    (2) There are no License Exceptions to General Prohibition Four 
(Denial Orders). The prohibition concerning persons denied export 
privileges may be overcome only by a specific authorization from BIS, 
something that is rarely granted.
    (h) STEP 13: Prohibited end-uses and end-users. (1) Review the end-
uses and end-users prohibited under General Prohibition Five (End-Use 
and End-User) (Sec. 736.2(b)(5) of the EAR) described in part 744 of 
the EAR. Part 744 of the EAR contains all the end-use and end-user 
license requirements, and those are in addition to the license 
requirements under General Prohibitions One (Exports and Reexports), Two 
(Parts and Components Reexports), and Three (Foreign-produced Direct 
Product Reexports). Unless otherwise indicated, the license requirements 
of General Prohibition Five (End-Use and End-User) described in part 744 
of the EAR apply to all items subject to the EAR, i.e. both items on the 
CCL and within EAR99. Moreover, the requirements of General Prohibition 
Five (End-Use and End-User) are in addition to various end-use and end-
user limitations placed on certain License Exceptions.
    (2) Under License Exception TSU (Sec. 740.13 of the EAR), operation 
technology and software, sales technology, and software updates overcome 
General Prohibition Five (End-Use and End-User) (Sec. 736.2(b)(5) of 
the EAR) if all terms and conditions of these provisions are met by the 
exporter or reexporter.
    (i) Step 14: Embargoed countries and special destinations. If your 
destination for any item is Cuba, Iran, Iraq, or Rwanda you must 
consider the requirements of parts 742 and 746 of the EAR. Unless 
otherwise indicated, General Prohibition Six (Embargo) applies to all 
items subject to the EAR, i.e. both items on the CCL and within EAR99. 
You may not make an export or reexport contrary to the provisions of 
part 746 of the EAR without a license unless:
    (1) You are exporting or reexporting only publicly available 
technology or software or other items outside the scope of the EAR, or
    (2) You qualify for a License Exception referenced in part 746 of 
the EAR concerning embargoed destinations. You may not use a License 
Exception described in part 740 of the EAR to overcome General 
Prohibition Six (Embargo) (Sec. 736.2(b)(6) of the EAR) unless it is 
specifically authorized in part 746 of the EAR. Note that part 754 of 
the EAR concerning short supply controls is self-contained and is the 
only location in the EAR for both the prohibitions and exceptions 
applicable to short supply controls.
    (j) Step 15: Proliferation activity of U.S. persons unrelated to 
exports and reexports. (1) Review the scope of activity prohibited by 
General Prohibition Seven (U.S. Person Proliferation Activity) (Sec. 
736.2(b)(7) of the EAR) as that activity is described in Sec. 744.6 of 
the EAR. Keep in mind that such activity is not limited to exports and 
reexports and is not limited to items subject to General Prohibition One 
(Exports and Reexports), Two (Parts and Components Reexports), and Three 
(Foreign-Produced Direct Product Reexports). Moreover, such activity 
extends to services and dealing in wholly foreign-origin items in 
support of the specified proliferation activity and is not limited to 
items listed on the CCL or included in EAR99.
    (2) Review the definition of U.S. Person in part 744 of the EAR.
    (k) Step 16: In-transit. Shippers and operators of vessels or 
aircraft should review General Prohibition Eight (In-Transit) to 
determine the countries in which you may not unladen or ship certain 
items in-transit. General Prohibition Eight applies to all items subject 
to the EAR, i.e. both items on the CCL and within EAR99.

[[Page 212]]

    (l) Step 17: Review orders, terms, and conditions. Review the 
orders, terms, and conditions applicable to your transaction. General 
Prohibition Nine (Orders, Terms, and Conditions) prohibits the violation 
of any orders, terms, and conditions imposed under the EAR. Terms and 
conditions are frequently contained in licenses. In addition, the ten 
general prohibitions (part 736 of the EAR) and the License Exceptions 
(part 740 of the EAR) impose terms and conditions or limitations on your 
proposed transactions and use of License Exceptions. A given license or 
License Exception may not be used unless each relevant term or condition 
is met.
    (m) Step 18: Review the ``Know Your Customer'' Guidance and General 
Prohibition Ten (Knowledge Violation to Occur). License requirements 
under the EAR are determined solely by the classification, end-use, end-
user, ultimate destination, and conduct of U.S. persons. Supplement No. 
1 to part 732 of the EAR is intended to provide helpful guidance 
regarding the process for the evaluation of information about customers, 
end-uses, and end-users. General Prohibition Ten (Knowledge Violation to 
Occur) prohibits anyone from proceeding with a transaction with 
knowledge that a violation of the EAR has occurred or is about to occur. 
It also prohibits related shipping, financing, and other services. 
General Prohibition Ten applies to all items subject to the EAR, i.e. 
both items on the CCL and within EAR99.
    (n) Step 19: Complete the review of the general prohibitions. After 
completion of Steps described in this section and review of all ten 
general prohibitions in part 736 of the EAR, including cross-referenced 
regulations in the EAR, you will know which, if any, of the ten general 
prohibitions of the EAR apply to you and your contemplated transaction 
or activity.
    (1) If none of the ten general prohibitions is applicable to your 
export from the United States, no license from BIS is required, you do 
not need to qualify for a License Exception under part 740 of the EAR. 
You should skip the Steps in Sec. 732.4 of this part regarding License 
Exceptions and proceed directly to the Steps in Sec. 732.5 of this part 
regarding recordkeeping, clearing the Bureau of Customs and Border 
Protection with the appropriate Shipper's Export Declaration or 
Automated Export System record, and using the required Destination 
Control Statement.
    (2) If none of the ten general prohibitions is applicable to your 
reexport or export from abroad, no license is required and you should 
skip all remaining Steps.
    (3) If one or more of the ten general prohibitions are applicable, 
continue with the remaining steps.

[61 FR 12740, Mar. 25, 1996, as amended at 61 FR 64274, Dec. 4, 1996; 61 
FR 68577, Dec. 30, 1996; 62 FR 25453, May 9, 1997; 63 FR 50520, Sept. 
22, 1998; 65 FR 38150, June 19, 2000; 65 FR 62604, Oct. 19, 2000; 67 FR 
38860, June 6, 2002; 67 FR 54952, Aug. 27, 2002; 67 FR 70546, Nov. 25, 
2002; 68 FR 50472, Aug. 21, 2003; 69 FR 3005, Jan. 22, 2004; 69 FR 5687, 
Feb. 6, 2004; 69 FR 23628, Apr. 29, 2004; 69 FR 46074, July 30, 2004]



Sec. 732.4  Steps regarding License Exceptions.

    (a) Introduction to Steps for License Exceptions. If your export or 
reexport is subject to the EAR and is subject to General Prohibitions 
One (Exports and Reexports), Two (Parts and Components Reexports), or 
Three (Foreign-Produced Direct Product Reexports), consider the steps 
listed in paragraph (b) of this section. If your export or reexport is 
subject to General Prohibitions Four (Denial Orders), Seven (U.S. Person 
Proliferation Activity), Eight (In-Transit), Nine (Orders, Terms, and 
Conditions), or Ten (Knowledge Violation to Occur), there are no License 
Exceptions available for your export or reexport. If your export is 
subject to General Prohibition Five (End-Use End-User), consult part 744 
of the EAR. If your export or reexport is subject to General Prohibition 
Six (Embargo), consult part 746 of the EAR for applicable License 
Exceptions.
    (b) Steps for License Exceptions. (1) Step 20: Applicability of 
General Prohibitions. Determine whether any one or more of the general 
prohibitions described in Sec. 736.2(b) of the EAR apply to your export 
or reexport. If no general prohibition applies to your export or 
reexport, then you may proceed with your export or reexport and need not 
review part 740 of the EAR regarding License Exceptions. You are 
reminded

[[Page 213]]

of your recordkeeping obligations related to the clearance of the U.S. 
Customs Service provided in parts 762 and 758 of the EAR.
    (2) Step 21: Applicability of restrictions on all License 
Exceptions. Determine whether any one or more of the restrictions in 
Sec. 740.2 of the EAR applies to your export or reexport. If any one or 
more of these restrictions apply, there are no License Exceptions 
available to you, and you must either obtain a license or refrain from 
the export or reexport.
    (3) Step 22: Terms and conditions of the License Exceptions. (i) If 
none of the restrictions in Sec. 740.2 of the EAR applies, then review 
each of the License Exceptions to determine whether any one of them 
authorizes your export or reexport. Eligibility for License Exceptions 
is based on the item, the country of ultimate destination, the end-use, 
and the end-user, along with any special conditions imposed within a 
specific License Exception.
    (ii) You may meet the conditions for more than one License 
Exception. Moreover, although you may not qualify for some License 
Exceptions you may qualify for others. Review the broadest License 
Exceptions first, and use any License Exception available to you. You 
are not required to use the most restrictive applicable License 
Exception. If you fail to qualify for the License Exception that you 
first consider, you may consider any other License Exception until you 
have determined that no License Exception is available.
    (iii) License Exceptions TMP, RPL, BAG, AVS, GOV, and TSU authorize 
exports notwithstanding the provisions of the CCL. List-based License 
Exceptions (LVS, GBS, CIV, TSR, and CTP) are available only to the 
extent specified on the CCL. Part 740 of the EAR provides authorization 
for reexports only to the extent each License Exception expressly 
authorizes reexports. License Exception APR authorizes reexports only.
    (iv) If you are exporting under License Exceptions GBS, CIV, LVS, 
CTP, TSR, or GOV, you should review Sec. 743.1 of the EAR to determine 
the applicability of certain reporting requirements.
    (4) Step 23: Scope of License Exceptions. Some License Exceptions 
are limited by country or by type of item.
    (i) Countries are arranged in country groups for ease of reference. 
For a listing of country groups, please refer to Supplement No. 1 to 
part 740 of the EAR. Unless otherwise indicated in a License Exception, 
License Exceptions do not apply to any exports or reexports to embargoed 
destinations. If your export or reexport is subject to General 
Prohibition Six (Embargo) for embargoed destinations, License Exceptions 
are only available to the extent specifically provided in part 746 of 
the EAR concerning embargoed destinations.
    (ii) Special commodity controls apply to short supply items. No 
License Exceptions described in part 740 of the EAR may be used for 
items listed on the CCL as controlled for Short Supply reasons. License 
Exceptions for short supply items are found in part 754 of the EAR.
    (5) Step 24: Compliance with all terms and conditions. If a License 
Exception is available, you may proceed with your export or reexport. 
However, you must meet all the terms and conditions required by the 
License Exception that you determined authorized your export or 
reexport. You must also consult part 758 and 762 of the EAR to determine 
your recordkeeping and documentation requirements.
    (6) Step 25: License requirements. If no License Exception is 
available, then you must either obtain a license before proceeding with 
your export or reexport or you must refrain from the proposed export or 
reexport.
    (7) Step 26: License applications. If you are going to file a 
license application with BIS, you should first review the requirements 
at part 748 of the EAR. Exporters, reexporters, and exporters from 
abroad should review the instructions concerning applications and 
required support documents prior to submitting an application for a 
license.

[61 FR 12740, Mar. 25, 1996, as amended at 61 FR 64274, Dec. 4, 1996; 63 
FR 2456, Jan. 15, 1998]

[[Page 214]]



Sec. 732.5  Steps regarding Shipper's Export Declaration or Automated 
Export System record, Destination Control Statements, and recordkeeping.

    (a) Step 27: Shipper's Export Declaration (SED) or Automated Export 
System (AES) record. Exporters or agents authorized to complete the 
Shipper's Export Declaration (SED), or to file SED information 
electronically using the Automated Export System (AES), should review 
Sec. 758.1 of the EAR to determine when an SED is required and what 
export control information should be entered on the SED or AES record. 
More detailed information about how to complete an SED or file the SED 
information electronically using AES may be found in the Bureau of 
Census Foreign Trade Statistics Regulations (FTSR) at 15 CFR part 30. 
Reexporters and firms exporting from abroad may skip Steps 27 through 29 
and proceed directly to Sec. 732.6.
    (1) Entering license authority. You must enter the correct license 
authority for your export on the SED or AES record (License number, 
License Exception symbol, or No License Required designator ``NLR'') as 
appropriate. See Sec. 758.1(g) of the EAR and 15 CFR 30.7(m) of the 
FTSR.
    (i) License number and expiration date. If you are exporting under 
the authority of a license, you must enter the license number on the SED 
or AES record. The expiration date must be entered on paper versions of 
the SED only.
    (ii) License Exception. If you are exporting under the authority of 
a License Exception, you must enter the correct License Exception symbol 
(e.g., LVS, GBS, CIV) on the SED or AES record. See Sec. 740.1 and 
Sec. 740.2 of the EAR.
    (iii) NLR. If you are exporting items for which no license is 
required, you must enter the designator NLR. You should use the NLR 
designator in two circumstances: first, when the items to be exported 
are subject to the EAR but not listed on the Commerce Control List (CCL) 
(i.e., items that are classified as EAR99), and second, when the items 
to be exported are listed on the CCL but do not require a license. Use 
of the NLR designator is also a representation that no license is 
required under any of the General Prohibitions set forth in part 736 of 
the EAR.
    (2) Item description. You must enter an item description identical 
to the item description on the license when a license is required, or 
enter an item description sufficient in detail to permit review by the 
U.S. Government and verification of the Schedule B Number (or Harmonized 
Tariff Schedule number) for License Exception shipments or shipments for 
which No License is Required (NLR). See Sec. 758.1(g) of the EAR; and 
15 CFR 30.7(l) of the FTSR.
    (3) Entering the ECCN. You must enter the correct Export Control 
Classification Number (ECCN) on the SED or AES record for all licensed 
and License Exception shipments, and ``No License Required'' (NLR) 
shipments of items having a reason for control other than anti-terrorism 
(AT). The only exception to this requirement would be the return of 
unwanted foreign origin items, meeting the provisions of License 
Exception TMP, under Sec. 740.9(b)(3). See Sec. 758.1(g) of the EAR.
    (b) Step 28: Destination Control Statement. The Destination Control 
Statement (DCS) must be entered on the invoice and on the bill of 
lading, air waybill, or other export control document that accompanies 
the shipment from its point of origin in the United States to the 
ultimate consignee or end-user abroad. The person responsible for 
preparation of those documents is responsible for entry of the DCS. The 
DCS is required for all exports from the United States of items on the 
Commerce Control List and is not required for items classified as EAR99, 
unless the export may be made under License Exception BAG or GFT (see 
part 740 of the EAR). Reexporters should review Sec. 752.15 of the EAR 
for DCS requirements when using a Special Comprehensive License; 
otherwise, DCS requirements do not apply to reexports. See Sec. 758.6 
of the EAR.
    (c) Step 29: Recordkeeping. Records of transactions subject to the 
EAR must be maintained for five years in accordance with the 
recordkeeping provisions of part 762 of the EAR.

[65 FR 42568, July 10, 2000]

[[Page 215]]



Sec. 732.6  Steps for other requirements.

    Sections 732.1 through 732.4 of this part are useful in determining 
the license requirements that apply to you. Other portions of the EAR 
impose other obligations and requirements. Some of them are:
    (a) Requirements relating to the use of a license in Sec. 758.4 of 
the EAR.
    (b) Obligations of carriers, forwarders, exporters and others to 
take specific steps and prepare and deliver certain documents to assure 
that items subject to the EAR are delivered to the destination to which 
they are licensed or authorized by a License Exception or some other 
provision of the regulations in Sec. 758.1 through Sec. 758.6 of the 
EAR.
    (c) Duty of carriers to return or unload shipments at the direction 
of U.S. Government officials (see Sec. 758.8 of the EAR).
    (d) Specific obligations imposed on parties to Special Comprehensive 
licenses in part 752 of the EAR.
    (e) Recordkeeping requirements imposed in part 762 of the EAR.
    (f) Requirements of part 764 of the EAR to disclose facts that may 
come to your attention after you file a license application or make 
other statements to the government concerning a transaction or proposed 
transaction that is subject to the EAR.
    (g) Certain obligations imposed by part 760 of the EAR on parties 
who receive requests to take actions related to foreign boycotts and 
prohibits certain actions relating to those boycotts.

[61 FR 12740, Mar. 25, 1996, as amended at 65 FR 42568, July 10, 2000]

[[Page 216]]

                        Supplement 1 to Part 732
[GRAPHIC] [TIFF OMITTED] TR06FE04.000


[69 FR 5687, Feb. 6, 2004]

[[Page 217]]

                        Supplement 2 to Part 732
[GRAPHIC] [TIFF OMITTED] TR06FE04.001


[69 FR 5687, Feb. 6, 2004]

[[Page 218]]

Supplement No. 3 to Part 732--BIS's ``Know Your Customer'' Guidance and 
                                Red Flags

                     ``Know Your Customer'' Guidance

    Various requirements of the EAR are dependent upon a person's 
knowledge of the end-use, end-user, ultimate destination, or other facts 
relating to a transaction or activity. These provisions include the 
nonproliferation-related ``catch-all'' sections and the prohibition 
against proceeding with a transaction with knowledge that a violation of 
the EAR has occurred or is about to occur.
    (a) BIS provides the following guidance on how individuals and firms 
should act under this knowledge standard. This guidance does not change 
or interpret the EAR.
    (1) Decide whether there are ``red flags''. Take into account any 
abnormal circumstances in a transaction that indicate that the export 
may be destined for an inappropriate end-use, end-user, or destination. 
Such circumstances are referred to as ``red flags''. Included among 
examples of red flags are orders for items that are inconsistent with 
the needs of the purchaser, a customer declining installation and 
testing when included in the sales price or when normally requested, or 
requests for equipment configurations that are incompatible with the 
stated destination (e.g., 120 volts in a country with 220 volts). 
Commerce has developed lists of such red flags that are not all-
inclusive but are intended to illustrate the types of circumstances that 
should cause reasonable suspicion that a transaction will violate the 
EAR.
    (2) If there are ``red flags'', inquire. If there are no ``red 
flags'' in the information that comes to your firm, you should be able 
to proceed with a transaction in reliance on information you have 
received. That is, absent ``red flags'' (or an express requirement in 
the EAR), there is no affirmative duty upon exporters to inquire, 
verify, or otherwise ``go behind'' the customer's representations. 
However, when ``red flags'' are raised in information that comes to your 
firm, you have a duty to check out the suspicious circumstances and 
inquire about the end-use, end-user, or ultimate country of destination. 
The duty to check out ``red flags'' is not confined to the use of 
License Exceptions affected by the ``know'' or ``reason to know'' 
language in the EAR. Applicants for licenses are required by part 748 of 
the EAR to obtain documentary evidence concerning the transaction, and 
misrepresentation or concealment of material facts is prohibited, both 
in the licensing process and in all export control documents. You can 
rely upon representations from your customer and repeat them in the 
documents you file unless red flags oblige you to take verification 
steps.
    (3) Do not self-blind. Do not cut off the flow of information that 
comes to your firm in the normal course of business. For example, do not 
instruct the sales force to tell potential customers to refrain from 
discussing the actual end-use, end-user, and ultimate country of 
destination for the product your firm is seeking to sell. Do not put on 
blinders that prevent the learning of relevant information. An 
affirmative policy of steps to avoid ``bad'' information would not 
insulate a company from liability, and it would usually be considered an 
aggravating factor in an enforcement proceeding.
    (4) Employees need to know how to handle ``red flags''. Knowledge 
possessed by an employee of a company can be imputed to a firm so as to 
make it liable for a violation. This makes it important for firms to 
establish clear policies and effective compliance procedures to ensure 
that such knowledge about transactions can be evaluated by responsible 
senior officials. Failure to do so could be regarded as a form of self-
blinding.
    (5) Reevaluate all the information after the inquiry. The purpose of 
this inquiry and reevaluation is to determine whether the ``red flags'' 
can be explained or justified. If they can, you may proceed with the 
transaction. If the ``red flags'' cannot be explained or justified and 
you proceed, you run the risk of having had ``knowledge'' that would 
make your action a violation of the EAR.
    (6) Refrain from the transaction or advise BIS and wait. If you 
continue to have reasons for concern after your inquiry, then you should 
either refrain from the transaction or submit all the relevant 
information to BIS in the form of an application for a license or in 
such other form as BIS may specify.
    (b) Industry has an important role to play in preventing exports and 
reexports contrary to the national security and foreign policy interests 
of the United States. BIS will continue to work in partnership with 
industry to make this front line of defense effective, while minimizing 
the regulatory burden on exporters. If you have any question about 
whether you have encountered a ``red flag'', you may contact the Office 
of Export Enforcement at 1-800-424-2980 or the Office of Exporter 
Services at (202) 482-4532.

                                Red Flags

    Possible indicators that an unlawful diversion might be planned by 
your customer include the following:
    1. The customer or purchasing agent is reluctant to offer 
information about the end-use of a product.
    2. The product's capabilities do not fit the buyer's line of 
business; for example, a small bakery places an order for several 
sophisticated lasers.
    3. The product ordered is incompatible with the technical level of 
the country to

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which the product is being shipped. For example, semiconductor 
manufacturing equipment would be of little use in a country without an 
electronics industry.
    4. The customer has little or no business background.
    5. The customer is willing to pay cash for a very expensive item 
when the terms of the sale call for financing.
    6. The customer is unfamiliar with the product's performance 
characteristics but still wants the product.
    7. Routine installation, training or maintenance services are 
declined by the customer.
    8. Delivery dates are vague, or deliveries are planned for out-of-
the-way destinations.
    9. A freight forwarding firm is listed as the product's final 
destination.
    10. The shipping route is abnormal for the product and destination.
    11. Packaging is inconsistent with the stated method of shipment or 
destination.
    12. When questioned, the buyer is evasive or unclear about whether 
the purchased product is for domestic use, export or reexport.

[61 FR 12740, Mar. 25, 1996. Redesignated and amended at 62 FR 25453, 
25456, May 9, 1997]



PART 734_SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS--Table of Contents




Sec.
734.1 Introduction.
734.2 Important EAR terms and principles.
734.3 Items subject to the EAR.
734.4 De minimis U.S. content.
734.5 Activities of U.S. and foreign persons subject to the EAR.
734.6 Assistance available from BIS for determining licensing and other 
          requirements.
734.7 Published information and software.
734.8 Information resulting from fundamental research.
734.9 Educational information.
734.10 Patent applications.
734.11 Government-sponsored research covered by contract controls.
734.12 Effect on foreign laws and regulations.

Supplement No. 1 to Part 734--Questions and Answers--Technology and 
          Software Subject to the EAR
Supplement No. 2 to Part 734--Calculation of Values for De Minimus Rules

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 
12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13020, 61 FR 54079, 
3 CFR, 1996 Comp. p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 
228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of 
August 6, 2004, 69 FR 48763 (August 10, 2004); Notice of November 4, 
2004, 69 FR 64637 (November 8, 2004).

    Source: 61 FR 12746, Mar. 25, 1996, unless otherwise noted.



Sec. 734.1  Introduction.

    (a) In this part, references to the Export Administration 
Regulations (EAR) are references to 15 CFR chapter VII, subchapter C. 
This part describes the scope of the Export Administration Regulations 
(EAR) and explains certain key terms and principles used in the EAR. 
This part provides the rules you need to use to determine whether items 
and activities are subject to the EAR. This part is the first step in 
determining your obligations under the EAR. If neither your item nor 
your activity is subject to the EAR, then you do not have any 
obligations under the EAR and you do not need to review other parts of 
the EAR. If you already know that your item or activity is subject to 
the EAR, you do not need to review this part and you can go on to review 
other parts of the EAR to determine your obligations. This part also 
describes certain key terms and principles used in the EAR. 
Specifically, it includes the following terms: ``subject to the EAR,'' 
``items subject to the EAR,'' ``export,'' and ``reexport.'' These and 
other terms are also included in part 772 of the EAR, Definitions of 
Terms, and you should consult part 772 of the EAR for the meaning of 
terms used in the EAR. Finally, this part makes clear that compliance 
with the EAR does not relieve any obligations imposed under foreign 
laws.
    (b) This part does not address any of the provisions set forth in 
part 760 of the EAR, Restrictive Trade Practices or Boycotts.
    (c) This part does not define the scope of legal authority to 
regulate exports, including reexports, or activities found in the Export 
Administration Act and other statutes. What this part does do is set 
forth the extent to which such legal authority has been exercised 
through the EAR.

[61 FR 12746, Mar. 25, 1996, as amended at 69 FR 5690, Feb. 6, 2004]



Sec. 734.2  Important EAR terms and principles.

    (a) Subject to the EAR--Definition. (1) ``Subject to the EAR'' is a 
term used in the EAR to describe those items and

[[Page 220]]

activities over which BIS exercises regulatory jurisdiction under the 
EAR. Conversely, items and activities that are not subject to the EAR 
are outside the regulatory jurisdiction of the EAR and are not affected 
by these regulations. The items and activities subject to the EAR are 
described in Sec. 734.2 through Sec. 734.5 of this part. You should 
review the Commerce Control List (CCL) and any applicable parts of the 
EAR to determine whether an item or activity is subject to the EAR. 
However, if you need help in determining whether an item or activity is 
subject to the EAR, see Sec. 734.6 of this part. Publicly available 
technology and software not subject to the EAR are described in Sec. 
734.7 through Sec. 734.11 and Supplement No. 1 to this part.
    (2) Items and activities subject to the EAR may also be controlled 
under export-related programs administered by other agencies. Items and 
activities subject to the EAR are not necessarily exempted from the 
control programs of other agencies. Although BIS and other agencies that 
maintain controls for national security and foreign policy reasons try 
to minimize overlapping jurisdiction, you should be aware that in some 
instances you may have to comply with more than one regulatory program.
    (3) The term ``subject to the EAR'' should not be confused with 
licensing or other requirements imposed in other parts of the EAR. Just 
because an item or activity is subject to the EAR does not mean that a 
license or other requirement automatically applies. A license or other 
requirement applies only in those cases where other parts of the EAR 
impose a licensing or other requirement on such items or activities.
    (b) Export and reexport--(1) Definition of export. ``Export'' means 
an actual shipment or transmission of items subject to the EAR out of 
the United States, or release of technology or software subject to the 
EAR to a foreign national in the United States, as described in 
paragraph (b)(2)(ii) of this section. See paragraph (b)(9) of this 
section for the definition that applies to exports of encryption source 
code and object code software subject to the EAR.
    (2) Export of technology or software. (See paragraph (b)(9) for 
provisions that apply to encryption source code and object code 
software.) ``Export'' of technology or software, excluding encryption 
software subject to ``EI'' controls, includes:
    (i) Any release of technology or software subject to the EAR in a 
foreign country; or
    (ii) Any release of technology or source code subject to the EAR to 
a foreign national. Such release is deemed to be an export to the home 
country or countries of the foreign national. This deemed export rule 
does not apply to persons lawfully admitted for permanent residence in 
the United States and does not apply to persons who are protected 
individuals under the Immigration and Naturalization Act (8 U.S.C. 
1324b(a)(3)). Note that the release of any item to any party with 
knowledge a violation is about to occur is prohibited by Sec. 
736.2(b)(10) of the EAR.
    (3) Definition of ``release'' of technology or software. Technology 
or software is ``released'' for export through:
    (i) Visual inspection by foreign nationals of U.S.-origin equipment 
and facilities;
    (ii) Oral exchanges of information in the United States or abroad; 
or
    (iii) The application to situations abroad of personal knowledge or 
technical experience acquired in the United States.
    (4) Definition of reexport. ``Reexport'' means an actual shipment or 
transmission of items subject to the EAR from one foreign country to 
another foreign country; or release of technology or software subject to 
the EAR to a foreign national outside the United States, as described in 
paragraph (b)(5) of this section.
    (5) Reexport of technology or software. Any release of technology or 
source code subject to the EAR to a foreign national of another country 
is a deemed reexport to the home country or countries of the foreign 
national. However, this deemed reexport definition does not apply to 
persons lawfully admitted for permanent residence. The term ``release'' 
is defined in paragraph (b)(3) of this section. Note that the release of 
any item to any party with

[[Page 221]]

knowledge or reason to know a violation is about to occur is prohibited 
by Sec. 736.2(b)(10) of the EAR.
    (6) For purposes of the EAR, the export or reexport of items subject 
to the EAR that will transit through a country or countries or be 
transshipped in a country or countries to a new country or are intended 
for reexport to the new country, are deemed to be exports to the new 
country.
    (7) If a territory, possession, or department of a foreign country 
is not listed on the Country Chart in Supplement No. 1 to part 738 of 
the EAR, the export or reexport of items subject to the EAR to such 
destination is deemed under the EAR to be an export to the foreign 
country. For example, a shipment to the Cayman Islands, a dependent 
territory of the United Kingdom, is deemed to be a shipment to the 
United Kingdom.
    (8) Export or reexport of items subject to the EAR does not include 
shipments among any of the states of the United States, the Commonwealth 
of Puerto Rico, or the Commonwealth of the Northern Mariana Islands or 
any territory, dependency, or possession of the United States. These 
destinations are listed in Schedules C & E, Classification of Country 
and Territory Designations for U.S. Export Statistics, issued by the 
Bureau of the Census.
    (9) Export of encryption source code and object code software. (i) 
For purposes of the EAR, the export of encryption source code and object 
code software means:
    (A) An actual shipment, transfer, or transmission out of the United 
States (see also paragraph (b)(9)(ii) of this section); or
    (B) A transfer of such software in the United States to an embassy 
or affiliate of a foreign country.
    (ii) The export of encryption source code and object code software 
controlled for ``EI'' reasons under ECCN 5D002 on the Commerce Control 
List (see Supplement No. 1 to part 774 of the EAR) includes downloading, 
or causing the downloading of, such software to locations (including 
electronic bulletin boards, Internet file transfer protocol, and World 
Wide Web sites) outside the U.S., or making such software available for 
transfer outside the United States, over wire, cable, radio, electro-
magnetic, photo optical, photoelectric or other comparable 
communications facilities accessible to persons outside the United 
States, including transfers from electronic bulletin boards, Internet 
file transfer protocol and World Wide Web sites, unless the person 
making the software available takes precautions adequate to prevent 
unauthorized transfer of such code. See Sec. 740.13(e) of the EAR for 
notification requirements for exports or reexports of encryption source 
code and object code software considered to be publicly available 
consistent with the provisions of Sec. 734.3(b)(3) of the EAR.
    (iii) Subject to the General Prohibitions described in part 736 of 
the EAR, such precautions for Internet transfers of products eligible 
for export under Sec. 740.17 (b)(2) of the EAR (encryption software 
products, certain encryption source code and general purpose encryption 
toolkits) shall include such measures as:
    (A) The access control system, either through automated means or 
human intervention, checks the address of every system outside of the 
U.S. or Canada requesting or receiving a transfer and verifies such 
systems do not have a domain name or Internet address of a foreign 
government end-user (e.g., ``.gov,'' ``.gouv,'' ``.mil'' or similar 
addresses);
    (B) The access control system provides every requesting or receiving 
party with notice that the transfer includes or would include 
cryptographic software subject to export controls under the Export 
Administration Regulations, and anyone receiving such a transfer cannot 
export the software without a license or other authorization; and
    (C) Every party requesting or receiving a transfer of such software 
must acknowledge affirmatively that the software is not intended for use 
by a government end-user, as defined in part 772, and he or she 
understands the cryptographic software is subject to export controls 
under the Export Administration Regulations and anyone receiving the 
transfer cannot export the software without a license or other 
authorization. BIS will consider acknowledgments in electronic form 
provided they

[[Page 222]]

are adequate to assure legal undertakings similar to written 
acknowledgments.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 68578, Dec. 30, 1996; 
63 FR 50520, Sept. 22, 1998; 64 FR 13339, Mar. 18, 1999; 65 FR 2496, 
Jan. 14, 2000; 67 FR 38860, June 6, 2002]



Sec. 734.3  Items subject to the EAR.

    (a) Except for items excluded in paragraph (b) of this section, the 
following items are subject to the EAR:
    (1) All items in the United States, including in a U.S. Foreign 
Trade Zone or moving intransit through the United States from one 
foreign country to another;
    (2) All U.S. origin items wherever located;
    (3) U.S. origin parts, components, materials or other commodities 
integrated abroad into foreign-made products, U.S. origin software 
commingled with foreign software, and U.S. origin technology commingled 
with foreign technology:
    (i) In any quantity, as described in section 734.4(a) of this part; 
or
    (ii) In quantities exceeding de minimis levels as described in 
section 734.4(c) and Supplement No. 2 of this part;
    (4) Certain foreign-made direct products of U.S. origin technology 
or software, as described in Sec. 736.2(b)(3) of the EAR. The term 
``direct product'' means the immediate product (including processes and 
services) produced directly by the use of technology or software; and
    (5) Certain commodities produced by any plant or major component of 
a plant located outside the United States that is a direct product of 
U.S.-origin technology or software, as described in Sec. 736.2(b)(3) of 
the EAR.
    (b) The following items are not subject to the EAR:
    (1) Items that are exclusively controlled for export or reexport by 
the following departments and agencies of the U.S. Government which 
regulate exports or reexports for national security or foreign policy 
purposes:
    (i) Department of State. The International Traffic in Arms 
Regulations (22 CFR part 121) administered by the Directorate of Defense 
Trade Controls relate to defense articles and defense services on the 
U.S. Munitions List. Section 38 of the Arms Export Control Act (22 
U.S.C. 2778).
    (ii) Treasury Department, Office of Foreign Assets Control (OFAC). 
Regulations administered by OFAC implement broad controls and embargo 
transactions with certain foreign countries. These regulations include 
controls on exports and reexports to certain countries (31 CFR chapter 
V). Trading with the Enemy Act (50 U.S.C. app. section 1 et seq.), and 
International Emergency Economic Powers Act (50 U.S.C. 1701, et seq.)
    (iii) U.S. Nuclear Regulatory Commission (NRC). Regulations 
administered by NRC control the export and reexport of commodities 
related to nuclear reactor vessels (10 CFR part 110). Atomic Energy Act 
of 1954, as amended (42 U.S.C. part 2011 et seq.).
    (iv) Department of Energy (DOE). Regulations administered by DOE 
control the export and reexport of technology related to the production 
of special nuclear materials (10 CFR part 810). Atomic Energy Act of 
1954, as amended (42 U.S.C. section 2011 et seq.).
    (v) Patent and Trademark Office (PTO). Regulations administered by 
PTO provide for the export to a foreign country of unclassified 
technology in the form of a patent application or an amendment, 
modification, or supplement thereto or division thereof (37 CFR part 5). 
BIS has delegated authority under the Export Administration Act to the 
PTO to approve exports and reexports of such technology which is subject 
to the EAR. Exports and reexports of such technology not approved under 
PTO regulations must comply with the EAR.
    (2) Prerecorded phonograph records reproducing in whole or in part, 
the content of printed books, pamphlets, and miscellaneous publications, 
including newspapers and periodicals; printed books, pamphlets, and 
miscellaneous publications including bound newspapers and periodicals; 
children's picture and painting books; newspaper and periodicals, 
unbound, excluding waste; music books; sheet music; calendars and 
calendar blocks, paper; maps, hydrographical charts, atlases, 
gazetteers, globe covers, and globes (terrestrial and celestial); 
exposed and developed microfilm reproducing, in

[[Page 223]]

whole or in part, the content of any of the above; exposed and developed 
motion picture film and soundtrack; and advertising printed matter 
exclusively related thereto.
    (3) Publicly available technology and software, except software 
controlled for ``EI'' reasons under ECCN 5D002 on the Commerce Control 
List and mass market encryption software with symmetric key length 
exceeding 64-bits controlled under ECCN 5D992, that:
    (i) Are already published or will be published as described in Sec. 
734.7 of this part;
    (ii) Arise during, or result from, fundamental research, as 
described in Sec. 734.8 of this part;
    (iii) Are educational, as described in Sec. 734.9 of this part;
    (iv) Are included in certain patent applications, as described in 
Sec. 734.10 of this part.

    Note to paragraphs (b)(2) and (b)(3) of this section: A printed book 
or other printed material setting forth encryption source code is not 
itself subject to the EAR (see Sec. 734.3(b)(2)). However, 
notwithstanding Sec. 734.3(b)(2), encryption source code in electronic 
form or media (e.g., computer diskette or CD ROM) remains subject to the 
EAR (see Sec. 734.3(b)(3)).

    (4) Foreign made items that have less than the de minimis percentage 
of controlled U.S. content based on the principles described in Sec. 
734.4 of this part.
    (c) ``Items subject to the EAR'' consist of the items listed on the 
Commerce Control List (CCL) in part 774 of the EAR and all other items 
which meet the definition of that term. For ease of reference and 
classification purposes, items subject to the EAR which are not listed 
on the CCL are designated as ``EAR99.''

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 65464, Dec. 13, 1996; 
61 FR 68578, Dec. 30, 1996; 62 FR 25456, May 9, 1997; 67 FR 38860, June 
6, 2002; 69 FR 5690, Feb. 6, 2004; 69 FR 5929, Feb. 9, 2004]



Sec. 734.4  De minimis U.S. content.

    (a) Items for which there is no de minimis level. (1) There is no de 
minimis level for the export from a foreign country of a foreign-made 
computer exceeding 190,000 MTOPS containing U.S.-origin controlled 
semiconductors (other than memory circuits) classified under ECCN 3A001 
to Computer Tier 3; or exceeding 28,000 MTOPS containing U.S.-origin 
controlled semiconductors (other than memory circuits) classified under 
ECCN 3A001 or high speed interconnect devices (ECCN 4A994.j) to Computer 
Tier 4 countries described in Sec. 742.12 of the EAR.
    (2) Foreign produced encryption technology that incorporates U.S. 
origin encryption technology controlled by ECCN 5E002 is subject to the 
EAR regardless of the amount of U.S. origin content.
    (3) There is no de minimis level for foreign-made:
    (i) Commercial Standby Instrument Systems (CSIS) of the type 
described in ECCN 7A994 on the Commerce Control List (Supplement No. 1 
to part 774 the EAR) when the CSISs integrate QRS11-00100-100/101 
Micromachined Angular Rate Sensors; and
    (ii) Aircraft of the type described in ECCN 9A991 when such aircraft 
incorporate a CSIS integrating a QRS11-00100-100/101 sensor.

    Note to paragraph (a)(3): QRS11 Micromachined Angular Rate Sensors 
are subject to the export licensing jurisdiction of the U.S. Department 
of State, Directorate of Defense Trade Controls, except when the QRS11-
00100-100/101 version of the sensor is integrated into and included as 
an integral part of a CSIS of the type described in ECCN 7A994 or 
aircraft of the type described in ECCN 9A991 that incorporates a CSIS 
that has such a sensor integrated, or is exported solely for integration 
into such a system.

    (b) Special requirements for certain encryption items. Foreign made 
items that incorporate U.S. origin items that are listed in this 
paragraph are subject to the EAR unless they meet the de minimis level 
and destination requirements of paragraph (c) or (d) of this section and 
the requirements of this paragraph.
    (1) The U.S. origin commodities or software, if controlled under 
ECCNs 5A002.a.1, .a.2, .a.5, or .a.6, or 5D002, must have been:
    (i) Authorized for license exception TSU because of having met the 
notification requirements of Sec. 740.13(e) of the EAR (ECCN 5D002 
only);
    (ii) Authorized for License Exception ENC by BIS after a review 
pursuant to Sec. 740.17(b)(3) of the EAR; or

[[Page 224]]

    (iii) Authorized for License Exception ENC by BIS after a review 
pursuant to Sec. 740.17(b)(2), and the foreign made product will not be 
sent to any destination in Country Group E:1 in Supplement No. 1 to part 
740 of the EAR.
    (2) The U.S. origin encryption items, if controlled under ECCNs 
5A992, 5D992, or 5E992 must:
    (i) Have met the notification requirements of Sec. 742.15(b)(1) of 
the EAR; or
    (ii) Have been determined by BIS to be ``mass market'' commodities 
or software after a review in accordance with Sec. 742.15(b)(2) of the 
EAR (ECCNs 5A992 and 5D992 only); or
    (iii) Be an item described in Sec. 742.15(b)(3)(ii) or Sec. 
742.15(b)(3)(iii) of the EAR.
    Note to paragraph (b): See supplement No. 2 to this part for de 
minimis calculation procedures and reporting requirements.
    (c) Except as provided in paragraphs(a) and (b)(1)(iii) and subject 
to the provisions of paragraphs (b)(1)(i), (b)(1)(ii) and (b)(2) of this 
section, the following reexports are not subject to the EAR when made to 
a terrorist-supporting country listed in Country Group E:1 (see 
Supplement No. 1 to part 740 of the EAR).
    (1) Reexports of a foreign-made commodity incorporating controlled 
U.S.-origin commodities valued at 10% or less of the total value of the 
foreign-made commodity;
    (2) Reexports of foreign-made software incorporating controlled 
U.S.-origin software valued at 10% or less of the total value of the 
foreign-made software; or
    (3) Reexports of foreign technology commingled with or drawn from 
controlled U.S.-origin technology valued at 10% or less of the total 
value of the foreign technology.
    (d) Except as provided in paragraph (a) of this section and subject 
to the provisions of paragraph (b) of this section, the following 
reexports are not subject to the EAR when made to countries other than 
those described in paragraph (c) of this section.
    (1) Reexports of a foreign-made commodity incorporating controlled 
U.S.-origin commodities valued at 25% or less of the total value of the 
foreign-made commodity;
    (2) Reexports of foreign-made software incorporating controlled 
U.S.-origin software valued at 25% or less of the total value of the 
foreign-made software; or
    (3) Reexports of foreign technology commingled with or drawn from 
controlled U.S.-origin technology valued at 25% or less of the total 
value of the foreign technology.
    (e) For purposes of determining de minimis levels, technology and 
source code used to design or produce foreign-made commodities or 
software are not considered to be incorporated into such foreign-made 
commodities or software. Commodities subject only to short supply 
controls are not included in calculating U.S. content.
    (f) You are responsible for making the necessary calculations to 
determine whether the de minimis provisions apply to your situation. See 
Supplement No. 2 to part 734 for guidance regarding calculation of U.S. 
controlled content.
    (g) See Sec. 770.3 of the EAR for principles that apply to 
commingled U.S.-origin technology and software.
    (h) Notwithstanding the provisions of paragraphs (c) and (d) of this 
section, U.S.-origin technology controlled by ECCN 9E003a.1 through 
a.12, and .f, and related controls, and encryption software controlled 
for ``EI'' reasons under ECCN 5D002 or encryption technology controlled 
for ``EI'' reasons under ECCN 5E002 do not lose their U.S.-origin when 
redrawn, used, consulted, or otherwise commingled abroad in any respect 
with other software or technology of any other origin. Therefore, any 
subsequent or similar software or technology prepared or engineered 
abroad for the design, construction, operation, or maintenance of any 
plant or equipment, or part thereof, which is based on or uses any such 
U.S.-origin

[[Page 225]]

software or technology is subject to the EAR.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 54543, Oct. 21, 1996; 
61 FR 65464, Dec. 13, 1996; 61 FR 68578, Dec. 30, 1996; 62 FR 25456, May 
9, 1997; 63 FR 50520, Sept. 22, 1998; 64 FR 13339, Mar. 18, 1999; 64 FR 
42011, Aug. 3, 1999; 65 FR 2496, Jan. 14, 2000; 65 FR 60854, Oct. 13, 
2000; 65 FR 62604, Oct. 19, 2000; 66 FR 42109, Aug. 10, 2001; 67 FR 
10610, 10613, Mar. 8, 2002; 67 FR 38860, June 6, 2002; 68 FR 35784, June 
17, 2003; 69 FR 5690, Feb. 6, 2004; 69 FR 5929, Feb. 9, 2004; 69 FR 
71359, Dec. 9, 2004]



Sec. 734.5  Activities of U.S. and foreign persons subject to the EAR.

    The following kinds of activities are subject to the EAR:
    (a) Certain activities of U.S. persons related to the proliferation 
of nuclear explosive devices, chemical or biological weapons, missile 
technology as described in Sec. 744.6 of the EAR, and the proliferation 
of chemical weapons as described in part 745 of the EAR.
    (b) Activities of U.S. or foreign persons prohibited by any order 
issued under the EAR, including a Denial Order issued pursuant to part 
766 of the EAR.
    (c) Technical assistance by U.S. persons with respect to encryption 
commodities or software as described in Sec. 744.9 of the EAR.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 68578, Dec. 30, 1996; 
64 FR 27141, May 18, 1999; 64 FR 47105, Aug. 30, 1999]



Sec. 734.6  Assistance available from BIS for determining licensing 
and other requirements.

    (a) If you are not sure whether a commodity, software, technology, 
or activity is subject to the EAR, or is subject to licensing or other 
requirements under the EAR, you may ask BIS for an advisory opinion, 
classification, or a determination whether a particular item or activity 
is subject to the EAR. In many instances, including those where the item 
is specially designed, developed, configured, adapted, or modified for 
military application, the item may fall under the licensing jurisdiction 
of the Department of State and may be subject to the controls of the 
International Traffic in Arms Regulations (22 CFR parts 120 through 130) 
(ITAR). In order to determine if the Department of State has licensing 
jurisdiction over an item, you should submit a request for a commodity 
jurisdiction determination to the Department of State, Directorate of 
Defense Trade Controls. Exporters should note that in a very limited 
number of cases, the categories of items may be subject to both the ITAR 
and the EAR. The relevant departments are working to eliminate any 
unnecessary overlaps that may exist.
    (b) As the agency responsible for administering the EAR, BIS is the 
only agency that has the responsibility for determining whether an item 
or activity is subject to the EAR and, if so, what licensing or other 
requirements apply under the EAR. Such a determination only affects EAR 
requirements, and does not affect the applicability of any other 
regulatory programs.
    (c) If you need help in determining BIS licensing or other 
requirements you may ask BIS for help by following the procedures 
described in Sec. 748.3 of the EAR.



Sec. 734.7  Published information and software.

    (a) Information is ``published'' when it becomes generally 
accessible to the interested public in any form, including:
    (1) Publication in periodicals, books, print, electronic, or any 
other media available for general distribution to any member of the 
public or to a community of persons interested in the subject matter, 
such as those in a scientific or engineering discipline, either free or 
at a price that does not exceed the cost of reproduction and 
distribution (See Supplement No. 1 to this part, Questions A(1) through 
A(6));
    (2) Ready availability at libraries open to the public or at 
university libraries (See Supplement No. 1 to this part, Question A(6));
    (3) Patents and open (published) patent applications available at 
any patent office; and
    (4) Release at an open conference, meeting, seminar, trade show, or 
other open gathering.
    (i) A conference or gathering is ``open'' if all technically 
qualified members of the public are eligible to attend and attendees are 
permitted to

[[Page 226]]

take notes or otherwise make a personal record (not necessarily a 
recording) of the proceedings and presentations.
    (ii) All technically qualified members of the public may be 
considered eligible to attend a conference or other gathering 
notwithstanding a registration fee reasonably related to cost and 
reflecting an intention that all interested and technically qualified 
persons be able to attend, or a limitation on actual attendance, as long 
as attendees either are the first who have applied or are selected on 
the basis of relevant scientific or technical competence, experience, or 
responsibility (See Supplement No. 1 to this part, Questions B(1) 
through B(6)).
    (iii) ``Publication'' includes submission of papers to domestic or 
foreign editors or reviewers of journals, or to organizers of open 
conferences or other open gatherings, with the understanding that the 
papers will be made publicly available if favorably received. (See 
Supplement No. 1 to this part, Questions A(1) and A(3)).
    (b) Software and information is published when it is available for 
general distribution either for free or at a price that does not exceed 
the cost of reproduction and distribution. See Supplement No. 1 to this 
part, Questions G(1) through G(3).
    (c) Notwithstanding paragraphs (a) and (b) of this section, note 
that encryption software controlled under ECCN 5D002 for ``EI'' reasons 
on the Commerce Control List and mass market encryption software with 
symmetric key length exceeding 64-bits controlled under ECCN 5D992 
remain subject to the EAR. See Sec. 740.13(e) of the EAR for certain 
exports and reexports under license exception.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 65464, Dec. 13, 1996; 
61 FR 68578, Dec. 30, 1996; 65 FR 2496, Jan. 14, 2000; 67 FR 38861, June 
6, 2002]



Sec. 734.8  Information resulting from fundamental research.

    (a) Fundamental research. Paragraphs (b) through (d) of this section 
and Sec. 734.11 of this part provide specific rules that will be used 
to determine whether research in particular institutional contexts 
qualifies as ``fundamental research''. The intent behind these rules is 
to identify as ``fundamental research'' basic and applied research in 
science and engineering, where the resulting information is ordinarily 
published and shared broadly within the scientific community. Such 
research can be distinguished from proprietary research and from 
industrial development, design, production, and product utilization, the 
results of which ordinarily are restricted for proprietary reasons or 
specific national security reasons as defined in Sec. 734.11(b) of this 
part. (See Supplement No. 1 to this part, Question D(8)). Note that the 
provisions of this section do not apply to encryption software 
controlled under ECCN 5D002 for ``EI'' reasons on the Commerce Control 
List (Supplement No. 1 to Part 774 of the EAR) or to mass market 
encryption software with symmetric key length exceeding 64-bits 
controlled under ECCN 5D992. See Sec. 740.13(e) of the EAR for certain 
exports and reexports under license exception.
    (b) University based research. (1) Research conducted by scientists, 
engineers, or students at a university normally will be considered 
fundamental research, as described in paragraphs (b) (2) through (6) of 
this section. (``University'' means any accredited institution of higher 
education located in the United States.)
    (2) Prepublication review by a sponsor of university research solely 
to insure that the publication would not inadvertently divulge 
proprietary information that the sponsor has furnished to the 
researchers does not change the status of the research as fundamental 
research. However, release of information from a corporate sponsor to 
university researchers where the research results are subject to 
prepublication review, is subject to the EAR. (See Supplement No. 1 to 
this part, Questions D(7), D(9), and D(10).)
    (3) Prepublication review by a sponsor of university research solely 
to ensure that publication would not compromise patent rights does not 
change the status of fundamental research, so long as the review causes 
no more than a temporary delay in publication of the research results.

[[Page 227]]

    (4) The initial transfer of information from an industry sponsor to 
university researchers is subject to the EAR where the parties have 
agreed that the sponsor may withhold from publication some or all of the 
information so provided. (See Supplement No. 1 to this part, Question 
D(2).)
    (5) University based research is not considered ``fundamental 
research'' if the university or its researchers accept (at the request, 
for example, of an industrial sponsor) other restrictions on publication 
of scientific and technical information resulting from the project or 
activity. Scientific and technical information resulting from the 
research will nonetheless qualify as fundamental research once all such 
restrictions have expired or have been removed. (See Supplement No. 1 to 
this part, Question D(7) and D(9).)
    (6) The provisions of Sec. 734.11 of this part will apply if a 
university or its researchers accept specific national security controls 
(as defined in Sec. 734.11 of this part) on a research project or 
activity sponsored by the U.S. Government. (See Supplement No. 1 to this 
part, Questions E(1) and E(2).)
    (c) Research based at Federal agencies or FFRDCs. Research conducted 
by scientists or engineers working for a Federal agency or a Federally 
Funded Research and Development Center (FFRDC) may be designated as 
``fundamental research'' within any appropriate system devised by the 
agency or the FFRDC to control the release of information by such 
scientists and engineers. (See Supplement No. 1 to this part, Questions 
D(8) and D(11).)
    (d) Corporate research. (1) Research conducted by scientists or 
engineers working for a business entity will be considered ``fundamental 
research'' at such time and to the extent that the researchers are free 
to make scientific and technical information resulting from the research 
publicly available without restriction or delay based on proprietary 
concerns or specific national security controls as defined in Sec. 
734.11(b) of this part.
    (2) Prepublication review by the company solely to ensure that the 
publication would compromise no proprietary information provided by the 
company to the researchers is not considered to be a proprietary 
restriction under paragraph (d)(1) of this section. However, paragraph 
(d)(1) of this section does not authorize the release of information to 
university researchers where the research results are subject to 
prepublication review. (See Supplement No. 1 to this part, Questions 
D(8), D(9), and D(10).)
    (3) Prepublication review by the company solely to ensure that 
prepublication would compromise no patent rights will not be considered 
a proprietary restriction for this purpose, so long as the review causes 
no more than a temporary delay in publication of the research results.
    (4) However, the initial transfer of information from a business 
entity to researchers is not authorized under the ``fundamental 
research'' provision where the parties have agreed that the business 
entity may withhold from publication some or all of the information so 
provided.
    (e) Research based elsewhere. Research conducted by scientists or 
engineers who are not working for any of the institutions described in 
paragraphs (b) through (d) of this section will be treated as corporate 
research, as described in paragraph (d) of this section. (See Supplement 
No. 1 to this part, Question D(8).)

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 68579, Dec. 30, 1996; 
62 FR 25456, May 9, 1997; 65 FR 2496, Jan. 14, 2000; 67 FR 38861, June 
6, 2002]



Sec. 734.9  Educational information.

    ``Educational information'' referred to in Sec. 734.3(b)(3)(iii) of 
this part is not subject to the EAR if it is released by instruction in 
catalog courses and associated teaching laboratories of academic 
institutions. Dissertation research is discussed in Sec. 734.8(b) of 
this part. (Refer to Supplement No. 1 to this part, Question C(1) 
through C(6)). Note that the provisions of this section do not apply to 
encryption software controlled under ECCN 5D002 for ``EI'' reasons on 
the Commerce Control List or to mass market encryption software with 
symmetric key length exceeding 64-bits controlled under ECCN 5D992.

[[Page 228]]

See Sec. 740.13(e) of the EAR for certain exports and reexports under 
license exception.

[67 FR 38861, June 6, 2002]



Sec. 734.10  Patent applications.

    The information referred to in Sec. 734.3(b)(3)(iv) of this part 
is:
    (a) Information contained in a patent application prepared wholly 
from foreign-origin technical data where the application is being sent 
to the foreign inventor to be executed and returned to the United States 
for subsequent filing in the U.S. Patent and Trademark Office;
    (b) Information contained in a patent application, or an amendment, 
modification, supplement or division of an application, and authorized 
for filing in a foreign country in accordance with the regulations of 
the Patent and Trademark Office, 37 CFR part 5; 1 or
---------------------------------------------------------------------------

    \1\ Regulations issued by the Patent and Trademark Office in 37 CFR 
part 5 provide for the export to a foreign country of unclassified 
technical data in the form of a patent application or an amendment, 
modification, or supplement thereto or division thereof.
---------------------------------------------------------------------------

    (c) Information contained in a patent application when sent to a 
foreign country before or within six months after the filing of a United 
States patent application for the purpose of obtaining the signature of 
an inventor who was in the United States when the invention was made or 
who is a co-inventor with a person residing in the United States.



Sec. 734.11  Government-sponsored research covered by contract controls.

    (a) If research is funded by the U.S. Government, and specific 
national security controls are agreed on to protect information 
resulting from the research, Sec. 734.3(b)(3) of this part will not 
apply to any export or reexport of such information in violation of such 
controls. However, any export or reexport of information resulting from 
the research that is consistent with the specific controls may 
nonetheless be made under this provision.
    (b) Examples of ``specific national security controls'' include 
requirements for prepublication review by the Government, with right to 
withhold permission for publication; restrictions on prepublication 
dissemination of information to non-U.S. citizens or other categories of 
persons; or restrictions on participation of non-U.S. citizens or other 
categories of persons in the research. A general reference to one or 
more export control laws or regulations or a general reminder that the 
Government retains the right to classify is not a ``specific national 
security control''. (See Supplement No. 1 to this part, Questions E(1) 
and E(2).)



Sec. 734.12  Effect on foreign laws and regulations.

    Any person who complies with any of the license or other 
requirements of the EAR is not relieved of the responsibility of 
complying with applicable foreign laws and regulations. Conversely, any 
person who complies with the license or other requirements of a foreign 
law or regulation is not relieved of the responsibility of complying 
with U.S. laws and regulations, including the EAR.

  Supplement No. 1 to Part 734--Questions and Answers--Technology and 
                       Software Subject to the EAR

    This Supplement No. 1 contains explanatory questions and answers 
relating to technology and software that is subject to the EAR. It is 
intended to give the public guidance in understanding how BIS interprets 
this part, but is only illustrative, not comprehensive. In addition, 
facts or circumstances that differ in any material way from those set 
forth in the questions or answers will be considered under the 
applicable provisions of the EAR. Exporters should note that the 
provisions of this supplement do not apply to encryption software 
(including source code) transferred from the U.S. Munitions List to the 
Commerce Control List consistent with E.O. 13026 of November 15, 1996 
(61 FR 58767) and pursuant to the Presidential Memorandum of that date. 
See Sec. 742.15 of the EAR. This supplement is divided into nine 
sections according to topic as follows:
    Section A: Publication of technology and exports and reexports of 
technology that has been or will be published.
    Section B: Release of technology at conferences.
    Section C: Educational instruction.
    Section D: Research, correspondence, and informal scientific 
exchanges.

[[Page 229]]

    Section E: Federal contract controls.
    Section F: Commercial consulting.
    Section G: Software.
    Section H: Availability in a public library.
    Section I: Miscellaneous.

                         Section A: Publication

    Question A(1): I plan to publish in a foreign journal a scientific 
paper describing the results of my research, which is in an area listed 
in the EAR as requiring a license to all countries except Canada. Do I 
need a license to send a copy to my publisher abroad?
    Answer: No. This export transaction is not subject to the EAR. The 
EAR do not cover technology that is already publicly available, as well 
as technology that is made public by the transaction in question 
(Sec. Sec. 734.3 and 734.7 of this part). Your research results would 
be made public by the planned publication. You would not need a license.
    Question A(2): Would the answer differ depending on where I work or 
where I performed the research?
    Answer: No. Of course, the result would be different if your 
employer or another sponsor of your research imposed restrictions on its 
publication (Sec. 734.8 of this part).
    Question (A)3: Would I need a license to send the paper to the 
editors of a foreign journal for review to determine whether it will be 
accepted for publication?
    Answer: No. This export transaction is not subject to the EAR 
because you are submitting the paper to the editors with the intention 
that the paper will be published if favorably received (Sec. 
734.7(a)(4)(iii) of this part).
    Question A(4): The research on which I will be reporting in my paper 
is supported by a grant from the Department of Energy (DOE). The grant 
requires prepublication clearance by DOE. Does that make any difference 
under the Export Administration Regulations?
    Answer: No, the transaction is not subject to the EAR. But if you 
published in violation of any Department of Energy controls you have 
accepted in the grant, you may be subject to appropriate administrative, 
civil, or criminal sanctions under other laws.
    Question A(5): We provide consulting services on the design, layout, 
and construction of integrated circuit plants and production lines. A 
major part of our business is the publication for sale to clients of 
detailed handbooks and reference manuals on key aspects on the design 
and manufacturing processes. A typical cost of publishing such a 
handbook and manual might be $500; the typical sales price is about 
$15,000. Is the publication and sale of such handbooks or manuals 
subject to the EAR?
    Answer: Yes. The price is above the cost of reproduction and 
distribution (Sec. 734.7(a)(1) of this part). Thus, you would need to 
obtain a license or qualify for a License Exception before you could 
export or reexport any of these handbooks or manuals.
    Question A(6): My Ph.D. thesis is on technology, listed in the EAR 
as requiring a license to all destinations except Canada, which has 
never been published for general distribution. However, the thesis is 
available at the institution from which I took the degree. Do I need a 
license to send another copy to a colleague overseas?
    Answer: That may depend on where in the institution it is available. 
If it is not readily available in the university library (e.g., by 
filing in open stacks with a reference in the catalog), it is not 
``publicly available'' and the export or reexport would be subject to 
the EAR on that ground. The export or reexport would not be subject to 
the EAR if your Ph.D. research qualified as ``fundamental research'' 
under Sec. 734.8 of this part. If not, however, you will need to obtain 
a license or qualify for a License Exception before you can send a copy 
out of the country.
    Question A(7): We sell electronically recorded information, 
including software and databases, at wholesale and retail. Our products 
are available by mail order to any member of the public, though intended 
for specialists in various fields. They are priced to maximize sales to 
persons in those fields. Do we need a license to sell our products to 
foreign customers?
    Answer: You would not need a license for otherwise controlled 
technology or software if the technology and software are made publicly 
available at a price that does not exceed the cost of production and 
distribution to the technical community. Even if priced at a higher 
level, the export or reexport of the technology or software source code 
in a library accessible to the public is not subject to the EAR (Sec. 
734.7(a) of this part).

                         Section B: Conferences

    Question B(1): I have been invited to give a paper at a prestigious 
international scientific conference on a subject listed as requiring a 
license under the EAR to all countries, except Canada. Scientists in the 
field are given an opportunity to submit applications to attend. 
Invitations are given to those judged to be the leading researchers in 
the field, and attendance is by invitation only. Attendees will be free 
to take notes, but not make electronic or verbatim recordings of the 
presentations or discussions. Some of the attendees will be foreigners. 
Do I need a license to give my paper?
    Answer: No. Release of information at an open conference and 
information that has been released at an open conference is not subject 
to the EAR. The conference you describe fits the definition of an open 
conference (Sec. 734.7(a) of this part).

[[Page 230]]

    Question B(2): Would it make any difference if there were a 
prohibition on making any notes or other personal record of what 
transpires at the conference?
    Answer: Yes. To qualify as an ``open'' conference, attendees must be 
permitted to take notes or otherwise make a personal record (although 
not necessarily a recording). If note taking or the making of personal 
records is altogether prohibited, the conference would not be considered 
``open''.
    Question B(3): Would it make any difference if there were also a 
registration fee?
    Answer: That would depend on whether the fee is reasonably related 
to costs and reflects an intention that all interested and technically 
qualified persons should be able to attend (Sec. 734.7(a)(4)(ii) of 
this part).
    Question B(4): Would it make any difference if the conference were 
to take place in another country?
    Answer: No.
    Question B(5): Must I have a license to send the paper I propose to 
present at such a foreign conference to the conference organizer for 
review?
    Answer: No. A license is not required under the EAR to submit papers 
to foreign organizers of open conferences or other open gatherings with 
the intention that the papers will be delivered at the conference, and 
so made publicly available, if favorably received. The submission of the 
papers is not subject to the EAR (Sec. 734.7(a)(4)(iii) of this part).
    Question B(6): Would the answers to any of the foregoing questions 
be different if my work were supported by the Federal Government?
    Answer: No. You may export and reexport the papers, even if the 
release of the paper violates any agreements you have made with your 
government sponsor. However, nothing in the EAR relieves you of 
responsibility for conforming to any controls you have agreed to in your 
Federal grant or contract.

                   Section C: Educational Instruction

    Question C(1): I teach a university graduate course on design and 
manufacture of very high-speed integrated circuitry. Many of the 
students are foreigners. Do I need a license to teach this course?
    Answer: No. Release of information by instruction in catalog courses 
and associated teaching laboratories of academic institutions is not 
subject to the EAR (Sec. 734.9 of this part).
    Question C(2): Would it make any difference if some of the students 
were from countries to which export licenses are required?
    Answer: No.
    Question C(3): Would it make any difference if I talk about recent 
and as yet unpublished results from my laboratory research?
    Answer: No.
    Question C(4): Even if that research is funded by the Government?
    Answer: Even then, but you would not be released from any separate 
obligations you have accepted in your grant or contract.
    Question C(5): Would it make any difference if I were teaching at a 
foreign university?
    Answer: No.
    Question C(6): We teach proprietary courses on design and 
manufacture of high-performance machine tools. Is the instruction in our 
classes subject to the EAR?
    Answer: Yes. That instruction would not qualify as ``release of 
educational information'' under Sec. 734.9 of this part because your 
proprietary business does not qualify as an ``academic institution'' 
within the meaning of Sec. 734.9 of this part. Conceivably, however, 
the instruction might qualify as ``release at an open * * * seminar, * * 
* or other open gathering'' under Sec. 734.7(a) of this part. The 
conditions for qualification of such a seminar or gathering as ``open'', 
including a fee ``reasonably related to costs (of the conference, not of 
producing the data) and reflecting an intention that all interested and 
technically qualified persons be able to attend,'' would have to be 
satisfied.

 Section D: Research, Correspondence, and Informal Scientific Exchanges

    Question D(1): Do I need a license in order for a foreign graduate 
student to work in my laboratory?
    Answer: Not if the research on which the foreign student is working 
qualifies as ``fundamental research'' under Sec. 734.8 of this part. In 
that case, the research is not subject to the EAR.
    Question D(2): Our company has entered into a cooperative research 
arrangement with a research group at a university. One of the 
researchers in that group is a PRC national. We would like to share some 
of our proprietary information with the university research group. We 
have no way of guaranteeing that this information will not get into the 
hands of the PRC scientist. Do we need to obtain a license to protect 
against that possibility?
    Answer: No. The EAR do not cover the disclosure of information to 
any scientists, engineers, or students at a U.S. university in the 
course of industry-university research collaboration under specific 
arrangements between the firm and the university, provided these 
arrangements do not permit the sponsor to withhold from publication any 
of the information that he provides to the researchers. However, if your 
company and the researchers have agreed to a prohibition on publication, 
then you must obtain a license or qualify for a License Exception before

[[Page 231]]

transferring the information to the university. It is important that you 
as the corporate sponsor and the university get together to discuss 
whether foreign nationals will have access to the information, so that 
you may obtain any necessary authorization prior to transferring the 
information to the research team.
    Question D(3): My university will host a prominent scientist from 
the PRC who is an expert on research in engineered ceramics and 
composite materials. Do I require a license before telling our visitor 
about my latest, as yet unpublished, research results in those fields?
    Answer: Probably not. If you performed your research at the 
university, and you were subject to no contract controls on release of 
the research, your research would qualify as ``fundamental research'' 
(Sec. 734.8(a) of this part). Information arising during or resulting 
from such research is not subject to the EAR (Sec. 734.3(b)(3) of this 
part).
    You should probably assume, however, that your visitor will be 
debriefed later about anything of potential military value he learns 
from you. If you are concerned that giving such information to him, even 
though permitted, could jeopardize U.S. security interests, the Commerce 
Department can put you in touch with appropriate Government scientists 
who can advise you. Write to Department of Commerce, Bureau of Industry 
and Security, P.O. Box 273, Washington, DC 20044.
    Question D(4): Would it make any difference if I were proposing to 
talk with a PRC expert in China?
    Answer: No, if the information in question arose during or resulted 
from the same ``fundamental research.''
    Question D(5): Could I properly do some work with him in his 
research laboratory inside China?
    Answer: Application abroad of personal knowledge or technical 
experience acquired in the United States constitutes an export of that 
knowledge and experience, and such an export may be subject to the EAR. 
If any of the knowledge or experience you export in this way requires a 
license under the EAR, you must obtain such a license or qualify for a 
License Exception.
    Question D(6): I would like to correspond and share research results 
with an Iranian expert in my field, which deals with technology that 
requires a license to all destinations except Canada. Do I need a 
license to do so?
    Answer: Not as long as we are still talking about information that 
arose during or resulted from research that qualifies as ``fundamental'' 
under the rules spelled out in Sec. 734.8(a) of this part.
    Question D(7): Suppose the research in question were funded by a 
corporate sponsor and I had agreed to prepublication review of any paper 
arising from the research?
    Answer: Whether your research would still qualify as ``fundamental'' 
would depend on the nature and purpose of the prepublication review. If 
the review is intended solely to ensure that your publications will 
neither compromise patent rights nor inadvertently divulge proprietary 
information that the sponsor has furnished to you, the research could 
still qualify as ``fundamental.'' But if the sponsor will consider as 
part of its prepublication review whether it wants to hold your new 
research results as trade secrets or otherwise proprietary information 
(even if your voluntary cooperation would be needed for it to do so), 
your research would no longer qualify as ``fundamental.'' As used in 
these regulations it is the actual and intended openness of research 
results that primarily determines whether the research counts as 
``fundamental'' and so is not subject to the EAR.
    Question D(8): In determining whether research is thus open and 
therefore counts as ``fundamental,'' does it matter where or in what 
sort of institution the research is performed?
    Answer: In principle, no. ``Fundamental research'' is performed in 
industry, Federal laboratories, or other types of institutions, as well 
as in universities. The regulations introduce some operational 
presumptions and procedures that can be used both by those subject to 
the regulations and by those who administer them to determine with some 
precision whether a particular research activity is covered. Recognizing 
that common and predictable norms operate in different types of 
institutions, the regulations use the institutional locus of the 
research as a starting point for these presumptions and procedures. 
Nonetheless, it remains the type of research, and particularly the 
intent and freedom to publish, that identifies ``fundamental research,'' 
not the institutional locus (Sec. 734.8(a) of this part).
    Question D(9): I am doing research on high-powered lasers in the 
central basic-research laboratory of an industrial corporation. I am 
required to submit the results of my research for prepublication review 
before I can publish them or otherwise make them public. I would like to 
compare research results with a scientific colleague from Vietnam and 
discuss the results of the research with her when she visits the United 
States. Do I need a license to do so?
    Answer: You probably do need a license (Sec. 734.8(d) of this 
part). However, if the only restriction on your publishing any of that 
information is a prepublication review solely to ensure that publication 
would compromise no patent rights or proprietary information provided by 
the company to the researcher your research may be considered 
``fundamental research,'' in which case you

[[Page 232]]

may be able to share information because it is not subject to the EAR. 
Note that the information will be subject to the EAR if the 
prepublication review is intended to withhold the results of the 
research from publication.
    Question D(10): Suppose I have already cleared my company's review 
process and am free to publish all the information I intend to share 
with my colleague, though I have not yet published?
    Answer: If the clearance from your company means that you are free 
to make all the information publicly available without restriction or 
delay, the information is not subject to the EAR. (Sec. 734.8(d) of 
this part)
    Question D(11): I work as a researcher at a Government-owned, 
contractor-operated research center. May I share the results of my 
unpublished research with foreign nationals without concern for export 
controls under the EAR?
    Answer: That is up to the sponsoring agency and the center's 
management. If your research is designated ``fundamental research'' 
within any appropriate system devised by them to control release of 
information by scientists and engineers at the center, it will be 
treated as such by the Commerce Department, and the research will not be 
subject to the EAR. Otherwise, you would need to obtain a license or 
qualify for a License Exception, except to publish or otherwise make the 
information public (Sec. 734.8(c) of this part).

                  Section E: Federal Contract Controls

    Question E(1): In a contract for performance of research entered 
into with the Department of Defense (DOD), we have agreed to certain 
national security controls. DOD is to have ninety days to review any 
papers we proposed before they are published and must approve assignment 
of any foreign nationals to the project. The work in question would 
otherwise qualify as ``fundamental research'' section under Sec. 734.8 
of this part. Is the information arising during or resulting from this 
sponsored research subject to the EAR?
    Answer: Under Sec. 734.11 of this part, any export or reexport of 
information resulting from government-sponsored research that is 
inconsistent with contract controls you have agreed to will not qualify 
as ``fundamental research'' and any such export or reexport would be 
subject to the EAR. Any such export or reexport that is consistent with 
the controls will continue to be eligible for export and reexport under 
the ``fundamental research'' rule set forth in Sec. 734.8(a) of this 
part. Thus, if you abide by the specific controls you have agreed to, 
you need not be concerned about violating the EAR. If you violate those 
controls and export or reexport information as ``fundamental research'' 
under Sec. 734.8(a) of this part, you may subject yourself to the 
sanctions provided for under the EAR, including criminal sanctions, in 
addition to administrative and civil penalties for breach of contract 
under other law.
    Question E(2): Do the Export Administration Regulations restrict my 
ability to publish the results of my research?
    Answer: The Export Administration Regulations are not the means for 
enforcing the national security controls you have agreed to. If such a 
publication violates the contract, you would be subject to 
administrative, civil, and possible criminal penalties under other law.

                    Section F: Commercial Consulting

    Question F(1): I am a professor at a U.S. university, with expertise 
in design and creation of submicron devices. I have been asked to be a 
consultant for a ``third-world'' company that wishes to manufacture such 
devices. Do I need a license to do so?
    Answer: Quite possibly you do. Application abroad of personal 
knowledge or technical experience acquired in the United States 
constitutes an export of that knowledge and experience that is subject 
to the Export Administration Regulations. If any part of the knowledge 
or experience your export or reexport deals with technology that 
requires a license under the EAR, you will need to obtain a license or 
qualify for a License Exception.

                    Section G: Software 2
---------------------------------------------------------------------------

    \2\ Exporters should note that these provisions do not apply to 
software controlled under the International Traffic in Arms Regulations 
(e.g., certain encryption software).
---------------------------------------------------------------------------

    Question G(1): Is the export or reexport of software in machine 
readable code subject to the EAR when the source code for such software 
is publicly available?
    Answer: If the source code of a software program is publicly 
available, then the machine readable code compiled from the source code 
is software that is publicly available and therefore not subject to the 
EAR.
    Question G(2): Is the export or reexport of software sold at a price 
that does not exceed the cost of reproduction and distribution subject 
to the EAR?
    Answer: Software in machine readable code is publicly available if 
it is available to a community at a price that does not exceed the cost 
of reproduction and distribution. Such reproduction and distribution 
costs may include variable and fixed allocations of overhead and normal 
profit for the reproduction and distribution functions either in your 
company or in a third party distribution system. In your company, such 
costs may not include recovery for development, design, or acquisition. 
In this case, the provider of the software does not receive a fee for 
the inherent value of the software.

[[Page 233]]

    Question G(3): Is the export or reexport of software subject to the 
EAR if it is sold at a price BIS concludes in a classification letter to 
be sufficiently low so as not to subject it to the EAR?
    Answer: In response to classification requests, BIS may choose to 
classify certain software as not subject to the EAR even though it is 
sold at a price above the costs of reproduction and distribution as long 
as the price is nonetheless sufficiently low to qualify for such a 
classification in the judgment of BIS.

                Section H: Available in a Public Library

    Question H(1): Is the export or reexport of information subject to 
the EAR if it is available in a library and sold through an electronic 
or print service?
    Answer: Electronic and print services for the distribution of 
information may be relatively expensive in the marketplace because of 
the value vendors add in retrieving and organizing information in a 
useful way. If such information is also available in a library--itself 
accessible to the public--or has been published in any way, that 
information is ``publicly available'' for those reasons, and the 
information itself continues not to be subject to the EAR even though 
you access the information through an electronic or print service for 
which you or your employer pay a substantial fee.
    Question H(2): Is the export or reexport of information subject to 
the EAR if the information is available in an electronic form in a 
library at no charge to the library patron?
    Answer: Information available in an electronic form at no charge to 
the library patron in a library accessible to the public is information 
publicly available even though the library pays a substantial 
subscription fee for the electronic retrieval service.
    Question H(3): Is the export or reexport of information subject to 
the EAR if the information is available in a library and sold for more 
than the cost of reproduction and distribution?
    Answer: Information from books, magazines, dissertations, papers, 
electronic data bases, and other information available in a library that 
is accessible to the public is not subject to the EAR. This is true even 
if you purchase such a book at more than the cost of reproduction and 
distribution. In other words, such information is ``publicly available'' 
even though the author makes a profit on your particular purchase for 
the inherent value of the information.

                        Section I: Miscellaneous

    Question I(1): The manufacturing plant that I work at is planning to 
begin admitting groups of the general public to tour the plant 
facilities. We are concerned that a license might be required if the 
tour groups include foreign nationals. Would such a tour constitute an 
export? If so, is the export subject to the EAR?
    Answer: The EAR define exports and reexports of technology to 
include release through visual inspection by foreign nationals of U.S.-
origin equipment and facilities. Such an export or reexport qualifies 
under the ``publicly available'' provision and would not be subject to 
the EAR so long as the tour is truly open to all members of the public, 
including your competitors, and you do not charge a fee that is not 
reasonably related to the cost of conducting the tours. Otherwise, you 
will have to obtain a license, or qualify for a License Exception, prior 
to permitting foreign nationals to tour your facilities (Sec. 734.7 of 
this part).
    Question I(2): Is the export or reexport of information subject to 
the EAR if the information is not in a library or published, but sold at 
a price that does not exceed the cost of reproduction and distribution?
    Answer: Information that is not in a library accessible to the 
public and that has not been published in any way, may nonetheless 
become ``publicly available'' if you make it both available to a 
community of persons and if you sell it at no more than the cost of 
reproduction and distribution. Such reproduction and distribution costs 
may include variable and fixed cost allocations of overhead and normal 
profit for the reproduction and distribution functions either in your 
company or in a third party distribution system. In your company, such 
costs may not include recovery for development, design, or acquisition 
costs of the technology or software. The reason for this conclusion is 
that the provider of the information receives nothing for the inherent 
value of the information.
    Question I(3): Is the export or reexport of information contributed 
to an electronic bulletin board subject to the EAR?
    Answer: Assume each of the following:
    1. Information is uploaded to an electronic bulletin board by a 
person that is the owner or originator of the information;
    2. That person does not charge a fee to the bulletin board 
administrator or the subscribers of the bulletin board; and
    3. The bulletin board is available for subscription to any 
subscriber in a given community regardless of the cost of subscription.
    Such information is ``publicly available'' and therefore not subject 
to the EAR even if it is not elsewhere published and is not in a 
library. The reason for this conclusion is that the bulletin board 
subscription charges or line charges are for distribution exclusively, 
and the provider of the information receives nothing for the inherent 
value of the information.

[[Page 234]]

    Question I(4): Is the export or reexport of patented information 
fully disclosed on the public record subject to the EAR?
    Answer: Information to the extent it is disclosed on the patent 
record open to the public is not subject to the EAR even though you may 
use such information only after paying a fee in excess of the costs of 
reproduction and distribution. In this case the seller does receive a 
fee for the inherent value of the technical data; however, the export or 
reexport of the information is nonetheless not subject to the EAR 
because any person can obtain the technology from the public record and 
further disclose or publish the information. For that reason, it is 
impossible to impose export controls that deny access to the 
information.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 68579, Dec. 30, 1996; 
62 FR 25456, May 9, 1997]

Supplement No. 2 to Part 734--Calculation of Values for De Minimis Rules

    (a) Use the following guidelines in determining values for 
establishing exemptions or for submission of a request for 
authorization:
    (1) U.S. content value.
    (i) U.S. content value is the delivered cost to the foreign 
manufacturer of the U.S. origin parts, components, or materials. (When 
affiliated firms have special arrangements that result in lower than 
normal pricing, the cost should reflect ``fair market'' prices that 
would normally be charged to similar, unaffiliated customers.)
    (ii) In calculating the U.S. content value, do not include parts, 
components, or materials that could be exported from the United States 
to the new country of destination without a license (designated as 
``NLR'') or under License Exception GBS (see part 740 of the EAR) or 
under NLR for items classified as EAR99.
    (2) The foreign-made product value is the normal selling price 
f.o.b. factory (excluding value added taxes or excise taxes).
    (3) To determine the value of the U.S.-origin controlled content, 
you should classify the U.S.-origin content on the Commerce Control 
List, determine those items that would require a license from BIS for 
reexport to the ultimate destination of the foreign-made product if such 
parts, components, or materials were reexported to that destination in 
the form received, and divide the total value of the controlled U.S. 
parts, components, and materials incorporated into the foreign-made item 
by the sale price of the foreign-made item.
    (4) If no U.S. parts, components or materials are incorporated or if 
the incorporated U.S. parts, components, and materials are below the de 
minimis level, then the foreign-made item is not subject to the EAR by 
reason of Sec. 734.4 of this part, the classification of a foreign-made 
item is irrelevant in determining the scope of the EAR, and you should 
skip Step 4 in Sec. 732.2(d) and go on to consider Step 6 in Sec. 
732.2(f) of the EAR regarding the foreign-produced direct product rule.

    Note to paragraph (a)-- U.S. origin peripheral or accessory devices 
that are merely rack mounted with or cable connected into foreign 
equipment are not deemed to be incorporated components even though 
intended for use with products made abroad. Rather, such items are 
treated as U.S. items that retain their identity and remain subject to 
the EAR.

    (b) One-time report prior to reliance upon the de minimis exclusion. 
Report requirement. Before you may rely upon the de minimis exclusion 
for foreign software and technology commingled with U.S. software or 
technology, you must file a one-time report for the foreign software or 
technology. The report must include the percentage of U.S.-content by 
value and a description of your calculations including relevant values, 
assumptions, and the basis or methodologies for making the percentage 
calculation. The three criteria important to BIS in its review of your 
report will be the export price of the U.S.-content, the assumption 
regarding future sales of software, and the choice of the scope of 
foreign technology. Your methodologies must be based upon the accounting 
standards used in the operation of your business, and you must specify 
that standard in your report. Regardless of the accounting systems, 
standard, or conventions you use in the operation of your business, you 
may not depreciate the fair market values reported or otherwise reduce 
the fair market values by other accounting conventions such as 
depreciation. You may rely upon the de minimis exclusion from the 
commingled rule only to the extent you have reported the relevant 
calculations, values, assumptions, and the basis or methodologies for 
the calculations. These values may be historic or projected. You may 
rely on projected values only to the extent that and for so long as they 
remain consistent with your report or future values reduce the U.S.-
content under your reported assumptions, basis, and methodologies. You 
are not required to file the above report if you do not choose to take 
advantage of the de minimis exclusion from the commingled rule.
    (2) Export price. The report must include a description of the U.S.-
content including its classification on the Commerce Control List, its 
performance characteristics and features, and the method of calculating 
its fair market value. The fair market value shall be the arms-length 
transaction price, if it is available. If an arms-length transaction 
price is unavailable, then the report will describe the

[[Page 235]]

valuation method chosen to calculate or derive the fair market value. 
Such methods may include comparable market prices or costs of production 
and distribution. This rule does not require calculations based upon any 
one accounting system or U.S. accounting standards. However, you must 
specify the accepted accounting standards you have chosen, and cost-
based methods of valuation must be based upon records you maintain in 
the normal course of business. You should also indicate whether reported 
values are actual arms-length market prices or derived from comparable 
transactions or costs of production, overhead, and profit. For example, 
if you chose to make calculations under the transfer pricing rules of 
the United States Internal Revenue Code at section 482, your report 
should indicate that this is the source for your methodology, and you 
should also indicate which of the several methodologies in these 
transfer pricing rules you have chosen.
    (3) Future software sales. For calculations of U.S.-content in 
foreign software, you shall include your historic and estimated future 
software sales in units and value along with the rationale and basis for 
those estimates in the report. Unlike parts incorporated into 
commodities, the cost of U.S. software code will be attributed or 
allocated to the future sales of foreign-made software incorporating the 
U.S. code, to determine the percentage of U.S. controlled content. In 
making this calculation for foreign-made software, you must make an 
estimate of future software sales of that foreign software if it is 
commingled with or incorporated with the U.S. code. The value of the 
U.S. code commingled with or incorporated into the foreign made software 
shall be divided by the total selling price of all foreign-made software 
units already sold, plus the total selling price of all foreign-made 
software units estimated for future sales.
    (4) Foreign technology and software. For calculations of U.S.-
content in foreign technology and software, you shall include in the 
report a description of the foreign technology or software and a 
description of its fair market value along with the rationale and basis 
for the selection and valuation of such foreign software or technology. 
The report does not require information regarding destinations and end 
users for reexport. The purpose of the report is solely to permit the 
U.S. Government to evaluate the reasonableness of U.S.-content 
calculations.
    (5) Report and wait. If you have not been contacted by BIS 
concerning your report within thirty days after filing the report with 
BIS, you may rely upon the calculations in your report and the de 
minimis exclusions for software and technology for so long as you are 
not contacted by BIS. BIS may contact you concerning your report to 
inquire of you further or to indicate that BIS does not accept the 
assumptions or rationale for your calculations. If you receive such a 
contact or communication from BIS, you may not rely upon the de minimis 
exclusions for software and technology in Sec. 734.4 of this part until 
BIS has indicated whether or not you may do so in the future. You must 
include in your report the name, title, address, telephone number, and 
facsimile number of the person BIS may contact concerning your report.

[61 FR 12746, Mar. 25, 1996, as amended at 62 FR 25456, May 9, 1997]



PART 736_GENERAL PROHIBITIONS--Table of Contents




Sec.
736.1 Introduction.
736.2 General prohibitions and determination of applicability.

Supplement No. 1 to Part 736--General Orders
Supplement No. 2 to Part 736--Administrative Orders

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 22 
U.S.C. 2151 note; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; 
E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp. p. 219; E.O. 13026, 61 FR 
58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 
Comp., p. 783; E.O. 13338 of May 11, 2004; Notice of August 7, 2003, 68 
FR 47833, 3 CFR, 2003 Comp., p. 328; Notice of October 29, 2003, 68 FR 
62209, 3 CFR, 2003 Comp., p. 347.



Sec. 736.1  Introduction.

    In this part, references to the EAR are references to 15 CFR chapter 
VII, subchapter C. A person may undertake transactions subject to the 
EAR without a license or other authorization, unless the regulations 
affirmatively state such a requirement. As such, if an export, reexport, 
or activity is subject to the EAR, the general prohibitions contained in 
this part and the License Exceptions specified in part 740 of the EAR 
must be reviewed to determine if a license is necessary. In the case of 
all exports from the United States, you must document your export as 
described in part 762 of the EAR regarding recordkeeping and clear your 
export through the U.S. Customs Service as described in part 758 of the 
EAR regarding export clearance requirements. Also note that for short 
supply controls all prohibitions and License Exceptions are in part 754 
of the EAR.
    (a) In this part we tell you:

[[Page 236]]

    (1) The facts that make your proposed export, reexport, or conduct 
subject to these general prohibitions, and
    (2) The ten general prohibitions.
    (b) Your obligations under the ten general prohibitions and under 
the EAR depend in large part upon the five types of information 
described in Sec. 736.2(a) of this part and upon the general 
prohibitions described in Sec. 736.2(b) of this part. The ten general 
prohibitions contain cross-references to other parts of the EAR that 
further define the breadth of the general prohibitions. For that reason, 
this part is not freestanding. In part 732, we provide certain steps you 
may follow in proper order to help you understand the general 
prohibitions and their relationship to other parts of the EAR.
    (c) If you violate any of these ten general prohibitions, or engage 
in other conduct contrary to the Export Administration Act, the EAR, or 
any order, license, License Exception, or authorization issued 
thereunder, as described in part 764 of the EAR regarding enforcement, 
you will be subject to the sanctions described in that part.



Sec. 736.2  General prohibitions and determination of applicability.

    (a) Information or facts that determine the applicability of the 
general prohibitions. The following five types of facts determine your 
obligations under the ten general prohibitions and the EAR generally:
    (1) Classification of the item. The classification of the item on 
the Commerce Control List (see part 774 of the EAR);
    (2) Destination. The country of ultimate destination for an export 
or reexport (see parts 738 and 774 of the EAR concerning the Country 
Chart and the Commerce Control List);
    (3) End-user. The ultimate end-user (see General Prohibition Four 
(paragraph (b)(4) of this section) and parts 744 and 764 of the EAR for 
a reference to the list of persons you may not deal with);
    (4) End-use. The ultimate end-use (see General Prohibition Five 
(paragraph (b)(5) of this section) and part 744 of the EAR for general 
end-use restrictions); and
    (5) Conduct. Conduct such as contracting, financing, and freight 
forwarding in support of a proliferation project as described in part 
744 of the EAR.
    (b) General prohibitions. The following ten general prohibitions 
describe certain exports, reexports, and other conduct, subject to the 
scope of the EAR, in which you may not engage unless you either have a 
license from the Bureau of Industry and Security (BIS) or qualify under 
part 740 of the EAR for a License Exception from each applicable general 
prohibition in this paragraph. The License Exceptions at part 740 of the 
EAR apply only to General Prohibitions One (Exports and Reexports in the 
Form Received), Two (Parts and Components Reexports), and Three 
(Foreign-Produced Direct Product Reexports); however, selected License 
Exceptions are specifically referenced and authorized in part 746 of the 
EAR concerning embargo destinations and in Sec. 744.2(c) of the EAR 
regarding nuclear end-uses.
    (1) General Prohibition One--Export and reexport of controlled items 
to listed countries (Exports and Reexports). You may not, without a 
license or License Exception, export any item subject to the EAR to 
another country or reexport any item of U.S.-origin if each of the 
following is true:
    (i) The item is controlled for a reason indicated in the applicable 
Export Control Classification Number (ECCN), and
    (ii) Export to the country of destination requires a license for the 
control reason as indicated on the Country Chart at part 738 of the EAR. 
(The scope of this prohibition is determined by the correct 
classification of your item and the ultimate destination as that 
combination is reflected on the Country Chart.) 1 Note that 
each License Exception described at part 740 of the EAR supersedes 
General Prohibition One if all terms and conditions of a given License 
Exception are met by the exporter or reexporter.
---------------------------------------------------------------------------

    \1\ See part 738 of the EAR for selected controls that are not 
specified on the Country Chart.
---------------------------------------------------------------------------

    (2) General Prohibition Two--Reexport and export from abroad of 
foreign-made items incorporating more than a de minimis amount of 
controlled U.S. content (Parts and Components Reexports). (i)

[[Page 237]]

You may not, without a license or License Exception, export, reexport or 
export from abroad any foreign-made commodity, software, or technology 
incorporating U.S.-origin commodities, software, or technology 
respectively that is controlled to the country of ultimate destination 
if the foreign-made item meets all three of the following conditions:
    (A) It incorporates more than the de minimis amount of controlled 
U.S. content, as defined in Sec. 734.4 of the EAR concerning the scope 
of the EAR;
    (B) It is controlled for a reason indicated in the applicable ECCN; 
and
    (C) Its export to the country of destination requires a license for 
that control reason as indicated on the Country Chart. (The scope of 
this prohibition is determined by the correct classification of your 
foreign-made item and the ultimate destination, as that combination is 
reflected on the Country Chart.)
    (ii) Each License Exception described in part 740 of the EAR 
supersedes General Prohibition Two if all terms and conditions of a 
given License Exception are met by the exporter or reexporter.
    (3) General Prohibition Three--Reexport and export from abroad of 
the foreign-produced direct product of U.S. technology and software 
(Foreign-Produced Direct Product Reexports). (i) Country scope of 
prohibition. You may not, without a license or License Exception, 
reexport or export from abroad items subject to the scope of this 
General Prohibition Three to Cuba or a destination in Country Group D:1 
(See Supplement No. 1 to part 740 of the EAR).
    (ii) Product scope of foreign-made items subject to prohibition. 
This General Prohibition 3 applies if an item meets either the 
Conditions defining the direct product of technology or the Conditions 
defining the direct product of a plant in paragraph (b)(3)(ii)(A) of 
this section:
    (A) Conditions defining direct product of technology. Foreign-made 
items are subject to this General Prohibition 3 if they meet both of the 
following conditions:
    (1) They are the direct product of technology or software that 
requires a written assurance as a supporting document for a license, as 
defined in paragraph (o)(3)(i) of Supplement No. 2 to part 748 of the 
EAR, or as a precondition for the use of License Exception TSR at Sec. 
740.6 of the EAR, and
    (2) They are subject to national security controls as designated on 
the applicable ECCN of the Commerce Control List at part 774 of the EAR.
    (B) Conditions defining direct product of a plant. Foreign-made 
items are also subject to this General Prohibition 3 if they are the 
direct product of a complete plant or any major component of a plant if 
both of the following conditions are met:
    (1) Such plant or component is the direct product of technology that 
requires a written assurance as a supporting document for a license or 
as a precondition for the use of License Exception TSR in Sec. 740.6 of 
the EAR, and
    (2) Such foreign-made direct products of the plant or component are 
subject to national security controls as designated on the applicable 
ECCN of the Commerce Control List at part 774 of the EAR.
    (iii) License Exceptions. Each License Exception described at part 
740 of the EAR supersedes this General Prohibition Three if all terms 
and conditions of a given exception are met by the exporter or 
reexporter.
    (4) General Prohibition Four (Denial Orders)--Engaging in actions 
prohibited by a denial order. (i) You may not take any action that is 
prohibited by a denial order issued under part 766 of the EAR, 
Administrative Enforcement Proceedings. These orders prohibit many 
actions in addition to direct exports by the person denied export 
privileges, including some transfers within a single country, either in 
the United States or abroad, by other persons. You are responsible for 
ensuring that any of your transactions in which a person who is denied 
export privileges is involved do not violate the terms of the order. 
Orders denying export privileges are published in the Federal Register 
when they are issued and are the legally controlling documents in 
accordance with their terms. BIS also maintains compilations of persons 
denied export privileges on a Web site and as a supplement to the 
unofficial edition of the EAR available by subscription from the 
Government Printing Office. BIS may,

[[Page 238]]

on an exceptional basis, authorize activity otherwise prohibited by a 
denial order. See Sec. 764.3(a)(2) of the EAR.
    (ii) There are no License Exceptions described in part 740 of the 
EAR that authorize conduct prohibited by this General Prohibition Four.
    (5) General Prohibition Five--Export or reexport to prohibited end-
uses or end-users (End-Use End-User). You may not, without a license, 
knowingly export or reexport any item subject to the EAR to an end-user 
or end-use that is prohibited by part 744 of the EAR.
    (6) General Prohibition Six--Export or reexport to embargoed 
destinations (Embargo). (i) You may not, without a license or License 
Exception authorized under part 746, export or reexport any item subject 
to the EAR to a country that is embargoed by the United States or 
otherwise made subject to controls as both are described at part 746 of 
the EAR.
    (ii) License Exceptions to General Prohibition Six are described in 
part 746 of the EAR, on Embargoes and Other Special Controls. Unless a 
License Exception or other authorization is authorized in part 746 of 
the EAR, the License Exceptions described in part 740 of the EAR are not 
available to overcome this general prohibition.
    (7) General Prohibition Seven--Support of proliferation activities 
(U.S. person proliferation activity)--(i) Support of proliferation 
activities (U.S. person proliferation activity). (A) If you are a U.S. 
person as that term is defined in Sec. 744.6(c) of the EAR, you may not 
engage in any activities prohibited by Sec. 744.6(a) or (b) of the EAR, 
which prohibits the performance, without a license from BIS, of certain 
financing, contracting, service, support, transportation, freight 
forwarding, or employment that you know will assist in certain 
proliferation activities described further in part 744 of the EAR. There 
are no License Exceptions to this General Prohibition Seven in part 740 
of the EAR unless specifically authorized in that part.
    (B) If you are a U.S. person as that term is defined in Sec. 
744.6(c) of the EAR, you may not export a Schedule 1 chemical listed in 
Supplement No. 1 to Part 745 without first complying with the provisions 
of Sec. Sec. 742.18 and 745.1 of the EAR.
    (C) If you are a U.S. person as that term is defined in Sec. 
744.6(c) of the EAR, you may not export a Schedule 3 chemical listed in 
Supplement No. 1 to Part 745 to a destination not listed in Supplement 
No. 2 to Part 745 without complying with the End-Use Certificate 
requirements in Sec. 745.2 of the EAR that apply to Schedule 3 
chemicals controlled for CW reasons in ECCN 1C350, ECCN 1C355, or ECCN 
1C395.
    (8) General Prohibition Eight--In transit shipments and items to be 
unladen from vessels or aircraft (Intransit).
    (i) Unlading and shipping in transit. You may not export or reexport 
an item through or transit through a country listed in paragraph 
(b)(8)(ii) of this section unless a License Exception or license 
authorizes such an export or reexport directly to such a country of 
transit, or unless such an export or reexport is eligible to such a 
country of transit without a license.
    (ii) Country scope. This General Prohibition Eight applies to 
Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba, 
Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania, 
Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine, 
Uzbekistan, Vietnam.
    (9) General Prohibition Nine--Violation of any order, terms, and 
conditions (Orders, Terms, and Conditions). You may not violate terms or 
conditions of a license or of a License Exception issued under or made a 
part of the EAR, and you may not violate any order issued under or made 
a part of the EAR. There are no License Exceptions to this General 
Prohibition Nine in part 740 of the EAR. Supplements Nos. 1 and 2 to 
this part provide for certain General Orders and Administrative Orders.
    (10) General Prohibition Ten--Proceeding with transactions with 
knowledge that a violation has occurred or is about to occur (Knowledge 
Violation to Occur). You may not sell, transfer, export, reexport, 
finance, order, buy, remove, conceal, store, use, loan, dispose of, 
transfer, transport, forward, or otherwise service, in whole or in part, 
any item subject to the EAR and exported or to be exported with 
knowledge that

[[Page 239]]

a violation of the Export Administration Regulations, the Export 
Administration Act or any order, license, License Exception, or other 
authorization issued thereunder has occurred, is about to occur, or is 
intended to occur in connection with the item. Nor may you rely upon any 
license or License Exception after notice to you of the suspension or 
revocation of that license or exception. There are no License Exceptions 
to this General Prohibition Ten in part 740 of the EAR.

[61 FR 12754, Mar. 25, 1996, as amended at 61 FR 64274, Dec. 4, 1996; 61 
FR 68579, Dec. 30, 1996; 62 FR 25456, May 9, 1997; 64 FR 27141, May 18, 
1999; 64 FR 47105, Aug. 30, 1999; 65 FR 14859, Mar. 20, 2000; 65 FR 
38150, June 19, 2000; 66 FR 49523, Sept. 28, 2001; 67 FR 37981, May 31, 
2002; 67 FR 54953, Aug. 27, 2002; 69 FR 5690, Feb. 6, 2004; 69 FR 23628, 
Apr. 29, 2004]

              Supplement No. 1 to Part 736--General Orders

    General Order No. 1 of September 16, 1998; Establishing a 24-month 
validity period on reexport authorizations issued without a validity 
period and revoking those exceeding that period.
    (a) Reexport authorizations issued within 24-months of the General 
Order. All reexport authorizations issued with no validity period within 
the 24-months preceding September 16, 1998 shall be deemed to have an 
expiration date which shall be the date 24-months from the date of 
issuance of the reexport authorization or November 16, 1998, whichever 
is longer.
    (b) Reexport authorizations issued before the 24-month period 
preceding the General Order. For reexport authorizations issued with no 
validity period before the 24-month period preceding September 16, 1998:
    (1) Effective September 16, 1998, all such outstanding reexport 
authorizations for terrorist-supporting countries (see parts 742 and 746 
of the EAR) are revoked.
    (2) Effective November 16, 1998, all other such outstanding reexport 
authorizations are revoked.
    (c) Extensions. If necessary, you may request extensions of such 
authorizations according to procedures set forth in Sec. 750.7(g) of 
the EAR.
    (d) Specific Notice from BIS. If you have received, or should you 
receive, specific notice from BIS with regard to a reexport 
authorization covered by this General Order, informing you of a 
revocation, suspension, or revision (including validity period) of any 
such reexport authorization, then the terms of that specific notice will 
be controlling.
    (e) Definition of ``authorization''. The term ``authorization'' as 
used in this General Order encompasses the range of reexport 
authorizations granted by BIS, which includes licenses, individual 
letters, and other types of notifications.
    General Order No. 2 of May 14, 2004; sections 5(a)(1) and 5(a)(2)(A) 
of the Syria Accountability and Lebanese Sovereignty Act of 2003 (Public 
Law 108-175, codified as a note to 22 U.S.C. 2151) (the SAA), require 
(1) a prohibition on the export to Syria of all items on the Commerce 
Control List (in 15 CFR part 774)(CCL) and (2) a prohibition on the 
export to Syria of products of the United States, other than food and 
medicine. The President has also exercised national security waiver 
authority pursuant to Section 5(b) of the SAA for certain transactions. 
This Order is issued consistent with Executive Order 13338 of May 11, 
2004, which implements the SAA.
    (a) License requirements. Effective May 14, 2004, a license is 
required for export or reexport to Syria of all items subject to the 
EAR, except food and medicine classified as EAR99 (medicine is defined 
in part 772 of the EAR). A license is required for the ``deemed export'' 
and ``deemed reexport,'' as described in Sec. 734.2(b) of the EAR, of 
any technology or source code on the Commerce Control List (CCL) to a 
Syrian foreign national. ``Deemed exports'' and ``deemed reexports'' 
involving technology or source code subject to the EAR but not listed on 
the CCL do not require a license to Syrian foreign nationals.
    (b) Revocation of Authority to Export under Existing Licenses. 
Effective May 14, 2004, the authority to export or reexport to Syria 
under existing licenses is hereby revoked (see savings clause in 
paragraph (e) of this General Order). License conditions requiring 
written U.S. Government authorization for the reexport, transfer, or 
resale of items already exported or reexported remain in effect, and 
requests for BIS authorization to reexport, transfer, or sell such items 
will require interagency approval.
    (c) License Exceptions. Effective May 14, 2004, no License 
Exceptions to the license requirements set forth in paragraph (a) of 
this General Order are available for exports or reexports to Syria, 
except the following:
    (1) TMP for items for use by the news media as set forth in Sec. 
740.9(a)(2)(viii) of the EAR,
    (2) GOV for items for personal or official use by personnel and 
agencies of the U.S. Government as set forth in Sec. 740.11(b)(2)(i) 
and (ii) of the EAR,
    (3) TSU for operation technology and software, sales technology and 
software updates pursuant to the terms of Sec. 740.13(a), (b), or (c) 
of the EAR,
    (4) BAG for exports of items by individuals leaving the United 
States as personal baggage pursuant to the terms of Sec. 740.14 (a) 
through (d) only of the EAR, and

[[Page 240]]

    (5) AVS for the temporary sojourn of civil aircraft reexported to 
Syria pursuant to the terms of Sec. 740.15(a)(4) of the EAR.
    (d) Licensing policy. All license applications for export or 
reexport to Syria are subject to a general policy of denial. License 
applications for ``deemed exports'' and ``deemed reexports'' of 
technology and source code will be reviewed on a case-by-case basis. BIS 
may consider, on a case-by-case basis, license applications for exports 
and reexports of items necessary to carry out the President's 
constitutional authority to conduct U.S. foreign affairs and as 
Commander-in-Chief, including those exports and reexports of items 
necessary for the performance of official functions by the United States 
Government personnel abroad. BIS may also consider the following license 
applications on a case-by-case basis: items in support of activities, 
diplomatic or otherwise, of the United States Government (to the extent 
that regulation of such exportation or reexportation would not fall 
within the President's constitutional authority to conduct the nation's 
foreign affairs); medicine (on the CCL) and medical devices (both as 
defined in part 772 of the EAR); parts and components intended to ensure 
the safety of civil aviation and the safe operation of commercial 
passenger aircraft; aircraft chartered by the Syrian Government for the 
transport of Syrian Government officials on official Syrian Government 
business; telecommunications equipment and associated computers, 
software and technology; and items in support of United Nations 
operations in Syria. The total dollar value of each approved license for 
aircraft parts for flight safety normally will be limited to no more 
than $2 million over the 24-month standard license term, except in the 
case of complete overhauls. In addition, consistent with part 734 of the 
EAR, the following are not subject to this General Order: informational 
materials in the form of books and other media; publicly available 
software and technology; and technology exported in the form of a patent 
application or an amendment, modification, or supplement thereto or a 
division thereof (see 15 CFR 734.3(b)(1)(v), (b)(2) and (b)(3)).
    (e) Savings Clause. Items that are on dock for loading, on lighter, 
laden aboard an exporting carrier or en route aboard a carrier to a port 
of export on May 14, 2004, shall be subject to the licensing rules 
applicable to such items as of May 13, 2004. Any such items not actually 
exported or reexported before midnight May 28, 2004, may be exported or 
reexported only if authorized pursuant to this General Order.

[63 FR 49426, Sept. 16, 1998, as amended at 65 FR 76562, Dec. 7, 2000; 
69 FR 26768, May 14, 2004; 69 FR 42333, July 15, 2004; 69 FR 76843, Dec. 
23, 2004]

           Supplement No. 2 to Part 736--Administrative Orders

    Administrative Order One: Disclosure of License Issuance and Other 
Information. Consistent with section 12(c) of the Export Administration 
Act of 1979, as amended, information obtained by the U.S. Department of 
Commerce for the purpose of consideration of or concerning license 
applications, as well as related information, will not be publicly 
disclosed without the approval of the Secretary of Commerce. Shipper's 
Export Declarations also are exempt from public disclosure, except with 
the approval of the Secretary of Commerce, in accordance with Sec. 
301(g) of Title 13, United States Code.
    Administrative Order Two: Conduct of Business and Practice in 
Connection with Export Control Matters.
    (a) Conduct of business and practice in connection with export 
control matters.
    (1) Exclusion of persons guilty of unethical conduct or not 
possessing required integrity and ethical standards.
    (i) Who may be excluded. Any person, whether acting on his own 
behalf or on behalf of another, who shall be found guilty of engaging in 
any unethical activity or who shall be demonstrated not to possess the 
required integrity and ethical standards, may be excluded from (denied) 
export privileges on his own behalf, or may be excluded from practice 
before BIS on behalf of another, in connection with any export control 
matter, or both, as provided in part 764 of the EAR.
    (ii) Grounds for exclusion. Among the grounds for exclusion are the 
following:
    (A) Inducing or attempting to induce by gifts, promises, bribes, or 
otherwise, any officer or employee of BIS or any customs or post office 
official, to take any action with respect to the issuance of licenses or 
any other aspects of the administration of the Export Administration 
Act, whether or not in violation of any regulation;
    (B) Offering or making gifts or promises thereof to any such officer 
or employee for any other reason;
    (C) Soliciting by advertisement or otherwise the handling of 
business before BIS on the representation, express or implied, that such 
person, through personal acquaintance or otherwise, possesses special 
influence over any officer or employee of BIS;
    (D) Charging, or proposing to charge, for any service performed in 
connection with the issuance of any license, any fee wholly contingent 
upon the granting of such license and the amount or value thereof. This 
provision will not be construed to prohibit the charge of any fee agreed 
to by the parties; provided that the out-of-pocket expenditures and the 
reasonable value of the services performed, whether or not the license 
is issued and regardless of the amount thereof, are fairly compensated; 
and

[[Page 241]]

    (E) Knowingly violating or participating in the violation of, or an 
attempt to violate, any regulation with respect to the export of 
commodities or technical data, including the making of or inducing 
another to make any false representations to facilitate any export in 
violation of the Export Administration Act or any order or regulation 
issued thereunder.
    (iii) Definition. As used in this Administration Order, the terms 
``practice before BIS'' and ``appear before BIS'' include:
    (A) The submission on behalf of another of applications for export 
licenses or other documents required to be filed with BIS, or the 
execution of the same;
    (B) Conferences or other communications on behalf of another with 
officers or employees of BIS for the purpose of soliciting or expediting 
approval by BIS of applications for export licenses or other documents, 
or with respect to quotas, allocations, requirements or other export 
control actions, pertaining to matters within the jurisdiction of BIS;
    (C) Participating on behalf of another in any proceeding pending 
before BIS; and
    (D) Submission to a customs official on behalf of another of a 
license or Shipper's Export Declaration or other export control 
document.
    (iv) Proceedings. All proceedings under this Administrative Order 
shall be conducted in the same manner as provided in part 766 of the 
EAR.
    (2) Employees and former employees. Persons who are or at any time 
have been employed on a full-time or part-time, compensated or 
uncompensated, basis by the U.S. Government are subject to the 
provisions of 18 U.S.C. 203, 205, and 207 (Pub. L. 87-849, 87th 
Congress) in connection with representing a private party or interest 
before the U.S. Department of Commerce in connection with any export 
control matter.



PART 738_COMMERCE CONTROL LIST OVERVIEW AND THE COUNTRY CHART--Table 
of Contents




Sec.
738.1 Introduction.
738.2 Commerce Control List (CCL) structure.
738.3 Commerce Country Chart structure.
738.4 Determining whether a license is required.

Supplement No. 1 to Part 738--Commerce Country Chart

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 
U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 287c; 
22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 
U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 
U.S.C. app. 5; Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; 
E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 
44025, 3 CFR, 2001 Comp., p. 783; Notice of August 6, 2004, 69 FR 48763 
(August 10, 2004).

    Source: 61 FR 12756, Mar. 25, 1996, unless otherwise noted.



Sec. 738.1  Introduction.

    (a) Commerce Control List scope. (1) In this part, references to the 
EAR are references to 15 CFR chapter VII, subchapter C. The Bureau of 
Industry and Security (BIS) maintains the Commerce Control List (CCL) 
within the Export Administration Regulations (EAR), which includes items 
(i.e., commodities, software, and technology) subject to the export 
licensing authority of BIS. The CCL does not include those items 
exclusively controlled for export or reexport by another department or 
agency of the U.S. Government. In instances where agencies other than 
the Department of Commerce administer controls over related items, 
entries in the CCL contain a reference to these controls.
    (2) The CCL is contained in Supplement No. 1 to part 774 of the EAR. 
Supplement No. 2 to part 774 of the EAR contains the General Technology 
and Software Notes relevant to entries contained in the CCL.
    (b) Commerce Country Chart scope. BIS also maintains the Commerce 
Country Chart. The Commerce Country Chart, located in Supplement No. 1 
to part 738, contains licensing requirements based on destination and 
Reason for Control. In combination with the CCL, the Commerce Country 
Chart allows you to determine whether a license is required for items on 
the CCL to any country in the world.



Sec. 738.2  Commerce Control List (CCL) structure.

    (a) Categories. The CCL is divided into 10 categories, numbered as 
follows:

0--Nuclear Materials, Facilities and Equipment and Miscellaneous
1--Materials, Chemicals, ``Microorganisms,'' and Toxins
2--Materials Processing
3--Electronics
4--Computers
5--Telecommunications and Information Security
6--Lasers and Sensors
7--Navigation and Avionics

[[Page 242]]

8--Marine
9--Propulsion Systems, Space Vehicles and Related Equipment

    (b) Groups. Within each category, items are arranged by group. Each 
category contains the same five groups. Each Group is identified by the 
letters A through E, as follows:

A--Equipment, Assemblies and Components
B--Test, Inspection and Production Equipment
C--Materials
D--Software
E--Technology

    (c) Order of review. In order to classify your item against the CCL, 
you should begin with a review of the general characteristics of your 
item. This will usually guide you to the appropriate category on the 
CCL. Once the appropriate category is identified, you should match the 
particular characteristics and functions of your item to a specific 
ECCN. If the ECCN contains a list under the ``Items'' heading, you 
should review the list to determine within which subparagraph(s) your 
items are identified.
    (d) Entries. (1) Composition of an entry. Within each group, 
individual items are identified by an Export Control Classification 
Number (ECCN). Each number consists of a set of digits and a letter. The 
first digit identifies the general category within which the entry falls 
(e.g., 3A001). The letter immediately following this first digit 
identifies under which of the five groups the item is listed (e.g., 3 
A001). The second digit differentiates individual entries by identifying 
the type of controls associated with the items contained in the entry 
(e.g., 3A001). Listed below are the Reasons for Control associated with 
this second digit.

0: National Security reasons (including Dual Use and International 
Munitions List) and Items on the NSG Dual Use Annex and Trigger List
1: Missile Technology reasons
2: Nuclear Nonproliferation reasons
3: Chemical & Biological Weapons reasons
9: Anti-terrorism, Crime Control, Regional Stability, Short Supply, UN 
Sanctions, etc.

    (i) Since Reasons for Control are not mutually exclusive, numbers 
are assigned in order of precedence. As an example, if an item is 
controlled for both National Security and Missile Technology reasons, 
the entry's third digit will be a ``0''. If the item is controlled only 
for Missile Technology the third digit will be ``1''.
    (ii) The numbers in either the second or third digit (e.g., 3A001) 
serve to differentiate between multilateral and unilateral entries. An 
entry with the number ``9'' as the second digit, identifies the entire 
entry as controlled for a unilateral concern (e.g., 2B991 for anti-
terrorism reasons). If the number ``9'' appears as the third digit, the 
item is controlled for unilateral purposes based on a proliferation 
concern (e.g., 2A292 is controlled for unilateral purposes based on 
nuclear nonproliferation concerns).
    (iii) The last digit within each entry (e.g., 3A001) is used for the 
sequential numbering of ECCNs to differentiate between entries on the 
CCL.
    (2) Reading an ECCN. A brief description is provided next to each 
ECCN. Following this description is the actual entry containing 
``License Requirements,'' ``License Exceptions,'' and ``List of Items 
Controlled'' sections. A brief description of each section and its use 
follows:
    (i) License Requirements. This section contains a separate line 
identifying all possible Reasons for Control in order of precedence, and 
two columns entitled ``Control(s)'' and ``Country Chart''.
    (A) The ``Controls'' header identifies all applicable Reasons for 
Control, in order of restrictiveness, and to what extent each applies 
(e.g., to the entire entry or only to certain subparagraphs). Those 
requiring licenses for a larger number of countries and/or items are 
listed first. As you read down the list the number of countries and/or 
items requiring a license declines. Since Reasons for Control are not 
mutually exclusive, items controlled within a particular ECCN may be 
controlled for more than one reason. The following is a list of all 
possible Reasons for Control:

AT Anti-Terrorism
CB Chemical & Biological Weapons
CC Crime Control
CW Chemical Weapons Convention
EI Encryption Items
FC Firearms Convention
MT Missile Technology
NS National Security

[[Page 243]]

NP Nuclear Nonproliferation
RS Regional Stability
SS Short Supply
XP Computers
SI Significant Items

    (B) The ``Country Chart'' header identifies, for each applicable 
Reason for Control, a column name and number (e.g., CB Column 1). These 
column identifiers are used to direct you from the CCL to the 
appropriate column identifying the countries requiring a license. 
Consult part 742 of the EAR for an indepth discussion of the licensing 
requirements and policies applicable to each Country Chart column.
    (ii) License Exceptions. This section provides a brief eligibility 
statement for each ECCN-driven License Exception that may be applicable 
to your transaction, and should be consulted only AFTER you have 
determined a license is required based on an analysis of the entry and 
the Country Chart. The brief eligibility statement in this section is 
provided to assist you in deciding which ECCN-driven License Exception 
related to your particular item and destination you should explore prior 
to submitting an application. The term ``Yes'' (followed in some 
instances by the scope of Yes) appears next to each available ECCN-
driven License Exception. The term ``N/A'' will be noted for License 
Exceptions that are not available within a particular entry. If one or 
more License Exceptions appear to apply to your transaction, you must 
consult part 740 of the EAR to review the conditions and restrictions 
applicable to each available License Exception. The list of License 
Exceptions contained within each ECCN is not an all-exclusive list. 
Other License Exceptions, not based on particular ECCNs, may be 
available. Consult part 740 of the EAR to determine eligibility for non-
ECCN-driven License Exceptions.
    (iii) List of Items Controlled--(A) Units. The unit of measure 
applicable to each entry is identified in the ``Units'' header. Most 
measurements used in the CCL are expressed in metric units with an inch-
pound conversion where appropriate. Note that in some ECCNs the inch-
pound unit will be listed first. In instances where other units are in 
general usage or specified by law, these will be used instead of metric. 
Generally, when there is a difference between the metric and inch-pound 
figures, the metric standard will be used for classification and 
licensing purposes.
    (B) Related definitions. This header identifies, where appropriate, 
definitions or parameters that apply to all items controlled by the 
entry. The information provided in this section is unique to the entry, 
and hence not listed in the definitions contained in part 772 of the 
EAR.
    (C) Related controls. If another U.S. government agency or 
department has export licensing authority over items related to those 
controlled by an entry, a statement is included identifying the agency 
or department along with the applicable regulatory cite. An additional 
cross-reference may be included in instances where the scope of controls 
differs between a CCL entry and its corresponding entry on list 
maintained by the European Union. This information is provided to assist 
readers who use both lists.
    (D) Items. This header contains a positive list of all items 
controlled by a particular entry and must be reviewed to determine 
whether your item is controlled by that entry. In some entries, the list 
is contained within the entry heading. In these entries a note is 
included to direct you to the entry heading.

[61 FR 112756, Mar. 25, 1996, as amended at 61 FR 68579, Dec. 30, 1996; 
62 FR 25456, May 9, 1997; 64 FR 17970, Apr. 13, 1999; 27141, May 18, 
1999]



Sec. 738.3  Commerce Country Chart structure.

    (a) Scope. The Commerce Country Chart (Country Chart) allows you to 
determine, based on the Reason(s) for Control associated with your item, 
if you need a license to export or reexport your item to a particular 
destination. There are only two instances where the chart cannot be used 
for this purpose:
    (1) Items controlled for short supply reasons. Due to the unique 
nature of these controls, entries controlled for Short Supply reasons 
will send you directly to part 754 of the EAR. Part 754 of the

[[Page 244]]

EAR is self-contained and includes information on licensing 
requirements, licensing policies, and all available License Exceptions, 
for items controlled for Short Supply reasons.
    (2) Unique entries. The following are unique entries where you do 
not need to consult the Country Chart to determine whether a license is 
required.
    (i) ECCNs 0A983 and 5A980. A license is required for all 
destinations of items controlled under these entries. No License 
Exceptions apply. If your item is controlled by 0A983 or 5A980 you 
should proceed directly to part 748 of the EAR for license application 
instructions and Sec. 742.11 or Sec. 742.13 of the EAR for information 
on the licensing policy relevant to these types of applications.
    (ii) ECCNs 0A982, 0A985, 0A988, 0A989, 0A999, 0B986, 0B999, 0D999, 
0E982, 1A999, 1B999, 1C355, 1C995, 1C998, 1C999, 1D999, 2A994, 2A999, 
2B999, 2D994, 2E994, 3A999, and 6A999. A license is required for items 
controlled under these entries only to the specific countries identified 
within each entry.
    (b) Countries. The first column of the Country Chart lists all 
countries in alphabetical order. There are a number of destinations that 
are not listed in the Country Chart contained in Supplement No. 1 to 
part 738. If your destination is not listed on the Country Chart and 
such destination is a territory, possession, or department of a country 
included on the Country Chart, the EAR accords your destination the same 
licensing treatment as the country of which it is a territory, 
possession, or department. For example, if your destination is the 
Cayman Islands, a dependent territory of the United Kingdom, consult the 
United Kingdom on the Country Chart for licensing requirements.
    (c) Columns. Stretching out to the right are horizontal headers 
identifying the various Reasons for Control. Under each Reason for 
Control header are diagonal column identifiers capping individual 
columns. Each column identifier consists of the two letter Reason for 
Control and a column number. (e.g., CB Column 1). The column identifiers 
correspond to those listed in the ``Country Chart'' header within the 
``License Requirements'' section of each ECCN.
    (d) Cells. The symbol ``X'' is used to denote licensing requirements 
on the Country Chart. If an ``X'' appears in a particular cell, 
transactions subject to that particular Reason for Control/Destination 
combination require a license. There is a direct correlation between the 
number of ``X''s applicable to your transaction and the number of 
licensing reviews your application will undergo.

[61 FR 12756, Mar. 25, 1996, as amended at 63 FR 42228, Aug. 7, 1998; 65 
FR 55178, Sept. 13, 2000]



Sec. 738.4  Determining whether a license is required.

    (a) Using the CCL and the Country Chart--(1) Overview. Once you have 
determined that your item is controlled by a specific ECCN, you must use 
information contained in the ``License Requirements'' section of that 
ECCN in combination with the Country Chart to decide whether a license 
is required.
    (2) License decision making process. The following decision making 
process must be followed in order to determine whether a license is 
required to export or reexport a particular item to a specific 
destination:
    (i) Examine the appropriate ECCN in the CCL. Is the item you intend 
to export or reexport controlled for a single Reason for Control?
    (A) If yes, identify the single Reason for Control and the relevant 
Country Chart column identifier (e.g., CB Column 1).
    (B) If no, identify the Country Chart column identifier for each 
applicable Reason for Control (e.g., NS Column 1, NP Column 1, etc.).
    (ii) Review the Country Chart. With each of the applicable Country 
Chart Column identifiers noted, turn to the Country Chart (Supplement 
No. 1 to part 738). Locate the correct Country Chart column identifier 
on the diagonal headings, and determine whether an ``X'' is marked in 
the cell next to the country in question for each Country Chart column 
identified in the applicable ECCN. If your item is subject to more than 
one reason for control, repeat this step using each unique Country Chart 
column identifier.
    (A) If yes, a license application must be submitted based on the 
particular

[[Page 245]]

reason for control and destination, unless a License Exception applies. 
If ``Yes'' is noted next to any of the listed License Exceptions, you 
should consult part 740 of the EAR to determine whether you can use any 
of the available ECCN-drvien License Exceptions to effect your shipment, 
rather than applying for a license. Each affirmative license requirement 
must be overcome by a License Exception. If you are unable to qualify 
for a License Exception based on each license requirement noted on the 
Country Chart, you must apply for a license. Note that other License 
Exceptions, not related to the CCL, may also apply to your transaction 
(See part 740 of the EAR).
    (B) If no, a license is not required based on the particular Reason 
for Control and destination. Provided that General Prohibitions Four 
through Ten do not apply to your proposed transaction and that any 
applicable notification or review requirements described in Sec. 
742.15(b)(1) and (b)(2) of the EAR have been met for certain encryption 
items controlled under ECCNs 5A992, 5D992 and 5E992, you may effect your 
shipment using the symbol ``NLR''. Proceed to parts 758 and 762 of the 
EAR for information on export clearance procedures and recordkeeping 
requirements. Note that although you may stop after determining a 
license is required based on the first Reason for Control, it is best to 
work through each applicable Reason for Control. A full analysis of 
every possible licensing requirement based on each applicable Reason for 
Control is required to determine the most advantageous License Exception 
available for your particular transaction and, if a license is required, 
ascertain the scope of review conducted by BIS on your license 
application.
    (b) Sample analysis using the CCL and Country Chart--(1) Scope. The 
following sample entry and related analysis is provided to illustrate 
the type of thought process you must complete in order to determine 
whether a license is required to export or reexport a particular item to 
a specific destination using the CCL in combination with the Country 
Chart.
    (2) Sample CCL entry.

2A000: Entry heading.

License Requirements

Reason for Control: NS, NP, AT

------------------------------------------------------------------------
                 Control(s)                         Country Chart
------------------------------------------------------------------------
NS applies to entire entry.................  NS Column 2
NP applies to 2A000.b......................  NP Column 1
AT applies to entire entry.................  AT Column 1
------------------------------------------------------------------------

License Exceptions

LVS: $5,000
GBS: Yes
CIV: N/A

List of Items Controlled

Unit: Number
Related Definition: N/A
Related Controls: N/A
Items:

    a. Having x.
    b. Having z.

    (3) Sample analysis. After consulting the CCL, I determine my item, 
valued at $10,000, is classified under ECCN 2A000.a. I read that the 
entire entry is controlled for national security, and anti-terrorism 
reasons. Since my item is classified under paragraph .a, and not .b, I 
understand that though nuclear nonproliferation controls apply to a 
portion the entry, they do not apply to my item. I note that the 
appropriate Country Chart column identifiers are NS Column 2 and AT 
Column 1. Turning to the Country Chart, I locate my specific 
destination, India, and see that an ``X'' appears in the NS Column 2 
cell for India, but not in the AT Column 1 cell. I understand that a 
license is required, unless my transaction qualifies for a License 
Exception or Special Comprehensive License. From the License Exception 
LVS value listed in the entry, I know immediately that my proposed 
transaction exceeds the value limitation associated with LVS. Noting 
that License Exception GBS is ``Yes'' for this entry, I turn to part 740 
of the EAR to review the provisions related to use of GBS.

[61 FR 12756, Mar. 25, 1996, as amended at 67 FR 38861, June 6, 2002]

[[Page 246]]

          Supplement No. 1 to Part 738--Commerce Country Chart

                                                                                      [Reason for control]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                   Chemical and biological          Nuclear       National  security   Missile       Regional        Firearms           Crime control           Anti-terrorism
                                           weapons             nonproliferation  --------------------   tech         stability      convention -------------------------------------------------
           Countries           --------------------------------------------------                    ------------------------------------------
                                  CB 1      CB 2      CB 3      NP 1      NP 2      NS 1      NS 2      MT 1      RS 1      RS 2       FC 1       CC 1      CC 2      CC 3      AT 1      AT 2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Afghanistan...................        X         X         X         X   ........        X         X         X         X         X   ..........        X   ........        X
Albania.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X         X
Algeria.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Andorra.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Angola........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Antigua and Barbuda...........        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Argentina.....................        X   ........  ........  ........  ........        X         X         X         X         X          X          X   ........        X
Armenia.......................        X         X         X         X   ........        X         X         X         X         X   ..........        X         X
Aruba.........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Australia.....................        X   ........  ........  ........  ........        X   ........        X         X
Austria.......................        X   ........  ........  ........  ........        X   ........        X         X         X   ..........        X   ........        X
Azerbaijan....................        X         X         X         X   ........        X         X         X         X         X   ..........        X         X
Bahamas, The..................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Bahrain.......................        X         X         X         X   ........        X         X         X         X         X   ..........        X   ........        X
Bangladesh....................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Barbados......................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Belarus.......................        X         X         X   ........  ........        X         X         X         X         X   ..........        X         X
Belgium.......................        X   ........  ........  ........  ........        X   ........        X         X
Belize........................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Benin.........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Bhutan........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Bolivia.......................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Bosnia and Herzegovina........        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Botswana......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Brazil........................        X         X   ........  ........  ........        X         X         X         X         X          X          X   ........        X
Brunei........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Bulgaria......................        X   ........  ........  ........  ........        X         X         X         X
Burkina Faso..................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Burma.........................        X         X         X         X   ........        X         X         X         X         X   ..........        X   ........        X
Burundi.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Cambodia......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X         X
Cameroon......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Canada........................        X   ........  ........  ........  ........  ........  ........  ........  ........  ........         X
Cape Verde....................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Central African Republic......        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Chad..........................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Chile.........................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
China.........................        X         X         X         X   ........        X         X         X         X         X   ..........        X   ........        X
Colombia......................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Comoros.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X

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Congo (Democratic Republic of         X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
 the).........................
Congo (Republic of the).......        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Costa Rica....................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Cote d'Ivoire.................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Croatia.......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Cuba..........................                  See part 746 of the EAR to determine whether a license is required in order to export or reexport to this destination.
Cyprus........................        X   ........  ........  ........  ........        X         X         X         X         X   ..........        X   ........        X
Czech Republic................        X   ........  ........  ........  ........        X         X         X         X
Denmark.......................        X   ........  ........  ........  ........        X   ........        X         X
Djibouti......................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Dominica......................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Dominican Republic............        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
East Timor....................        X         X   ........        X   ........        X         X         X         X         X   ..........        X   ........        X
Ecuador.......................        X         X   ........        X   ........        X         X         X         X         X          X          X   ........        X
Egypt.........................        X         X         X         X   ........        X         X         X         X         X   ..........        X   ........        X
El Salvador...................        X         X   ........        X   ........        X         X         X