CBP Amends Regulations re: Use of Sampling Methods and Offsetting of Overpayments and Over-Declarations
CBP Regulations were updated to include the following provisions:
A requirement that a private party’s prior disclosure that employs sampling must include an explanation of the sampling plan and methodology used.
A requirement that a written waiver evidence a private party’s acceptance of the sampling plan and methodology to be employed in an auditor, where appropriate, in circumstances of self-testing or prior disclosure. The waiver limits the private party’s objections to the sampling procedure but does not limit any other substantive claims. The appropriate Regulatory Audit (RA) field director will sign for CBP. Acceptance of subsequent adjustments or modifications to the sampling plan or methodology also must be in writing.
A provision under which CBP will refer to RA for review and evaluation of all prior disclosures submitted outside the context of a CBP audit that apply or seek to apply offsetting. RA will approve the offsetting where it determines that the requirements of the statute and this final rule are satisfied.
This rule is effective December 27, 2011.
The current foreign policy-based export controls maintained by the BIS are set forth in the EAR (15 CFR parts 730-744), including in parts 742 (CCL Based Controls), 744 (End-User and End-Use Based Controls) and 746 (Embargoes and Other Special Controls). These controls apply to a range of countries, items, activities, and persons, including entities acting contrary to the national security or foreign policy interests of the United States, encryption items, restrictions on exports and reexports to certain persons, communication intercepting devices, software and technology, embargoed countries, certain entities in Russia, certain sanctioned entities, and many more. The complete list of controls is listed in the Federal Register notice.
Comments are due by October 3, 2011.
BIS Seeks Comments on Proposed Revisions to EAR re: Control of Items that No Longer Warrant ITAR Control Under the USML
This rule also proposes amending the EAR to establish a process by which certain items moving from the USML to the CCL would be made eligible for License Exception Strategic Trade Authorization (STA), and proposes EAR amendments related to movement of USML items to the CCL, such as new definitions of relevant terms, including “specially designed,” “end items,” “parts,” and “components.” The proposed rule also establishes a new holding Export Control Classification Number (ECCN) in which items that warrant a significant level of control, but are not otherwise classified on the CCL, may be temporarily placed.
Finally, the rule proposes the transfer of an initial tranche of items from USML Category VII (Tanks and Military Vehicles) to the CCL.
Comments to BIS are due September 13, 2011.
Effective July 1, 2011, sections 570.506 and 570.508 replace and supersede General License Nos. 3 and 2, respectively, which have been removed from OFAC’s web site. General License Nos. 1B, 4, and 5, as well as certain statements of licensing policy, are not being incorporated into the Regulations at this time and remain available on OFAC’s web site.
The current rule regarding parts and components requires additional licenses for licensed end-users and end-uses for systems and components already vetted in earlier licenses. The proposed rule adds a new section (§123.28) that eliminates the requirement for a license for parts and components for systems approved in a previous license. This proposed exemption applies only to exporters specifically identified in a previously approved authorization to export the end-item in question. It would not be applicable to upgrades of capabilities of the original end-item.
With respect to ITAR treatment of incorporated articles, the proposed new section of the ITAR (§126.19) lists three conditions under which a DDTC license is not required for the export or re-export of defense articles incorporated into an end-item that is subject to the EAR: (1) where the end-item would be “rendered inoperable” by the removal of the defense articles; (2) where no technical data for development or production are transferred with the defense article; and (3) where the incorporation of the defense article does not provide (or is not related to) a military application.
In addition, under the proposed rule, no license is required for the export or re-export of a defense article when that article would be rendered inoperable by removal form the end-item. A license would be required for the export of defense articles that are spare or replacement parts when they are embedded into a larger assembly such that they can be removed without destroying the defense articles.
Comments to the DDTC are due before April 14, 2011.
Through this Final Rule, BIS is removing from the scope of items subject to the Export Administration Regulations (EAR) ‘‘publicly available’’ mass market encryption object code software with a symmetric key length greater than 64- bits, and ‘‘publicly available’’ encryption object code classified under Export Control Classification Number (ECCN) 5D002 on the Commerce Control List when the corresponding source code meets the criteria specified under License Exception TSU. This change is being made pursuant to a determination by BIS that, because there are no regulatory restrictions on making such software ‘‘publicly available,’’ and because, once it is ‘‘publicly available,’’ by definition it is available for download by any end user without restriction, removing it from the jurisdiction of the EAR will have no effect on export control policy. This action will not result in the decontrol of source code classified under ECCN 5D002, but it will result in a simplification of the regulatory provisions for publicly available mass market software and specified encryption software in object code.
The revisions encompass changes related to manufacturing and value-added activities, as well as new rules designed to address compliance with the Foreign Trade Zones Act’s (FTZ Act) requirement for a grantee to provide uniform treatment for the users of a zone.
Specifically, the proposed changes are as follows:
The proposed regulations would eliminate the general requirement for advance approval from the FTZ Board for all manufacturing (i.e., substantial transformation) activity. As proposed, advanced approval for production activity would only be required under specific circumstances (e.g., if a lower U.S. duty rate will be applied to the component through its incorporation into a downstream product in the FTZ) (see 15 C.F.R. Sec. 400.14(a)).
In circumstances where advance approval is required for specific production activity, the proposed rule would delegate authority to the Commerce Department's Assistant Secretary for Import Administration to approve the activity on an interim basis pending completion of the full
FTZ Board's review of the request, which would significantly decrease the time a company must wait for approval (see 15 C.F.R. Sec. 400.14(d)(3)). This new provision would replace and will be significantly more flexible than the temporary/interim manufacturing (T/IM) procedure, which had not yet been the subject of specific regulations. The T/IM procedure was limited to activity similar to that approved by the FTZ Board in the preceding five years. The new provision for interim approvals contains no requirement for similarity to recently approved activity.
The proposed regulations also provide improved flexibility to accommodate changes in production at previously approved FTZ operations through retrospective notifications to the FTZ Board (see Sec. Sec. 400.14(e)(1) and 400.37). The current regulations allow grantees or zone operators to notify the FTZ Board of new components but require advance approval for any new finished products. The proposed regulations would allow grantees or zone operators to notify the Board of new finished products as well as new components. However, in order to preserve the public process long associated with FTZ Board evaluation of new “manufacturing'' activity, the proposed regulations would also require that a production operation obtain advance FTZ Board approval – after a public comment period on the proposal – for the list of broad categories of components or finished products within which specific new components or finished products would be identified. In addition, the proposed regulations would provide for a public comment period on all notifications submitted to the FTZ Board, as well as procedures to review any such notifications and to impose restrictions on notified changes when warranted.
Two other areas of change in the proposed regulations pertain to the statutory requirements that each zone be operated as a public utility and provide uniform treatment to all that apply to use the zone. The current regulations do not provide grantees guidance on the practical implementation of these requirements. The proposed regulations would provide such guidance and would establish specific standards for compliance with those requirements (see Secs. 400.42 and 400.43). FTZ Board plans that explicit standards regarding uniform treatment would help to ensure that the broadest range of U.S.-based operations can use zones to maximize their global competitiveness.
Additionally, the proposed regulations would implement the statutory authority to issue fines for violations of the FTZ Act or the Board's regulations through specific provisions targeting certain types of violations (see Sec. 400.62). The current regulations contain no provisions pertaining to the statutory fining authority. The fining provisions are supplemented by provisions through which the Board or the Commerce Department's Assistant Secretary for Import Administration may order the suspension of the activated status of a zone operation in response to a violation. The proposed regulations' fining and suspension-of-activation provisions would help to ensure compliance with the statutory or regulatory requirements that zones submit annual reports to the FTZ Board, obtain advance approval (or submit notification) for certain production activity, and avoid certain conflicts of interest inconsistent with the statutory uniform treatment requirement.
Finally, the proposed regulations contain a new provision allowing for the ``prior disclosure'' of violations of the FTZ Act or the Board's regulations (see Sec. 400.63). Disclosure of a violation to the FTZ Board prior to its discovery by the Board would generally result in the potential total fine for the violation (or series of offenses stemming from a continuing violation) being reduced to $1,000.
In addition to the overview of changes above, the rule contains a detailed explanation of proposed changes by section. Comments on the proposed rule are due on April 8, 2011.
Questions to be discussed in the conference call must be submitted in advance to firstname.lastname@example.org with the subject line "Teleconference Questions".
To participate in the free conference calls, which are limited to the first 100 people per session, you may dial in at 866-917-2731, participant code 4136642. Callers should dial in 10 minutes early. No reservations are required.
BIS Implements Additional Changes from Annual Review of Entity List for Entities in China and Russia
The changes to the Entity List from the annual review is being implemented in three rules. The first rule published on May 28, 2010 (75 FR 29884) implemented the results of the annual review for listed entities located in Canada, Egypt, Germany, Hong Kong, Israel, Kuwait, Lebanon, Malaysia, South Korea, Singapore, and the United Kingdom.
The second rule, published on 12/17/10, implements the results of the annual review for entities located in China and Russia. This rule removes five entities from the Entity List under Russia and makes twenty-one modifications to the Entity List (consisting of modifications to eighteen Chinese entries and three Russian entries currently on the Entity List) by adding additional addresses, aliases and/or clarifying the names for these twenty-one entities.
The third rule, which will likely be published in early 2011, will implement the remaining results of the annual review.
The Entity List provides notice to the public that certain exports, reexports, and transfers (in-country) to entities identified on the Entity List require a license from the Bureau of Industry and Security and that availability of license exceptions in such transactions is
The DDTC administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120–130). The items subject to the jurisdiction of the ITAR, i.e., ‘‘defense articles,’’ are identified on the ITAR’s U.S. Munitions List (USML) (22 CFR 121.1). The descriptions in many USML categories are general and include design intent as an element of causing an item to be controlled. The descriptions in most CCL categories are specific and generally include technical parameters as an element for causing an item to be controlled.
Both the ITAR and the EAR impose license requirements on exports and re- exports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR. A key part of the Administration’s Export Control Reform effort is to review and revise these two lists of controlled items to enhance national security so that they: (1) Are “tiered” consistent with the criteria the U.S. Government is establishing to distinguish the types of items that should be controlled at different levels for different types of destinations, end-uses, and end-users (“Criteria” (2) create a “bright line” between the two lists to clarify jurisdictional determinations and reduce government and industry uncertainty about whether particular items are subject to the jurisdiction of the ITAR or the EAR; and (3) are structurally “aligned” so that they later can be combined into a single list of controlled items.
In the process of revising the USML, articles will be screened to determine which items that are currently USML-controlled defense articles should remain on the USML, which items that are currently USML controlled defense articles could be controlled under the CCL, and which items should be subject to the EAR without a specific Export Control Classification Number (ECCN) on the CCL. This proposed rule addresses both the need for “tiering” Category VII and the need for establishing a “bright line” between the USML and the CCL so that, after application of this process to the remaining categories of the USML and meeting the statutory and other requirements of Export Control Reform, the two lists can be combined into a single list of controlled items. Prior to the completion of a single U.S. Government control list, DDTC plans to publish in the existing ITAR a final rule amending Category VII after it has reviewed and considered all comments received on this proposed rule, received interagency input and approval, and satisfied its obligations under section 38(f) of the Arms Export Control Act.
The DDTC has revised Category VII to assign all controlled defense articles under this category one of the three control Criteria, that is Tier 1 (T1), Tier 2 (T2), or Tier 3 (T3). These tier designations were made upon a government-wide assessment of the appropriate level of export control for each item based upon different types of destinations, end-uses, and end-users. As other USML categories are reviewed and revised, the same “tiering” structure is planned to be applied to the remaining USML categories.
DDTC is not seeking with this advance notice of proposed rulemaking (ANPRM) input on whether particular defense articles should or should not be controlled on the USML or whether any defense articles should be controlled differently. Rather, it is only seeking with this ANPRM input on how the USML can be revised so that it clearly describes what is subject to the jurisdiction of the International Traffic in Arms Regulations (ITAR), how defense articles are identified by tier, and what current defense articles do not fall within the scope of any of the tiers.
Comments must be received by the DDTC no later than February 8, 2011.
The ANPRM states in part that:
A key part of the Administration’s Export Control Reform effort is to review and revise both the ITAR and the CCL to enhance national security so that they: (1) Are ‘‘tiered’’ consistent with the criteria the U.S. Government has established to distinguish the types of items that should be controlled at different levels for different types of destinations, end-uses, and end-users; (2) create a ‘‘bright line’’ between the two lists to clarify jurisdictional determinations and reduce government and industry uncertainty about whether a particular item is subject to the jurisdiction of the ITAR or the EAR; and (3) are structurally ‘‘aligned’’ so that they can eventually be combined into a single control list.
The Administration has determined that these changes are necessary to better focus its resources on protecting those items that need to be protected, to end jurisdictional confusion between the ITAR and EAR, and to provide clarity to make it easier for exporters to comply with the regulations and for the U.S. Government to administer and enforce them.
In order to accomplish the three above-referenced tasks simultaneously, the USML and, to a lesser degree, the CCL must be revised so that they are aligned into ‘‘positive lists.’’ A ‘‘positive list’’ is one that describes controlled items using objective criteria such as horsepower, microns, wavelength, speed, accuracy, hertz or other precise descriptions rather than broad, open- ended, subjective, or design intent- based criteria.
As the U.S. Government continues its work on preparing proposed revisions to the USML, it seeks public input on how best to describe the USML in a positive manner. U.S. companies, trade associations, and individuals that produce, market, or export USML- controlled defense articles are generally well positioned to describe their articles positively and to provide comments on what are and are not clear descriptions of controls over the articles. Public comment at this stage of the USML review process also ensures that affected industry sectors have the opportunity to contribute and comment on a key element of Export Control Reform.
The following is a summary of the specific requests for public comment described in this notice:
- Public comments should be provided on a category-by-category basis.
- Within each category, public input should be further identified by groups A thru E as further described below.
- Public input should describe defense articles in a ‘‘positive’’ way:
1. Use objective criteria or thresholds, such as precise descriptions or technical parameters, that do not lend themselves to multiple interpretations by reasonable people.
2. Descriptions should not contain any (a) controls that use generic labels for ‘‘parts,’’ ‘‘components,’’ ‘‘accessories,’’ ‘‘attachments,’’ or ‘‘end-items’’ or (b) other types of controls for specific types of defense articles because, for example, they were ‘‘specifically designed or modified’’ for a defense article, but should contain identification of those ‘‘parts,’’ ‘‘components,’’ ‘‘accessories,’’ ‘‘attachments,’’ or ‘‘end-items’’ that do warrant enumerated control on the USML. Separately, the use of ‘‘specially designed’’ as a control criterion for the other ‘‘parts,’’ ‘‘components,’’ ‘‘accessories,’’ ‘‘attachments,’’ or ‘‘end- items’’ should only be applied when required by multilateral obligations or when no other reasonable option exists.
3. Items are not to be listed on both the CCL and the USML unless there are specific technical or other objective criteria—regardless of the reason why any particular item was designed or modified—that distinguish between when an item is USML-controlled or when it is CCL-controlled.
4. In cases where technical characteristics are classified and need to be protected, the objective descriptions of the products controlled should be set at an unclassified level below the classified level.
5. Public input should include the recommended tier of control for the defense articles described using the tiering criteria in Part IV, Step 4 of the Guidelines in this notice.
6. The public is also requested to identify any current defense articles that do not fall within the scope of any of the criteria’s tiers, and provide an explanation why they believe that such items are not within the scope of the criteria.
BIS Issues Advance Notice of Proposed Rulemaking re: Revising the Descriptions of Items on the CCL and Foreign Availability
BIS states that:
A core task of the Administration’s Export Control Reform Initiative is to enhance national security by reviewing and revising, as necessary and to the extent permitted by law and regime obligations, the lists of items (i.e., commodities, software, and technology) controlled for export and reexport so that they (1) are clearer and more "positive" in nature and (2) can more easily be screened into three tiers based upon a set of criteria. The Administration has developed a three- tiered set of criteria to help determine whether a license should be required or a license exception should be available to allow license-free export, reexport, or transfer (in-country) of a given item, with appropriate conditions, to various destinations. The three-tiered set of criteria has two primary elements-(a) the degree to which an item provides the United States with a military or intelligence advantage and (b) the availability of the item outside the United States, its close allies and multilateral export control regime partners.
Accordingly, BIS seeks public comments on how certain export control classification numbers (ECCNs) that do not contain "positive" descriptions or that are unclear can be made more clear and more specific. In addition, BIS also seeks public comments on whether items with the capabilities and characteristics described on the CCL, and controlled for other than solely anti- terrorism (AT) reasons or Crime Control (CC) reasons, are indigenously developed, produced, or enhanced (a) almost exclusively in the United States or (b) in destinations other than Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, Ukraine, or the United Kingdom.
This license exception would encompass three different authorizations, based on the reason(s) for control underlying the license requirements that would apply to the item in the particular transaction at issue, the destination, the sensitivity of the item and the end-use. One authorization would allow items subject to any (or all) of seven reasons for control to go to 37 destinations. Another authorization would allow less sensitive items subject to only national security reasons for control to go to two additional destinations. The third authorization would allow less sensitive items subject to only national security reasons for control to go to 125 additional destinations for civil end- uses. National security-controlled items that are ineligible for the last two authorizations would be identified by the new ‘‘STA exclusion paragraphs’’ in the ‘‘License Exceptions’’ sections of 50 ECCN entries on the Commerce Control List. Thus, the STA exclusion serves the opposite function of a typical list-based license exception paragraph, such as those setting forth license exceptions LVS (§ 740.3) and GBS (§ 740.4), which identifies items that are eligible for a license exception.
Comments on the proposed rule must be received by BIS no later than February 7, 2011.
Comments must be received by December 27, 2010.
The proposed amendment would allow brokers, upon the client’s consent in a written authorization, to share client information with affiliated entities related to the broker so that these entities may offer non-customs business services to the broker’s clients. The proposed amendment would also allow customs brokers to use a third-party to perform photocopying, scanning, and delivery of client records for the broker. These proposed changes are intended to update the regulation to reflect modern business practices, while protecting the confidentiality of client (importer) information. In addition, the proposed changes would align the regulations with CBP’s previously published rulings concerning brokers’ confidentiality of client information.
According to the correcting amendments, the final rule of September 7, 2010 contained errors that affect Export Control Classification Numbers (ECCNs) 6A005, 6A006, and 9A001, as well as the definition of “energetic materials.” In addition, the final rule’s preamble erroneously identified ECCN 6E993 as one of the ECCNs that was revised in the rule’s text.
The rule, as corrected, removes the note after 6A008.f. Also, the rule of September 8 listed an incorrect citation of “6.A.5.d.1.d” instead of “6A005.d.1.d” in 6A005.d.1.e, which is corrected by the amendment of October 13. The current rule also replaced two incomplete citations in the introductory text of ECCN 9A001.a; this rule replaces the citations “.a or .h” with “9E003.a or 9E003.h”.
Amendments are effective October 13, 2010.
BIS Seeks Comments on the Effectiveness of Licensing Procedures for Agricultural Commodities Exported to Cuba
Comments must be received by October 8, 2010.
The notice also provided:
In January 2010, the Secretary of Commerce, on the recommendation of the Secretary of State, extended for one year all foreign policy-based export controls then in effect. BIS is now soliciting public comment on the effects of extending or modifying the existing foreign policy-based export controls for another year. Among the criteria considered in determining whether to continue or revise U.S. foreign policy-based export controls are the following:
1. The likelihood that such controls will achieve their intended foreign policy purposes, in light of other factors, including the availability from other countries of the goods, software or technology proposed for such controls;
2. Whether the foreign policy objective of such controls can be achieved through negotiations or other alternative means;
3. The compatibility of the controls with the foreign policy objectives of the United States and with overall U.S. policy toward the country subject to the controls;
4. Whether the reaction of other countries to the extension of such controls is not likely to render the controls ineffective in achieving the intended foreign policy objective or be counterproductive to U.S. foreign policy interests;
5. The comparative benefits to U.S. foreign policy objectives versus the effect of the controls on the export performance of the United States, the competitive position of the United States in the international economy, the international reputation of the United States as a supplier of goods and technology; and
6. The ability of the United States to effectively enforce the controls.
BIS is particularly interested in receiving comments on the economic impact of proliferation controls. BIS is also interested in industry information relating to the following:
1. Information on the effect of foreign policy-based export controls on sales of U.S. products to third countries (i.e., those countries not targeted by sanctions), including the views of foreign purchasers or prospective customers regarding U.S. foreign policy- based export controls.
2. Information on controls maintained by U.S. trade partners. For example, to what extent do U.S. trade partners have similar controls on goods and technology on a worldwide basis or to specific destinations?
3. Information on licensing policies or practices by our foreign trade partners that are similar to U.S. foreign policy- based export controls, including license review criteria, use of conditions, and requirements for pre- and post-shipment verifications (preferably supported by examples of approvals, denials and foreign regulations).
4. Suggestions for revisions to foreign policy-based export controls that would bring them more into line with multilateral practice.
5. Comments or suggestions as to actions that would make multilateral controls more effective.
6. Information that illustrates the effect of foreign policy-based export controls on trade or acquisitions by intended targets of the controls.
7. Data or other information on the effect of foreign policy-based export controls on overall trade at the level of individual industrial sectors.
8. Suggestions as to how to measure the effect of foreign policy-based export controls on trade.
9. Information on the use of foreign policy-based export controls on targeted countries, entities, or individuals.
BIS is also interested in comments relating generally to the extension or revision of existing foreign policy-based export controls.
Comments are due by October 8, 2010.
The following Export Control Classifications Numbers (ECCNs) are affected: 1A001, 1A002, 1B001, 1C002, 1C006, 1C007, 1C008, 1C010, 1C011, 1E002, 2B006, 3A001, 3A002, 3B001, 4A001, 4A003, 4D001, 4D993, 4E001, 5A001, 5B001, 5D001, 5E001, 6A001, 6A005, 6A006, 6A008, 6C004, 6D003, 6E993, 7A005, 7B001, 7D003, 7E004, 9A001, 9A003, 9B002, 9D003, and 9E003. 4D003 is removed by the final rule.
Changes pertaining to ECCNs 5A002, 5D002, 6A002, 6A003, 8A002 and all related ECCNs will be implemented in a separate rule because of the sensitivity of the items and controls for these items.
For more information, refer to the final rule, which can be accessed here.
The exemption as amended covers technical data, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the U.S.
The change is effective August 27, 2010.
The rule is the third phase of the regulatory implementation of the results of a review of the CCL that was conducted by BIS starting in 2007. The BIS review was aided by input received from BIS’s Technical Advisory Committees (TACs) and comments received from the interested public.
The revisions in this rule include clarifications to existing controls; eliminating redundant or outdated controls; and establishing more focused and rationalized controls. This rule also makes CCL related changes to other parts of the EAR, including CCL related definitions and license exceptions.
The rule is effective upon publication and while no formal comment period, BIS welcomes comments from the public on this rule on a continuing basis.
BIS believes that the rule will streamline procedures for (1) less sensitive encryption items eligible for export under License Exception ENC and (2) most mass market encryption products. The interim final rule also implements the Wassenaar Arrangement’s decontrol of items that perform “ancillary cryptography” in the Commerce Control List.
The rule includes several significant changes to encryption export controls by modifying the way information about encryption products is collected an analyzed. The rule, as amended:
- Removes review requirements for less sensitive encryption items;
- Establishes a company registration requirement for encryption items under License Exception ENC or as mass market encryption items. Under the new rule, authorization for License Exception ENC and mass market treatment is based on company authorizations that operate like a bulk license for the company’s products rather than product-by-product authorizations;
- Creates an annual self-classification report requirement for such items pursuant to an encryption registration. Under the new rule, the self-classification report would be required to be submitted annually to BIS and the ENC Encryption Request Coordinator in February for items exported and reexported the previous calendar year;
- Makes encryption technology eligible for export and reexport under License Exception ENC, except to countries of highest concern;
- Lifts the semi-annual sales reporting for less sensitive encryption items under License Exception ENC. When sales reporting is not required under License Exception ENC, companies need only maintain records as required by the EAR that can be reviewed by appropriate agencies of the U.S. Government upon request;
- Removes the 30-day delay to export and reexport less sensitive encryption items under License Exception ENC; and
- Removes the 30-day delay to make most mass market encryption items eligible for mass market treatment.
Comments on the suggested changes are due by August 24, 2010.
The EAR generally do not apply to items that were made and are located outside the U.S. and that contain only a “de minimis” level of U.S-origin content. The procedures for calculating whether an item exceeds the de minimis threshold note that the calculation is appropriate only for items that are made outside the U.S. and are not currently in the U.S.
Effective June 4, 2010, the rule removes EAR provision in §734.3(b)(4), which outlines a category of items not subject to the EAR (“foreign made items that have less than the de minimis percentage of controlled U.S. content&rdquo, because the provision could be erroneously read as applying the de minimis exclusion to foreign made items that are located in the U.S.
In addition, the final rule provides technical corrections to the EAR involving certain performance criteria of turning machines and the rule also removes obsolete cross references, removes and reserves two regulatory provisions,
corrects a typographical error, and removes an unnecessary reporting
BIS further revised the EAR with additional AMD China information on May 14, 2010.
Specifically, the rule revises the EAR to state that BIS may issue export and reexport licenses either electronically or on paper and that each license will bear a license number. This language enables BIS to exercise discretion in deciding whether to issue a license electronically in SNAP-R or on paper. However, BIS expects that it will issue nearly all licenses electronically. Unless some exceptional circumstances exist, only licenses for which the applicant was authorized to file the application on paper and licenses that BIS cannot issue electronically (currently, only reopened licenses) will be issued on paper. BIS made the change to reduce the costs of generating and mailing paper copies of licenses.
Currently, BIS issues license related documents in two ways: electronically in BIS’s Simplified Network Application Processing Redesign system (SNAP-R) and on paper. Most license related documents are issued in both electronic and paper form. Only a few such documents are issued only on paper.
The EAR require that export license applications, reexport license application, License Exception AGR notification, encryption review requests, and classification requests be submitted to BIS electronically using SNAP-R, except in individual instances where BIS authorizes a paper submission. The license related documents associated with a SNAP-R submissions are issued on line in SNAP-R where the submitter may view, save, or print a copy. In addition, a paper version of each of those documents is mailed to the submitter.
In two situations, BIS issues only a paper version of a license related document: when BIS authorizes a paper submission, and when BIS must reissue the license related document because it reopened a matter previously considered to be completed. BIS does not intend to stop issuing paper license related documents in those two situations. It also does not intend to change its practices regarding issuance of Special Comprehensive Licenses or Special Iraq Reconstruction Licenses, both of which are paper-based.
BIS intends to discontinue issuing paper documents in the situations where it currently issues both paper and electronic versions of license related documents.
The final rule also made changes to recordkeeping requirements associated with the elimination of paper documents:
- The rule removes a requirement that the license holder attach a replacement license issued by BIS to the original license that it replaces. However, the rule retains the requirement that the license holder keep both the original and the replacement licenses.
• The rule exempts parties who submit documents to BIS via SNAP-R from requirements to retain copies of documents so submitted even thought those documents are “export control documents” under the EAR.
• The new rule requires that the following documents are kept: (1) notification from BIS that an application is being returned without action; (2) notification from BIS that an application is being denied; and (3) notification from BIS of the results of a commodity classification or encryption review request conducted by BIS.
The new rule also provides that parties who receive documents issued by BIS in SNAP-R may store the documents in two ways, either of which meet the requirements that original documents be retained: electronically in a format readable by software possessed by the recipient party, or storage of a complete printed paper copy of the document.
The new rule is effective May 5, 2010.
These amendments reflect issues identified by an interagency working group that is reviewing export control issues related to homeland security. The interagency working group is made up of representatives from the Departments of Commerce, Defense, Homeland Security and State. The purpose of the interagency working group is to ensure that appropriate export controls are in place to protect U.S. export control interests for homeland security related items, while at the same time facilitating the development, production and use of items that will enhance U.S. homeland security and the homeland security of key U.S. allies.
To help accomplish these objectives, this rule adds three new entries to the Commerce Control List (CCL) to control certain concealed object detection equipment operating in the frequency range from 30 GHz to 3000 GHz and related software and technology. In addition, to facilitate the export and reexport of these items to certain trusted destinations and end-users, this rule adds new license review criteria to the EAR to create a presumption of approval for certain cooperating countries provided the items are being made to a government end-user or to a person designated by the government end-user pursuant to contract.
Currently, CBP’s Technology Center transmits electronic courtesy notices to all Automated Broker Interface (ABI) filers and mails paper courtesy notices, on CBP Form 4333-A, to all importers of record whose entry summaries are set to liquidate by each port of entry. As a result, importers of record who are also ABI filers receive two notices: a paper notice and an electronic notice that the ABI filer receives on behalf of the importer of record.
CBP is proposing to discontinue mailing paper courtesy notices to importers of record whose entry summaries are filed in ABI because the ABI filer, who is either the importer of record or a customs broker, already receives an electronic courtesy notice of liquidation. CBP estimates that this amendment will save the agency $3.8 million annually by eliminating 90% of the paper courtesy notices currently sent to importers.
The proposed changes will not affect CBP’s obligation to post the official bulletin notice of liquidation in the customhouse at all ports of entry pursuant to 19 CFR 159.9(b). In addition, CBP Form 4333-A will continue to be used as a notice of extension and suspension.
Comments on the proposed rule are due May 17, 2010.
CBP Proposes Regulation Changes re: the Use of Statistical Sampling in Audits and Prior Dislcosures and Offsetting Overpayments and Over-Declarations
The proposed amendments to the regulations provide further guidance with regard to the use of statistical sampling in audits conducted by CBP under section 1509 of the Regulations and in independent reviews and lost revenue calculations for private parties for purposes of prior disclosure. Specifically, the amended regulations provide that: (1) CBP has the sole discretion concerning whether to employ statistical sampling in any given case, authorize a person being audited to perform self-testing and use statistical sampling, or accept the statistical sampling used by a private party conducting an independent review and calculation of lost revenue in a prior disclosure case. Once CBP approves the specfics of a statistical sampling plan, and the person being audited or submitting the prior disclosure agrees to waive its ability to challenge the validty of the sampling plan at a later date (any future challenges will be limited to computation and clerical errors), the audit (or self-testing) may proceed in accordance with the sampling plan. CBP reserves the reight in any case to conduct a full enty-by-entry audit if it deems such an audit to be appropriate.
Furthermore, the amendments provide that CBP auditors and private parties seeking to use statistical sampling with regard to a prior disclosure case may do so only when: (1) review of 100 percent of the transactions is impossible or impractical; (2) the sampling plan is prepared in accordance with generally recognized sampling procedures; and (3) the sampling procedure is executed in accordance with that plan. 19 C.F.R. § 163.11(c)(2) (as proposed).
With regard to offsetting overpayments and over-declarations, CBP is proposing updating the regulations to reflect an amendment to section 1509(b) made by Section 382 of the Trade Act of 2002. Prior to the Act, once liquidation had become final with respect to an entry that was overpaid, CBP was bound by the liquidation and could not offset an overpayment against the underpayments that formed the basis of a penalty action. CBP is now authorized under the statute to account for overpayments of duties and fees and over-declarations of quantities or values when calculating loss of duties, taxes, or fees and monetary penalties levied under section 1592, if:
(1) The overpayments or over-declarations are identified by CBP during an audit (review or examination) conducted by CBP under section 1509(b);
(2) The audit was completed on or after August 6, 2002, the effective date of the Act;
(3) The overpayments or over-declarations relate to liquidated entries;
(4) The overpayments or over-declarations are determined by CBP as having been made within the time period and scope of the audit as defined by CBP; and
(5) The overpayments or over-declarations are determined by CBP not to have been made for the purpose of violating any provision of law, including the customs laws and laws enforced by other agencies, including, but not limited to, the Internal Revenue Service.
Among other changes, the new rule would allow Category 1 and 2 quantities of materials listed in the Commission’s regulations to be imported under a general license, and would also revise the definition of “radioactive waste.”
The comment period for this proposed rule will close on September 8, 2009.