Federal Register Vol. 81, No.145,

Background

This final rule is published by the Bureau of Industry and Security (BIS) as part of the Administration's Export Control Reform (ECR) Initiative, the object of which is to protect and enhance U.S. national security interests. The implementation of the ECR initiative includes amendment of the International Traffic in Arms Regulations (ITAR) and its U.S. Munitions List (USML), so that they control only those items that provide the United States with a critical military or intelligence advantage or otherwise warrant such controls, and amendment of the Export Administration Regulations (EAR) to control military items that do not warrant USML controls. This series of amendments to the ITAR and the EAR will reform the U.S. export control system to enhance our national security by: (i) Improving the interoperability of U.S. military forces with allied countries; (ii) strengthening the U.S. industrial base by, among other things, reducing incentives for foreign manufacturers to design out and avoid U.S.-origin content and services; and (iii) allowing export control officials to focus government resources on transactions that pose greater national security, foreign policy, or proliferation concerns than those involving our NATO allies and other multi-regime partners.

Following the structure set forth in the final rule titled “Revisions to the Export Administration Regulations: Initial Implementation of Export Control Reform” (78 FR 22660, April 16, 2013) (hereinafter the “April 16 (initial implementation) rule”), this final rule describes BIS's implementation of controls, under the EAR's CCL, on certain dissemination, detection and protection “equipment” and related articles previously controlled under USML Category XIV in the ITAR and certain tooling, production “equipment,” test and evaluation “equipment,” test models and related articles previously controlled under USML Category XVIII of the ITAR.

In the April 16 (initial implementation) rule, BIS created a series of new ECCNs to control items that would be removed from the USML and similar items from the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies Munitions List (Wassenaar Arrangement Munitions List or WAML) that were already controlled elsewhere on the CCL. That final rule referred to this series of new ECCNs as the “600 series,” because the third character in each of these new ECCNs is the number “6.” The first two characters of the “600 series” ECCNs serve the same function as any other ECCN as described in § 738.2 of the EAR. The first character is a number, within the range of 0 through 9, that identifies the Category on the CCL in which the ECCN is located. The second character is a letter, within the range of A through E, that identifies the product group in a CCL Category. As indicated above, the third character in the “600 series” ECCNs is the number “6,” which distinguishes the items controlled under this series of ECCNs from items identified under other ECCNs on the CCL. With few exceptions, the final two characters identify the WAML category that covers items that are the same or similar to items in a particular “600 series” ECCN.

Pursuant to section 38(f) of the Arms Export Control Act (AECA), the President is obligated to review the USML “to determine what items, if any, no longer warrant export controls under” the AECA. The President must report the results of the review to Congress and wait 30 days before removing any such items from the USML. The report must “describe the nature of any controls to be imposed on that item under any other provision of law.” 22 U.S.C. 2778(f)(1).

The changes made by this final rule and in the State Department's companion rule to Categories XIV and XVIII of the USML are based on a review of these USML Categories by the Defense Department, which worked with the Departments of State and Commerce in preparing these amendments. Other agencies with expertise and equities in the items at issue in these rules were consulted as well. The review focused on identifying those types of articles that provide the United States with a critical military or intelligence capability and that are not currently in normal commercial use. Such items remain on the USML. Other items with less than a critical military or intelligence capability not in normal commercial use will transition to the “600 series” controls. It is the intent of the agencies that USML Categories XIV and XVIII, and the corresponding “600 series” ECCNs on the CCL, not control items in normal commercial use. Such items should be controlled under existing dual-use controls on the CCL, consistent with the Wassenaar Arrangement List of Dual-Use Goods and Technologies.

All references to the USML in this rule are to the list of defense articles that are controlled for purposes of export, temporary import, or brokering pursuant to the ITAR, and not to the list of defense articles on the United States Munitions Import List (USMIL) that are controlled by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for purposes of permanent import under its regulations at 27 CFR part 447. Pursuant to section 38(a)(1) of the AECA, all defense articles controlled for export or import, or that are subject to brokering controls, are part of the “USML” under the AECA. For the sake of clarity, references to the USMIL are to the list of defense articles controlled by ATF for purposes of permanent import. All defense articles described in the USMIL or the USML are subject to the brokering controls administered by the U.S. Department of State in part 129 of the ITAR. The transfer of defense articles from the ITAR's USML to the EAR's CCL, for purposes of export controls, does not affect the list of defense articles that are controlled on the USMIL under the AECA for purposes of permanent import.

On January 18, 2011, the President issued Executive Order 13563, affirming general principles of regulation and directing government agencies to conduct retrospective reviews of existing regulations. The revisions made by this rule are part of Commerce's retrospective regulatory review plan under Executive Order 13563. Commerce's full plan, completed in August 2011, can be accessed at: http://open.commerce.gov/news/2011/08/23/commerce-plan-retrospective-analysis-existing-rules.

This final rule implements amendments to the EAR proposed in BIS's rule titled “Commerce Control List: Addition of Items Determined to No Longer Warrant Control under United States Munitions List Category XIV (Toxicological Agents) or Category XVIII (Directed Energy Weapons),” which was published in the Federal Register on June 17, 2015 (RIN 0694-AF52) (80 FR 34562) (herein “the June 17 (toxicological agents and directed energy weapons) rule”).

BIS received comments from eight parties in response to the proposed amendments in the June 17 (toxicological agents and directed energy weapons) rule that addressed dissemination, detection and protection “equipment” and related items.

Comment: One commenter noted that tear gas and riot control agents were dropped from proposed USML Category XIV(d), but did not appear in proposed ECCN 1A607.

Response: The tear gas and riot control agents removed from USML Category XIV(d) are now controlled under ECCN 1C607.a.1 through a.6, as they were proposed to be controlled in BIS's June 17 (toxicological agents and directed energy weapons) rule. Therefore, no further action is required.

Comment: One commenter noted that proposed ECCN 1A607.f included protection “equipment,” but did not specifically indicate that it controlled Chemical Agent Resistant Coatings (CARC). The commenter recommended that CARC be specifically identified in ECCN 1A607.f or that the word “material” be added so that companies would be more likely to interpret ECCN 1A607.f to include coatings, such as CARC. In addition, the commenter recommended that the export controls on CARC be changed to align more closely with export controls maintained by U.S. allies, who do not require an export license for CARC to most destinations. Specifically, the commenter felt that companies familiar with the European Union military list could become confused, because the controls in ECCN 1A607.f are similar to those described in ML.7.f, which does not control CARC. In the event that CARC continues to require a license to most destinations, the commenter recommended that all CARC be placed under the export licensing jurisdiction of a single U.S. Government agency to simplify jurisdictional and/or classification determinations.

Response: ECCN 1A607.f indicates that it controls protection “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for defense against materials specified by USML XIV(a) or (b) or riot control agents controlled by ECCN 1C607.a. BIS believes that this control language, as revised in this final rule to specify “protective coatings” (as well as air conditioning units and protective clothing), is now sufficiently clear as to leave no doubt that it applies to paintings/coatings such as CARC. Consequently, the control language used in the June 17 (toxicological agents and directed energy weapons) rule has been retained in this final rule with only the above-referenced change (i.e., the revision of the parenthetical phrase in the introductory text of ECCN 1A607.f to read, as follows: “including air conditioning units, protective coatings, and protective clothing.”

As for the scope of the license requirements that apply to CARC, all items in ECCN 1A607, including CARC, are subject to NS Column 1 and RS Column 1 license requirements, which apply to all destinations, except Canada. While the scope of the EAR license requirements on CARC is considerably broader than that maintained by some of our allies, exports of CARC are authorized without a license, under License Exception STA, for destinations in, or nationals of, Country Group A:5 in Supplement No. 1 to part 740 of the EAR, which currently contains 36 countries. Furthermore, the EAR requirements that apply to the CARC that were previously controlled under USML Category XIV and are now controlled under new ECCN 1A607.f represent a significant easing of the regulatory burden on exporters of such CARC through: (i) Elimination of some license requirements; (ii) greater availability of license exceptions; (iii) simpler license application procedures; and (iv) reduced or eliminated registration fees. With respect to the commenter's recommendation that all CARC be placed under the export licensing jurisdiction of a single U.S. Government agency, BIS notes that the only CARC that continue to be controlled under USML Category XIV (specifically, in paragraph (f)(7) of USML Category XIV) are those that have been qualified to one of the following four military specifications: MIL-PRF-32348, MIL-DTL-64159, MIL-C-46168, or MIL-DTL-53039. In light of the anticipated benefits of moving certain CARC from USML Category XIV to new ECCN 1A607 on the EAR's CCL, as described above, there would appear to be little practical upside to continuing to control all CARC under the export licensing jurisdiction of a single U.S. Government agency.

Comment: One commenter recommended that all items identified in USML Category XIV(f)(4) for individual protection against chemical and biological agents specified in USML Category XIV(a) or (b) should be controlled under new ECCN 1A607.f on the CCL. In addition, the commenter recommended that all individual protection “equipment” and clothing controlled under new ECCN 1A607.f should be authorized for export under License Exception BAG under special provisions similar to those currently applicable to “personal protective equipment” (i.e., ECCN 1A613.c or .d) in accordance with Section 740.14(h) of the EAR.

Response: USML Category XIV(f)(4), as set forth in the State Department's companion rule to this final rule, controls equipment or items that offer individual or collective protection against items specified in USML Category XIV(a) or (b), as follows: (1) M53 Chemical Biological Protective Mask or M50 Joint Service General Purpose Mask (JSGPM); (2) filter cartridges containing sorbents controlled in USML Category XIV(f)(4)(iii); (3) ASZM-TEDA carbon; and (4) ensembles, garments, suits, jackets, pants, boots or socks for individual protection, and liners for collective protection, that allow no more than 1% breakthrough of GD, or no more than 2% breakthrough of any other chemical specified in USML Category XIV(a), when evaluated by executing the applicable method(s) of testing described in the current version of Test Operations Procedure (TOP) 08-2-201 (Collective Protection Novel Closures Testing) or 08-2-501 (Permeation Testing of Materials with Chemical Agents or Simulants—Swatch Testing) and using the defined DoD-specific requirements described therein.

The control criteria in USML Category XIV(f)(4), as described above, are the result of a review of USML Category XIV, as part of the Administration's Export Control Reform (ECR) Initiative, to ensure that it controls only those items that are inherently military, provide the United States with a critical military or intelligence advantage, or otherwise warrant control on the USML. In the absence of any compelling evidence contrary to the results of this review, no change is contemplated, with respect to these USML Category XIV criteria, at this time. New ECCN 1A607.f controls “equipment” previously controlled under USML Category XIV(f)(4) or (f)(5) that the President has determined no longer warrants control on the USML (i.e., protection “equipment,” including “equipment” for individual protection, not controlled by USML Category XIV(f) that is “specially designed” for military use and for defense against materials specified by USML XIV(a) or (b) or riot control agents controlled by ECCN 1C607.a). This final rule does not expand the scope of new ECCN 1A607.f to control all “equipment” for individual protection against chemical and biological agents specified in USML Category XIV(a) or (b), because this change would be contrary to the President's determination, based on the results of the aforementioned review of USML Category XIV (i.e., it would result in the transfer to the CCL of items that are inherently military, provide the United States with a critical military or intelligence advantage, or otherwise warrant control on the USML).

With respect to the commenter's recommendation that all individual protection “equipment” and clothing controlled under new ECCN 1A607.f should be authorized for export under License Exception BAG (under special provisions similar to those currently applicable to “personal protective equipment”), this final rule amends the License Exception BAG provisions in Section 740.14(h) of the EAR to authorize exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. In a corresponding change, this final rule also amends the License Exception TMP provisions in Section 740.9(a)(11) of the EAR to authorize temporary exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. These changes are also intended to make the scope of these license exceptions, as they apply to chemical or biological agent protective gear controlled under new ECCN 1A607.f, conform with the scope of the ITAR exemption for personal protective equipment in Section 123.17 of the ITAR.

Comment: One commenter noted that neither BIS's June 17 (toxicological agents and directed energy weapons) rule nor State's companion proposed rule clearly indicated whether filter cartridges containing sorbents funded by the Department of Defense via contract or other funding authorization, as proposed to be controlled under USML Category XIV(n), would be controlled under new ECCN 1A607.f on the CCL or under USML Category XIV(f) or (n). In addition, the commenter noted that neither of these proposed rules clearly indicated whether filter cartridges that meet the requirements of specifications PRF-EA-2251 for the M61 filter cartridge, but do not contain ASZM-TEDA carbon, would be controlled under new ECCN 1A605.f or under USML Category XIV(f) or (n).

Response: Neither of the observations made by the commenter requires any modification to new ECCN 1A607.f. Filter cartridges containing developmental sorbents are controlled under USML Category XIV(f)(4)(ii) if the sorbents were funded by the Department of Defense via contract or other funding authorization, as specified in USML Category XIV(n), and none of the elements in Note 1 to paragraph (n) apply (i.e., the sorbents are determined to be subject to the EAR via a commodity jurisdiction determination or they are identified in the relevant Department of Defense contract or other funding authorization as being developed for both civil and military applications). The commenter's question concerning the export licensing jurisdiction status of filter cartridges reflects the fact that State's companion Category XIV/XVIII proposed rule did not specifically enumerate (in Category XIV) filter cartridges containing sorbents controlled under USML Category XIV(n). USML Category XIV(f)(ii), in State's proposed rule, specified that it controlled filter cartridges containing sorbents controlled under USML Category XIV(f)(iii), but the control status of filter cartridges containing sorbents enumerated in proposed USML Category XIV(n) was not specifically indicated. Consequently, State's companion Category XIV/XVIII final rule corrects this oversight by clarifying USML Category XIV to indicate that it applies to filter cartridges that contain any of the sorbents specified under USML Category XIV(f)(iii) or (n) and, in so doing, eliminates the possibility that such filter cartridges could be controlled under new ECCN 1A607.f on the CCL (except to the limited extent that sorbents funded by the Department of Defense via contract or other funding authorization are excluded from USML Category XIV(n) for a specified period of time, as indicated in Note 3 thereto).

In response to the commenter's request for clarification concerning controls on filter cartridges that meet the requirements of specifications PRF-EA-2251 for the M61 filter cartridge, but do not contain ASZM-TEDA carbon, their control status also would depend upon the sorbents that they contain. As indicated above, filter cartridges that contain any of the sorbents controlled by USML Category XIV (i.e., sorbents specified under paragraph (f)(iii) or (n) of Category XIV) are controlled under USML Category XIV. Otherwise, they are controlled under new ECCN 1A607.f.

Comment: One commenter interpreted BIS's June 17 (toxicological agents and directed energy weapons) rule and State's companion USML Category XIV/XVIII proposed rule as transferring to new ECCN 1A607.h on the CCL all detection equipment, previously controlled under USML Category XIV(f)(2), that is “specially designed” for military use for the detection of agents identified in proposed USML Category XIV(a) or (b), except for: (1) Detection equipment that is classified or that relates to classified information; and (2) military detection equipment developed under a DoD contract or other funding authorization, as described in proposed USML Category XIV(f)(2) and subject to the restriction in Note 3 thereto, which indicated that the controls in paragraph (f)(2) would apply only to controls dated one year (or later) after the date of publication of State's USML Category XIV final rule. Note 3 to paragraph (f)(2) was mistakenly included in USML Category XIV, as described in State's proposed rule; consequently, it does not appear in State's final rule.

Response: New ECCN 1A607.h controls “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for the detection or identification of materials specified by USML Category XIV(a) or (b) or riot control agents controlled by ECCN 1C607.a on the CCL. Because new ECCN 1A607.h indicates that it does not include any detection equipment that is controlled by USML Category XIV(f), the scope of the ECCN is necessarily dependent upon the scope of Category XIV(f), which, in turn, is subject to interpretation by the U.S. Department of State. Therefore, the Department of State, and not BIS, is the appropriate U.S. Government agency to confirm whether the commenter's statement is correct (in whole or in part), as it applies to the scope of new ECCN 1A607.h and the “equipment” previously controlled under USML Category XIV(f)(2). Consequently, this question should be addressed, with respect to specific detection “equipment,” through the submission of one or more commodity jurisdiction (CJ) requests to the State Department's Directorate of Defense Trade Controls (DDTC), consistent with the requirements in the ITAR.

Comment: One commenter noted that items controlled under proposed new ECCN 1A607.k (military medical countermeasures “equipment”), and related “technology” controlled under proposed new ECCN 1E607.a, would not be eligible for export/reexport under the License Exception GOV provisions in Section 740.11(d), International Inspections under the Chemical Weapons Convention (CWC), to destinations located outside of Country Group A:5 in Supplement No. 1 to part 740 of the EAR.

Response: The commenter is correct in noting that “equipment” in new ECCN 1A607.k and related “technology” in new ECCN 1E607.a are not eligible for export under the License Exception GOV provisions in Section 740.11(d) of the EAR, except to destinations located in Country Group A:5. This restriction, which is described in Section 740.11(d)(2)(iii) of the EAR, was implemented as part of BIS's April 16 (initial implementation) rule in which the License Exception GOV provisions in Section 740.11 of the EAR were revised. Among the License Exception GOV provisions that were affected by these revisions were those authorizing exports and reexports to the Organization for the Prohibition of Chemical Weapons (OPCW) and exports and reexports by the OPCW for official international inspection and verification use under the terms of the CWC. Under the OPCW authorization, as revised, Section 740.11(d)(2)(iii) of the EAR prohibits exports and reexports of items controlled under “600 series” ECCNs on the CCL to countries not listed in Country Group A:5. Country Group A:5 currently consists of 36 countries, as established by BIS's April 16 (initial implementation) rule, which became effective on October 15, 2013. The scope of the OPCW authorization in License Exception GOV was the result of extensive U.S. Government interagency review and discussion. Furthermore, the scope of eligible countries for the OPCW authorization (i.e., 36 countries), as established by BIS's April 16 (initial implementation) rule, was initially broader than the country scope that was authorized under the License Exception GOV provisions for cooperating governments, as described in Section 740.11(c) of the EAR, which then authorized exports and reexports to 27 cooperating governments and agencies of the North Atlantic Treaty Organization (NATO). The country scope of the cooperating governments authorization under License Exception GOV was subsequently expanded, by BIS's Wassenaar Arrangement (WA) 2014 Plenary final rule (98 FR 29432, May 21, 2015), to include 41 cooperating governments and agencies of NATO. Currently, the country scope of the cooperating governments and OPCW authorizations under License Exception GOV are roughly equivalent (i.e., the former applies to four more countries than the latter—two of those countries are CWC States Parties and one is a special administrative region of a State Party). In light of the recent changes to the License Exception GOV provisions described above, BIS does not have any immediate plans to address possible revisions to the country scope of the OPCW authorization. BIS also considers any such action to be outside the scope of this rulemaking, which does not specifically address EAR requirements involving the CWC and the OPCW.

Comment: One commenter noted that proposed new ECCN 1A607.x indicated that it controlled “parts,” “components,” “accessories,” and “attachments” “specially designed” for the “equipment” described in proposed ECCN 1A607.e, .f, .g, or .j. However, the commenter also noted that “parts,” “components,” “accessories,” and “attachments” “specially designed” for the detection/identification “equipment” described in proposed ECCN 1A607.h were not included in proposed ECCN 1A607.x. As a result, the commenter questioned whether any “parts,” “components,” “accessories,” and “attachments” “specially designed” for detection/identification “equipment” that might be removed from the USML, as a result of the proposed revisions to USML Category XIV(f), would be controlled under proposed new ECCN 1A607 on the CCL (e.g., under proposed ECCN 1A607.x).

Response: The commenter is correct in noting that proposed new ECCN 1A607.x specified only those “parts,” “components,” “accessories,” and “attachments” “specially designed” for the “equipment” described in ECCN 1A607.e, .f, .g, or .j, and not those “parts,” “components,” “accessories,” and “attachments” “specially designed” for detection/identification “equipment” described in ECCN 1A607.h. This final rule corrects that oversight. New ECCN 1A607.x, as added to the CCL by this final rule, indicates that it controls “parts,” “components,” “accessories,” and “attachments” that are “specially designed” for a commodity controlled by ECCN 1A607.e, .f, .g, .h, or .j or for a defense article controlled by USML Category XIV(f) and that are not enumerated or otherwise described elsewhere in the USML.

Comment: One commenter noted that the BIS and State Category XIV/XVIII proposed rules omitted coverage of the Wassenaar Munitions List (WAML) items in WAML 7.a (Biological agents or radioactive materials adapted for use in war to produce casualties in humans and animals, degrade equipment, or damage crops or the environment).

Response: The items noted by the commenter are not identified in any of the new “600 series” ECCNs described in BIS's June 17 (toxicological agents and directed energy weapons) rule, but they are clearly enumerated under USML Category XIV in State's companion proposed rule. Proposed USML Category XIV(b)(1)(ii) identifies specific biological agents that have been militarized, as described in USML Category XIV(b)(1)(i), and proposed USML Category XIV(b)(2) describes biological agents identified under ECCN 1C351, 1C353, or 1C354 on the EAR's CCL that have been militarized, as described in USML Category XIV(b)(2)(i) and (b)(2)(ii). These defense articles are identified in the USML Category XIV amendments contained in State's companion rule to this final rule.

Comment: One commenter noted that the following two Australia Group (AG) controlled items were not identified in either the BIS or State Category XIV/XVIII proposed rules:

(1) Valves with a closure element designed to be interchangeable, as listed under 6.b on the AG Control List of Dual-Use Chemical Manufacturing Facilities and Equipment); and (2) nose-only exposure apparatus, as listed under 8.b on the AG Control List of Dual-Use Biological Equipment.

Response: The commenter accurately noted that neither of the two items were identified in the BIS and State Category XIV/XVIII proposed rules. However, because these items are identified as dual-use items on the AG common control lists indicated above, neither item is within the scope of this rulemaking. The valves, described under 6.b on the AG chemical manufacturing facilities and equipment control list, are currently controlled under ECCN 2B350.g.2 on the CCL. The nose-only exposure apparatus, described under 8.b on the AG biological equipment common control list, was recently added to this AG control list and is currently controlled under ECCN 2B352.h based on a recent update of AG listed items on the CCL (see 81 FR 36458, June 7, 2016).

Comment: One commenter indicated that some of the proposed new “600 series” ECCNs in BIS's June 17 (toxicological agents and directed energy weapons) rule maintained unilateral controls on certain items that were proposed to be transferred to the CCL from USML Category XIV.

Response: All the items described in the new “600 series” ECCNs created by this final rule were previously controlled on the USML under the ITAR and were added to these new ECCNs on the CCL only after the President determined that these items no longer warrant control on the USML for the reasons set forth above.

This final rule creates five new “600 series” ECCNs in CCL Category 1 (ECCNs 1A607, 1B607, 1C607, 1D607, and 1E607) that clarify the EAR controls applicable to certain dissemination, detection and protection “equipment” and related items that the President has determined no longer warrant control under USML Category XIV. Terms such as “part,” “component” “accessories,” “attachments,” and “specially designed” are applied in the same manner in this rule as those terms are defined in Section 772.1 of the EAR. In addition, to assist exporters in determining the control status of their items, a “Specially Designed” Decision Tool and a CCL Order of Review Decision Tool are available on the BIS Web site at: http://www.bis.doc.gov/index.php/decision-tree-tools.

In new ECCN 1A607, paragraphs .a through .d, paragraph .i, and paragraphs .l through .w are reserved. Paragraph .e of ECCN 1A607 controls “equipment” “specially designed” for military use and for the dissemination of any of the riot control agents controlled in ECCN 1C607.a. Paragraph .f of ECCN 1A607 controls protection “equipment” “specially designed” for military use and for defense against either materials controlled by USML Category XIV(a) or (b) or any of the riot control agents in new ECCN 1C607.a. Paragraph .g of ECCN 1A607 controls decontamination “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for the decontamination of objects contaminated with materials controlled by USML Category XIV(a) or (b). Paragraph .h controls “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for the detection or identification of either materials specified by USML Category XIV(a) or (b) or riot control agents controlled by new ECCN 1C607.a. Paragraph .j controls “equipment” “specially designed” to: (i) Interface with a detector, shelter, vehicle, vessel, or aircraft controlled by the USML or a “600 series” ECCN; and (ii) collect and process samples of articles controlled in USML Category XIV(a) or (b). Paragraph .k controls medical countermeasures that are “specially designed” for military use (including pre- and post- treatments, antidotes, and medical diagnostics) and “specially designed” to counter chemical agents controlled by USML Category XIV(a). Paragraph .x controls “parts,” “components,” “accessories,” and “attachments” that are “specially designed” for a commodity controlled under ECCN 1A607.e, .f, .g, .h, or .j or a defense article controlled in USML Category XIV(f) and that are not enumerated or otherwise described elsewhere in the USML.

In new ECCN 1B607, paragraph .a controls “equipment,” not including incinerators, that is “specially designed” for the destruction of chemical agents controlled by USML Category XIV(a). Paragraph .b of ECCN 1B607 controls test facilities and “equipment” that are “specially designed” for military certification, qualification, or testing of commodities controlled by new ECCN 1A607.e, .f, .g, .h, or .j or by USML Category XIV(f), except for XIV(f)(1). Paragraph .c of ECCN 1B607 controls tooling and “equipment” “specially designed” for the “development,” “production,” repair, overhaul, or refurbishing of commodities controlled under new ECCN 1A607.e, .f, .g, .h, or .j or USML Category XIV(f). Paragraphs .d through .w are reserved. Paragraph .x controls “parts,” “components,” “accessories,” and “attachments,” not enumerated or otherwise described elsewhere in the USML, that are “specially designed” for a commodity controlled by ECCN 1B607.b or .c or for a defense article controlled by USML Category XIV(f).

As indicated above, ECCN 1B607.b does not control test facilities and “equipment” that are “specially designed” for military certification, qualification, or testing of commodities and are enumerated or otherwise described in USML Category XIV(f)(1), as set forth in State's companion rule to this final rule (e.g., see the equipment in USML Category XIV(f)(1)(ii) that is “specially designed” for testing the articles controlled in paragraph (a), (b), (c), (e), or (f)(4) of USML Category XIV). In addition to the test facilities and “equipment” controlled by ECCN 1B607.b, see the tooling and “equipment” classified under ECCN 2B350 or 2B352 for producing the chemical/biological agents, precursors, or defoliants described in USML Category XIV(a), (b), (c), or (e). The EAR also control tooling and “equipment” to produce the antibodies/polynucleotides and vaccines described in USML Category XIV(g) and (h), respectively, as follows: lab “equipment” designated as EAR99 under the EAR; biological dual-use “equipment” (including protective “equipment”) classified under ECCN 2B352; and EAR-controlled biological systems for making vaccines (involving the use of mice, rabbits, etc.).

New ECCN 1C607.a controls specified tear gases and riot control agents. Paragraph .b of ECCN 1C607 controls “biopolymers” not controlled by USML Category XIV(g) that are “specially designed” or processed for the detection or identification of chemical warfare (CW) agents specified by USML Category XIV(a) and the cultures of specific cells used to produce them. Paragraph .c controls specified “biocatalysts” and biological systems that are not controlled by USML Category XIV(g) and are “specially designed” for the decontamination or degradation of CW agents specified by USML Category XIV(a). Paragraph .d controls chemical mixtures not controlled by USML Category XIV(f) that are “specially designed” for military use for the decontamination of objects contaminated with materials specified by USML Category XIV(a) or (b).

New ECCN 1D607.a controls “software” “specially designed” for the “development,” “production,” operation, or maintenance of items controlled by ECCN 1A607, 1B607 or 1C607. Paragraph .b of ECCN 1D607 is reserved.

New ECCN 1E607.a controls “technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of items controlled by ECCN 1A607, 1B607, 1C607, or 1D607. Paragraph .b of ECCN 1E607 is reserved.

Amendments to License Exceptions BAG and TMP related to Individual Protection “Equipment” in ECCN 1A607.f.

In response to public comments recommending that all individual protection “equipment” and clothing controlled under new ECCN 1A607.f should be authorized for export under License Exception BAG (under special provisions similar to those currently applicable to “personal protective equipment”), this final rule amends the License Exception BAG provisions in Section 740.14(h) of the EAR to authorize exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. In a corresponding change, this final rule also amends the License Exception TMP provisions in Section 740.9(a)(11) of the EAR to authorize temporary exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. The amendments to License Exceptions BAG and TMP also change the requirements for Afghanistan to be consistent with those of the majority of other Country Group D:5 destinations (i.e., the U.S. person authorized to use the license exception must be affiliated with the U.S. Government and be traveling on official business or traveling in support of a U.S. Government contract). The same requirement applies to the use of these license exception provisions for Iraq, also a D:5 country, with the additional option that the U.S. person must be traveling to Iraq under a direct authorization by the Government of Iraq and engaging in activities for, on behalf of, or at the request of, the Government of Iraq. These amendments are also intended to ensure that the scope of these license exceptions, as they apply to chemical or biological agent protective gear controlled under new ECCN 1A607.f, conforms with the scope of the ITAR exemption for personal protective equipment in Section 123.17 of the ITAR (e.g., by correcting the provisions for Afghanistan, as described above, to be consistent with those of the majority of other Country Group D:5 destinations).

BIS received comments from two parties in response to the proposed amendments in the June 17 (toxicological agents and directed energy weapons) rule related to tooling, production “equipment,” test, and evaluation “equipment,” test models and other articles related to directed energy weapons.

Comment: One commenter noted that the BIS and State Category XIV/XVIII proposed rules omitted coverage of the Wassenaar Munitions List (WAML) items in WAML 19.f (“Laser” systems “specially designed” to cause permanent blindness to unenhanced vision).

Response: The items noted by the commenter are not identified in any of the new “600 series” ECCNs described in BIS's June 17 (toxicological agents and directed energy weapons) rule, but they are clearly enumerated under USML Category XVIII in State's companion proposed rule. Proposed USML Category XVIII(a) identifies directed energy weapons (DEW) systems or “equipment” that, as their sole or primary purpose, cause permanent or flash blindness. These articles are identified in the USML Category XVIII amendments contained in State's companion rule to this final rule.

Comment: One commenter indicated that some of the proposed new “600 series” ECCNs in BIS's June 17 (toxicological agents and directed energy weapons) rule maintained unilateral controls on certain items that were proposed to be transferred to the CCL from the USML Category XVIII.

Response: All the items described in the new “600 series” ECCNs created by this final rule were previously controlled on the USML under the ITAR and were added to these new ECCNs on the CCL only after the President determined that these items no longer warrant control on the USML for the reasons set forth above.

This rule creates three new “600 series” ECCNs in CCL Category 6 (ECCNs 6B619, 6D619 and 6E619) that clarify the EAR controls applicable to certain tooling, production “equipment,” test and evaluation “equipment,” test models, and related articles for Directed Energy Weapons (DEWs) that the President has determined no longer warrant control under USML Category XVIII. Terms such as “part,” “component” “accessories,” “attachments,” and “specially designed” are applied in the same manner in this rule as those terms are defined in Section 772.1 of the EAR. In addition, to assist exporters in determining the control status of their items, a “Specially Designed” Decision Tool and a CCL Order of Review Decision Tool are available on the BIS Web site at: http://www.bis.doc.gov/index.php/decision-tree-tools.

New ECCN 6B619.a controls tooling, templates, jigs, mandrels, molds, dies, fixtures, alignment mechanisms, and test “equipment” not enumerated or otherwise described in USML Category XVIII and not elsewhere specified on the USML that are “specially designed” for the “development,” “production,” repair, overhaul, or refurbishing of commodities controlled by USML Category XVIII. The commodities that are controlled under new ECCN 6B619.a are used to produce directed energy weapons (including non-lethal directed energy weapons, such as active denial systems) and are similar to commodities that are in operation in a number of other countries, some of which are not allies of the United States or members of multinational export control regimes. Research and development is currently underway to determine the possible uses of such commodities (e.g., to protect the Earth from asteroids, or for perimeter security and crowd control). Possession of such commodities does not confer a significant military advantage on the United States and, therefore, the inclusion of such commodities on the CCL would be appropriate.

Paragraphs .b through .w of ECCN 6B619 are reserved. Paragraph .x controls “parts,” “components,” “accessories,” and “attachments” “specially designed” for a commodity subject to control under paragraph .a of this ECCN and not enumerated or otherwise described in USML Category XVIII and not elsewhere specified on the USML.

New ECCN 6D619 controls “software” “specially designed” for the “development,” “production,” operation or maintenance of commodities controlled by ECCN 6B619. Inclusion of this “software” on the CCL is appropriate, because it is limited to “software” “specially designed” for ECCN 6B619 commodities and does not include any “software” for items specifically enumerated or otherwise described on the USML.

New ECCN 6E619 controls “technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul or refurbishing of commodities controlled by ECCN 6B619, or “software” controlled by 6D619. Inclusion of this “technology” on the CCL is appropriate, because it is limited to “technology” “required” for ECCN 6B619 commodities and does not include any “technology” for items specifically enumerated or otherwise described on the USML.

Pursuant to the framework established in the April 16 (initial implementation) rule, detection and protection “equipment” and related commodities classified under ECCN 1A607; related test, inspection and production “equipment” classified under ECCN 1B607; tear gases, riot control agents and related commodities classified under ECCN 1C607 (except for items listed in ECCN 1C607.a.10, .a.11, .a.12, or a.14, all of which are specifically excluded from WAML Category 7 by Note 1 thereto); related “software” classified under ECCN 1D607 (except “software” for items listed in ECCN 1C607.a.10, .a.11, .a.12, or a.14); and related “technology” classified under ECCN 1E607 (except “technology” for items listed in ECCN 1C607.a.10, .a.11, .a.12, or a.14 and 1D607 “software” therefor) are subject to the licensing policies that apply to items controlled for national security (NS) reasons, as described in § 742.4(b)(1)—specifically, NS Column 1 controls. The same level of NS controls and licensing policies also apply to the directed energy weapons items that are controlled under the three new ECCNs (i.e., test, inspection, and production “equipment” classified under ECCN 6B619; related “software” classified under ECCN 6D619; and related “technology” classified under ECCN 6E619) that this rule adds to Category 6 of the CCL. In addition, all the items that are controlled under the new ECCNs created by this rule are subject to the regional stability (RS) licensing policies set forth in § 742.6(a)(1), i.e., RS Column 1, as well as antiterrorism (AT Column 1) and United Nations (UN) controls.

Also, in accordance with §§ 742.4(b)(1) and 742.6(b)(1) of the EAR, exports and reexports of “600 series” items controlled for NS or RS reasons will be reviewed consistent with United States arms embargo policies in § 126.1 of the ITAR, if destined to a country listed in Country Group D:5 of Supplement No. 1 to part 740 of the EAR. All items controlled for NS or RS reasons, as set forth in this final rule, are subject to this licensing policy.

BIS believes that the principal effect of this final rule, when considered in the context of similar rules being published as part of the ECR, will be to provide greater flexibility for exports and reexports to NATO member countries and other multiple-regime-member countries of items the President determines no longer warrant control on the USML. This greater flexibility is in the form of: the application of the EAR's de minimis threshold principle for items constituting less than a de minimis amount of controlled U.S.-origin content in foreign made items; the availability of license exceptions, particularly License Exceptions “Servicing and Replacement of Parts and Equipment” (RPL) and “Strategic Trade Authorization” (STA); the elimination of requirements for manufacturing license agreements and technical assistance agreements in connection with exports of technology; and a reduction in, or the elimination of, exporter and manufacturer registration requirements and associated registration fees. Some of these specific effects are discussed in more detail, below.

The April 16 (initial implementation) rule imposed certain unique de minimis requirements on items controlled under the new “600 series” ECCNs. Section 734.3 of the EAR provides, inter alia, that, under certain conditions, items made outside the United States that incorporate items subject to the EAR are not subject to the EAR if they do not exceed a “de minimis” percentage of controlled U.S. origin content. Under Section 734.4 of the EAR, as amended by the April 16 (initial implementation) rule, there is no eligibility for de minimis treatment for a foreign-made item that incorporates U.S.-origin “600 series” items when the foreign-made item is destined for a country that is subject to a U.S. arms embargo, i.e., a country listed in Country Group D:5 of Supplement No. 1 to part 740 of the EAR. Items controlled under the new “600 series” ECCNs created by this rule are eligible for de minimis treatment under the EAR, provided that the foreign-made items into which they are incorporated are not destined for a country listed in Country Group D:5. In contrast, the AECA does not permit the ITAR to have a de minimis treatment for USML-listed items, regardless of the significance or insignificance of the U.S.-origin content or the percentage of U.S.-origin content in the foreign-made item (i.e., USML-listed items remain subject to the ITAR when they are incorporated abroad into a foreign-made item, regardless of either of these factors).

The April 16 (initial implementation) rule imposed certain restrictions on the use of license exceptions for items controlled under “600 series” ECCNs on the CCL. The general restrictions that apply to the use of license exceptions for such items are described in § 740.2(a)(13) of the EAR. The EAR provisions that describe the requirements specific to individual license exceptions contain additional restrictions on the use of license exceptions for such items.

For example, this rule authorizes limited License Exception STA availability for the new “600 series” ECCNs contained herein. None of the items controlled under these new ECCNs are eligible for the STA “controls of lesser sensitivity” described in § 740.20(c)(2) of the EAR. Instead, STA eligibility for all such items is limited to the destinations listed in § 740.20(c)(1) of the EAR (i.e., Country Group A:5 destinations indicated in Supplement No. 1 to part 740 of the EAR). In addition, such items must be for: (1) ultimate end-use by a person of a type specified in § 740.20(b)(3)(ii) of the EAR (i.e., the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, or a search and rescue agency of a government of one of the countries listed in Country Group A:5 or the United States Government); or (2) the “development,” “production,” operation installation, maintenance, repair, overhaul, or refurbishing of an item, in one of the countries listed in Country Group A:5 or the United States, that will ultimately be used by any such government agencies, the United States Government, or by a person in the United States. The use of License Exception STA also may be authorized, under certain circumstances described in § 740.20(b)(3)(ii)(C), where the U.S. Government has otherwise authorized the ultimate end-use under a license.

None of the items controlled under the new “600 series” ECCNs created by this rule are treated as “end items” for purposes of License Exception STA and, therefore, such items are not subject to the License Exception STA eligibility request requirements in § 740.20(g) of the EAR.

Items controlled under new ECCN 1B607 or 6B619 are also eligible for License Exception LVS (limited value shipments) up to a value of $1,500, TMP (temporary exports), and RPL (servicing and replacement parts). License Exceptions TMP and RPL also are available for items controlled under new ECCN 1A607. In addition, special provisions in License Exception TMP (see § 740.9(a)(11) of the EAR) and License Exception BAG (baggage) (see § 740.14(h) of the EAR), as amended by this final rule, authorize exports, reexports, or in-country transfers of certain protection “equipment” described in ECCN 1A607.f.

BIS believes that the restrictions that apply to the use of license exceptions for the items in the new “600 series” ECCNs represents an overall reduction from the level of restrictions that previously applied to such items on the USML. This is particularly true with respect to exports of such items to NATO members and multiple-regime member countries.

Since the beginning of ECR, the Administration has stated that the reforms will be consistent with the United States' obligations to the multilateral export control regimes. Accordingly, the Administration has, in this final rule, exercised its national discretion to implement, clarify, and, to the extent feasible, align its controls with those of the regimes. In this rule, new ECCNs 1A607 and 1C607 implement, to the extent possible, the controls in WAML Category 7; new ECCNs 1B607 and 6B619 implement, to the extent possible, the controls in WAML Category 18 for production “equipment;” new ECCNs 1D607 and 6D619 implement, to the extent possible, the controls in WAML Category 21 for “software;” and new ECCNs 1E607 and 6E619 implement, to the extent possible, the controls in WAML Category 22 for “technology.”

Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 7, 2015 (80 FR 48233 (Aug. 11, 2015), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222 as amended by Executive Order 13637.

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget (OMB).

2. Notwithstanding any other provision of law, no person is required to respond to, nor is any person subject to a penalty for failure to comply with, a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid OMB control number. This final rule affects the following approved collections: Simplified Network Application Processing System (control number 0694-0088), which includes, among other things, license applications; License Exceptions and Exclusions (0694-0137); recordkeeping (0694-0096); export clearance (0694-0122); and the Automated Export System (0607-0152). The discussion, below, is intended to provide a general overview of possible burden changes as a result of all the ECR rules published by BIS, and not just this final rule, which affects items previously controlled under USML Category XIV or XVIII. No changes in burden for any of these collections is anticipated at this time, other than as indicated in the discussion, below.

As stated in the proposed rule published on July 15, 2011 (76 FR 41958) (the “July 15 proposed rule”), BIS initially estimated that the combined effect of all rules to be published, adding items to the EAR that would be removed from the ITAR as part of the Administration's Export Control Reform Initiative, would increase the number of license applications to be submitted to BIS by approximately 16,000 annually, resulting in an increase in burden hours of 5,067 (16,000 transactions at 17 minutes each) under control number 0694-0088. As the review of the USML has progressed, the interagency group has gained more specific information about the number of items that would come under BIS jurisdiction and whether those items would be eligible for export under license exception. As of June 21, 2012, BIS revised its estimate to reflect an increase in license applications of 30,000 annually, resulting in an increase in burden hours of 8,500 (30,000 transactions at 17 minutes each) under control number 0694-0088. BIS continues to believe that its revised estimate is accurate. Notwithstanding this increase in license applications under the EAR, the net burden that U.S. export controls impose on U.S. exporters is expected to go down, as described below, as a result of the transfer of less sensitive military items to the jurisdiction of the Department of Commerce, under the EAR, and the application of the license exceptions and other provisions in the EAR that are described in this final rule.

As implemented by this rule, certain dissemination, detection and protection “equipment” and related articles currently controlled under USML Category XIV in the ITAR and certain tooling, production “equipment,” test and evaluation “equipment,” test models and related articles currently controlled under USML Category XVIII of the ITAR are now subject to the licensing jurisdiction of the Department of Commerce under the EAR and its CCL, and also are eligible for certain license exceptions, including License Exception STA. For example, items controlled under new ECCN 1A607, 1B607, 1C607, 1D607, 1E607, 6B619, 6D619, or 6E619 are now eligible under certain provisions of License Exception STA and do not need a determination of eligibility as described in § 740.20(g) of the EAR. BIS believes that the increased use of License Exception STA resulting from the combined effect of all rules to be published, adding items to the EAR that would be removed from the ITAR as part of the Administration's Export Control Reform Initiative, would increase the burden associated with control number 0694-0137 by about 23,858 hours (20,450 transactions at 1 hour and 10 minutes each).

BIS expects that this increase in burden hours under the EAR will be more than offset by a reduction in the burden hours associated with currently approved collections related to the ITAR. With few exceptions, most exports of the dissemination, detection and protection “equipment” and related articles and the tooling, production “equipment,” test and evaluation “equipment,” test models and related articles that this rule adds to the CCL previously required State Department authorization, even when destined to NATO member states and other close allies. In addition, the exports of “technology” necessary to produce such items in the inventories of the United States and its NATO and other close allies previously required State Department authorization. Under the EAR, as implemented by this rule, such “technology” is now eligible for export to NATO member states and other close allies under License Exception STA, unless otherwise specifically excluded.

The anticipated reduction in burden hours will particularly impact exporters of “parts” and “components” that are no longer be subject to the ITAR, because, with few exceptions, the ITAR exempt from license requirements only exports to Canada. Most exports of such “parts” and “components,” even when destined to NATO and other close allies, previously required State Department authorization. Under the EAR, as implemented by this rule, a small number of low-level “parts” and “components” do not require a license to most destinations, while most other “parts” and “components” identified under the new “600 series” ECCNs are eligible for export to NATO and other close allies under License Exception STA.

Use of License Exception STA imposes a paperwork and compliance burden because, for example, exporters must furnish information about the item that is being exported to the consignee and obtain from the consignee an acknowledgement and commitment to comply with the requirements of the EAR. However, the Administration believes that complying with the requirements of STA is likely to be less burdensome than applying for licenses. For example, under License Exception STA, a single consignee statement can apply to an unlimited number of products, need not have an expiration date and need not be submitted to the government in advance for approval. Suppliers with regular customers can tailor a single statement and assurance to match their business relationship, rather than applying repeatedly for licenses with every purchase order, to supply allied and, in some cases, U.S. forces with routine replacement parts and components.

Even in situations in which a license is required under the EAR, the burden likely will be reduced, compared to the previous license requirement under the ITAR. In particular, license applications for exports of “technology” controlled by ECCN 1E607 or 6E619 are likely to be less complex and burdensome than the authorizations required to export ITAR-controlled “technology,” i.e., Manufacturing License Agreements and Technical Assistance Agreements.

3. This rule does not contain policies with Federalism implications as that term is defined under E.O. 13132.

4. The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et seq., generally requires an agency to prepare an initial regulatory flexibility analysis (IRFA) for any rule subject to the notice and comment rulemaking requirements under the Administrative Procedure Act (5 U.S.C. 553) or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Under section 605(b) of the RFA, however, if the head of an agency certifies that a rule will not have a significant impact on a substantial number of small entities, the RFA does not require the agency to prepare a regulatory flexibility analysis. Accordingly, pursuant to section 605(b), the Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration, that this proposed rule, if promulgated, will not have a significant impact on a substantial number of small entities. The rationale for this certification is as follows.

Although BIS does not collect data on the size of entities that apply for, and are issued, export licenses and is, therefore, unable to estimate the exact number of small entities—as defined by the Small Business Administration's regulations implementing the RFA—BIS acknowledges that some small entities may be affected by this proposed rule.

The amendments set forth in this rule are part of the Administration's ECR initiative, which seeks to revise the USML to be a positive control list—one that does not use generic, catch-all control text to describe items subject to the ITAR—and to move some items that the President has determined no longer warrant control under the ITAR to control under the EAR and its CCL. Such items, along with certain military items currently identified on the CCL (most of which are identified on the WAML), will be controlled under new “600 series” ECCNs on the CCL. In addition, certain other items currently on the CCL will move from existing ECCNs to the new “600 series” ECCNs.

This rule addresses certain dissemination, detection and protection “equipment” and related articles previously enumerated or otherwise described in USML Category XIV (Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment) and certain tooling, production “equipment,” test and evaluation “equipment,” test models and related articles previously enumerated or otherwise described in USML Category XVIII (Directed Energy Weapons). Most toxicological agents (i.e., chemical and biological agents) and associated equipment and all Directed Energy Weapons (DEWs) systems “specially designed” or modified for military applications, equipment “specially designed” or modified to detect, identify or defend against such systems, and “specially designed” “parts,” “components,” “accessories” and “attachments” for such systems or equipment remain on the USML. However, many other “parts” and “components” are now subject to the EAR (as items described in ECCN 1A607.x, 1B607.x, or 6B619.x), unless specifically enumerated or otherwise described on the USML. Many of these “parts” and “components” are more likely, than the USML articles described above, to be produced by small businesses. In addition, officials of the Department of State have informed BIS that license applications for such “parts” and “components” represent a high percentage of the license applications for USML articles reviewed by that department. Changing the jurisdictional status of certain Category XIV and Category XVIII items will reduce the burden on small entities (and other entities as well) through: (i) Elimination of some license requirements; (ii) greater availability of license exceptions; (iii) simpler license application procedures; and (iv) reduced or eliminated registration fees.

Moreover, “parts” and “components” that are controlled under the ITAR remain under ITAR control when incorporated into foreign-made items, regardless of the significance or insignificance of the item. This discourages foreign buyers from incorporating such U.S. content. The availability of de minimis treatment under the EAR, for those items that are no longer controlled under the ITAR, may reduce the disincentive for foreign manufacturers to purchase U.S.-origin “parts” and “components,” a development that potentially would mean greater sales for U.S. suppliers, including small entities.

Many exports and reexports of the Category XIV or Category XVIII articles that are added to the CCL by this rule (particularly, the “parts” and “components” that are controlled under new ECCN 1A607.x, 1B607.x, or 6B619.x) are now eligible for license exceptions that apply to exports to U.S. Government agencies, exports of “parts” and “components” for use as replacement parts, temporary exports and limited value exports (for ECCN 1B607 and 6B619 items, only), as well as License Exception STA, thereby reducing the number of licenses that exporters will need to obtain for these items. License exceptions under the EAR allow suppliers to send routine replacement parts and low level parts to NATO and other close allies and export control regime partners for use by those governments and for use by contractors building equipment for those governments or for the U.S. Government without having to obtain export licenses. Under License Exception STA, the exporter needs to furnish information about the item being exported to the consignee and obtain a statement from the consignee that, among other things, will commit the consignee to comply with the EAR and other applicable U.S. laws. Because such statements and obligations can apply to an unlimited number of transactions and have no expiration date, they will result in a net reduction in burden on transactions routinely approved by the government through the license application process that the License Exception STA statements would replace.

Even for exports and reexports for which a license will be required, the process for obtaining a license is simpler and less costly under the EAR. When a USML Category XIV or Category XVIII article is moved to the CCL, the number of destinations for which a license is required remains unchanged. However, the burden on the license applicant decreases because the licensing procedure for CCL items is simpler and more flexible than the licensing procedure for USML articles.

Under the USML licensing procedure, an applicant must include a purchase order or contract with its application. There is no such requirement under the CCL licensing procedure. This difference gives the CCL applicant at least two advantages. First, the applicant has a way to determine whether the U.S. Government will authorize the transaction before it enters into potentially lengthy, complex and expensive sales presentations or contract negotiations. Under the USML procedure, the applicant must caveat all sales presentations with a reference to the need for government approval, and is more likely to engage in substantial effort and expense only to find that the government will reject the application. Second, a CCL license applicant need not limit its application to the quantity or value of one purchase order or contract. It may apply for a license to cover all of its expected exports or reexports to a specified consignee over the life of a license (normally four years, but maybe longer if circumstances warrant a longer period), thus reducing the total number of licenses for which the applicant must apply.

In addition, many applicants exporting or reexporting items that this rule transfers from the USML to the CCL will realize cost savings through the elimination of some or all registration fees assessed under the USML's licensing procedure. Currently, USML applicants must pay to use the USML licensing procedure even if they never actually are authorized to export. Registration fees for manufacturers and exporters of articles on the USML start at $2,250 per year, increase to $2,750 for organizations applying for one to ten licenses per year and further increase to $2,750 plus $250 per license application (subject to a maximum of three percent of total application value) for those who need to apply for more than ten licenses per year. Conversely, there are no registration or application processing fees for applications to export items listed on the CCL. Entities who applied for licenses from the Department of State, for the Category XIV or Category XVIII items subject to this rulemaking that are removed from the USML and added to the CCL, will find their registration fees reduced if the number of USML licenses those entities need declines. If an entity's entire product line moves to the CCL, its ITAR registration and registration fee requirement will be eliminated.

BIS expects that the changes to the EAR implemented by this rule will have a positive effect on all affected entities, including small entities. While BIS acknowledges that this rule may have some cost impacts on small (and other) entities, those costs are more than offset by the benefits to the entities from the licensing procedures under the EAR, which are much less costly and less time consuming than the procedures under the ITAR. As noted above, any new burdens created by this rule will be offset by a reduction in the number of items that will require a license, increased opportunities for use of license exceptions for exports to certain countries, simpler export license applications, reduced or eliminated registration fees and application of a de minimis threshold for foreign-made items incorporating U.S.-origin parts and components, all of which will reduce the incentive for foreign buyers to design out or avoid U.S.-origin content. Accordingly, the Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration, that this rule, if implemented, would not have a significant economic impact on a substantial number of small entities. Accordingly, an initial regulatory flexibility analysis is not required, and none has been prepared.

For the reasons stated in the preamble, parts 740 and 774 of the Export Administration Regulations (15 CFR parts 730-774) are amended as follows:

The Directorate of Defense Trade Controls (DDTC), U.S. Department of State, 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). With few exceptions, items not subject to the export control jurisdiction of the ITAR are subject to the jurisdiction of the Export Administration Regulations (“EAR,” 15 CFR parts 730-774, which includes the Commerce Control List (CCL) in Supplement No. 1 to Part 774), administered by the Bureau of Industry and Security (BIS), U.S. Department of Commerce. Both the ITAR and the EAR impose license requirements on exports and reexports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR.

All references to the USML in this rule are to the list of defense articles controlled for the purpose of export or temporary import pursuant to the ITAR, and not to the defense articles on the USML that are controlled by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATFE) for the purpose of permanent import under its regulations. See 27 CFR part 447. Pursuant to section 38(a)(1) of the Arms Export Control Act (AECA), all defense articles controlled for export or import are part of the USML under the AECA. The list of defense articles controlled by ATFE for the purpose of permanent import is the U.S. Munitions Import List (USMIL). The transfer of defense articles from the ITAR's USML to the EAR's CCL does not affect the list of defense articles controlled on the USMIL.

This final rule revises USML Category XIV, covering toxicological agents, including chemical agents, biological agents, and associated equipment. The revisions are undertaken in order to more accurately describe the articles within the subject categories, and to establish a “bright line” between the USML and the CCL for the control of these articles. The Department published a proposed rule for these revisions on June 17, 2015 (80 FR 34572).

This final rule adopts for those pathogens and toxins that meet specific capabilities listed in paragraph (b) the “Tier 1” pathogens and toxins established in the Department of Health and Human Services and the United States Department of Agriculture select agents and toxins regulations (42 CFR part 73 and 9 CFR part 121). The Tier 1 pathogens and toxins that do not meet these capabilities remain controlled in Export Control Classification Number (ECCN) 1C351 on the CCL.

Additionally, this rule, in concert with the analogous rule published by the Department of Commerce, moves riot control agents to the export jurisdiction of the Department of Commerce, as well as the articles covered previously in paragraphs (j), (k), and (l), which include test facilities, equipment for the destruction of chemical and biological agents, and tooling for production of articles in paragraph (f), respectively.

Other changes include the addition of paragraph (a)(5) to control chemical warfare agents “adapted for use in war” and not elsewhere enumerated, as well as the removal of paragraphs (f)(3) and (f)(6) and movement to the CCL of equipment for the sample collection and decontamination or remediation of chemical agents and biological agents. Paragraph (f)(5) for collective protection was removed and partially combined in paragraph (f)(4) or the CCL. Paragraph (g) enumerates antibodies, recombinant protective antigens, polynucleotides, biopolymers, or biocatalysts exclusively funded by a Department of Defense contract for detection of the biological agents listed in paragraph (b)(1)(ii).

The Department notes that the controls in paragraph (f)(2) that include the phrase “developed under a Department of Defense contract or other funding authorization” do not apply when the Department of Defense acts solely as a servicing agency for a contract on behalf of another agency of the U.S. government. Moreover, “other funding authorization” refers to other funding authorization from the Department of Defense.

The Department notes that the controls in paragraphs (g)(1) and (h) that include the phrase “exclusively funded by a Department of Defense contract” do not apply when the Department of Defense acts solely as a servicing agency for a contract on behalf of another agency of the U.S. government, or, for example, in cases where the Department of Defense provides initial funding for the development of an item but another agency of the U.S. government provides funding to further develop or adapt the item.

Paragraph (h) enumerates certain vaccines funded exclusively by the Department of Defense, as well as certain vaccines controlled in (h)(4) that are specially designed for the sole purpose of protecting against biological agents and biologically derived substances identified in (b). Thus, the scope of vaccines controlled in (h)(4) is circumscribed by the nature of funding and the satisfaction of the term “specially designed” as that term is defined in ITAR § 120.41. In evaluating the scope of this control, please note that the Department offers a decision tool to aid exporters in determining whether a defense article meets the definition of “specially designed.” This tool is available at http://www.pmddtc.state.gov/licensing/dt_SpeciallyDesigned.htm.

Paragraph (i) is updated to provide better clarity on the scope of the control by including examples of Department of Defense tools that are used to determine or estimate potential effects of chemical or biological weapons strikes and incidents in order to plan to mitigate their impacts.

A new paragraph (x) has been added to USML Category XIV, allowing ITAR licensing on behalf of the Department of Commerce for commodities, software, and technology subject to the EAR, provided those commodities, software, and technology are to be used in or with defense articles controlled in USML Category XIV and are described in the purchase documentation submitted with the application. The intent of paragraph (x) is not to impose ITAR jurisdiction on commodities, software, and technology subject to EAR controls. Items described in paragraph (x) remain subject to the jurisdiction of the EAR. The Department added the paragraph as a regulatory reference point in response to industry requests to be able to use a Department of State license to export shipments that have a mix of ITAR controlled items and EAR controlled items for use in or with items described in that category.

Finally, this rule establishes USML control in subparagraph (f)(2) of certain chemical or biological agent equipment only when it contains reagents, algorithms, coefficients, software, libraries, spectral databases, or alarm set point levels developed under a Department of Defense contract or other funding authorization.

One commenter questioned whether the use of the words “to include” in proposed paragraph (a) was meant to indicate an all-inclusive list or only examples of controlled agents. The Department has modified paragraph (a) to replace “to include” with the all-inclusive “as follows” in light of this comment, and in order to align this language with the comparable language that appears in paragraph (b).

A commenting party suggested that the removal of former subparagraph (n)(2) would inhibit university research with respect to agents controlled by paragraph (a). The Department disagreed with this comment because former subparagraph (n)(2) applied only to agents controlled in paragraph (b).

Several commenters expressed confusion with respect to subparagraph (b)(1), arguing that, for example, the list in subparagraph (b)(1)(ii) was incomplete, or represented a migration to ITAR control of agents or research formerly subject to the EAR. The Department clarifies that all of the biological agents subject to control under revised paragraph (b) were also subject to ITAR control under former paragraph (b), which generally controlled those biological agents or biologically derived substances that were specifically developed, configured, adapted, or modified for the purpose of increasing their capability to produce casualties in humans or livestock, degrade equipment, or damage crops.

By contrast, subparagraph (b)(1) of revised Category XIV controls only those agents that meet the criteria of both subparagraphs (b)(1)(i) and (b)(1)(ii). To be controlled, the agent must be one of the specific listed microorganisms or toxins, or their non-naturally occurring genetic elements, and it must have been modified in a manner that is known or reasonably expected to result in an increase of at least one of two specific criteria. Subparagraph (b)(2) controls only biological agents that meet the criteria of subparagraph (b)(2)(i) and do so in a manner that is known or reasonably expected to result in an increase of at least one of three specific criteria in (b)(2)(ii). Subparagraphs (b)(1) and (b)(2) represent a narrowing of the universe of agents subject to control under the paragraph (b), and a more specific means of control than the broad, generic language of former paragraph (b).

One commenting party recommended an exclusion in paragraph (b) for research funded by the National Institutes of Health, the Centers for Disease Control and Prevention, or the U.S. Department of Agriculture. Given the refined and narrowed scope of control in paragraph (b) as described above, which focuses on specific and weaponized biological agents, the Department disagreed with this suggestion because it is overly broad.

Four commenting parties argued that regulation of biological agents in paragraph (b) is not necessary in the manner proposed because of the existence of the Federal Select Agent Program and the Dual Use Research of Concern policy. The Department disagreed with these comments because the referenced program and policy are not munitions export control regimes and do not share the national security and foreign policy objectives of the ITAR. As stated above, the articles described in revised paragraph (b) were subject to the ITAR under the previous Category XIV and do not include any biological agents that were not previously subject to the ITAR; as such, there is no expansion of control beyond what existed previously, and the relationship between these agents and the Federal Select Agent Program or Dual Use Research of Concern policy is unchanged.

One commenting party observed that subparagraph (b)(1)(ii) of the proposed rule adopted the Tier 1 list of select agents meeting certain criteria, but did not incorporate the exclusions of the Federal Select Agent Program. Revised Category XIV is not intended to intersect with the Federal Select Agent Program. The ITAR and Federal Select Agent Program do not share identical objectives; accordingly, it would be inappropriate to provide common exclusions for largely unrelated regulatory concerns.

Four commenters requested the reinstatement of former subparagraph (n)(2), which provided an exclusion for agents otherwise controlled in paragraph (b) that had been modified for civil applications. The Department disagreed with these comments because, as noted above, paragraph (b) has been reduced in scope significantly to control only weaponized strains of specified agents. By contrast, former paragraph (b) required the subparagraph (n)(2) exclusion because it was otherwise overly broad. Since the revised paragraph (b) does not capture modifications that would be undertaken for civil applications that do not merit control, the subparagraph (n)(2) exclusion is no longer appropriate.

One commenting party stated that former paragraph (b) was in essence an empty box because the export licensing of biological agents as munitions would violate the Biological Weapons Convention (BWC). The Department disagreed with this comment because such treatment of biological agents does not violate the BWC when used in the development of countermeasures, which serve “prophylactic” or “protective” purposes explicitly permitted by the BWC. Moreover, prevention of the acquisition of weaponized biological agents for impermissible purposes, as is achieved through regulation of such agents under the ITAR, is consistent with the objectives of the BWC.

A commenter expressed the view that based on proposed paragraph (b), an expression vector that produces Ebola virus envelope protein for use in pseudotyping minimal lentiviral vectors, even though harmless in itself, might be subject to ITAR control because the envelope is a pathogenicity factor to Ebola virus, even in the absence of Ebola virus. The Department disagrees with this comment because the described item would not be controlled by paragraph (b) unless it satisfied the criteria of subparagraph (b)(1)(i), particularly taken together with Note 2 to paragraph (b).

One commenter suggested that the list of biological agents in paragraph (b)(1)(ii) fails to take into account the danger and exposure risk presented by each toxin. The Department notes, as stated above, that the list in subparagraph (b)(1)(ii) does not stand alone as a list of agents subject to control. To be subject to the ITAR, an agent listed in subparagraph (b)(1)(ii) must also meet the criteria of subparagraph (b)(1)(i).

Four commenting parties indicated that the properties referenced in subparagraph (b)(1)(i) and (b)(2)(ii) are not properties for which researchers would typically test, and that the proposed language might result in mandatory testing for these properties to avoid inadvertent violations. The Department revised the language in these subparagraphs to limit the analysis of modifications to those that are known to or are reasonably expected to result in an increase in the subject properties.

Two commenters suggested that the research subject to control in subparagraph (b)(1) should focus on the intent or purpose of the research. The Department disagreed with this comment in light of the revisions made to subparagraphs (b)(1)(i) and (b)(2)(ii) in response to public comments, and also in order to avoid the introduction of an intent or end use-based control, which has been a longstanding objective of the ECR initiative.

Three commenting parties observed that the use of “e.g.” in subparagraph (b)(1)(i)(A) suggests that the parenthetical examples of persistence in a field environment is not complete. The Department changed “e.g.” to “i.e.,” and updated the parenthetical list accordingly.

One commenter requested a definition of “persistence in a field environment” in subparagraph (b)(2)(i)(A) to avoid ambiguity. The Department refined the subparagraph to provide more comprehensive criteria.

Three commenters noted that ECCN 1C352 has been combined with ECCN 1C351, and that any references to the former should be deleted from Category XIV. The Department agrees with these comments.

Two commenting parties submitted comments that suggested a misunderstanding that references in subparagraph (b)(2) to ECCNs 1C351, 1C353, and 1C354 would move agents controlled under those ECCNs to the jurisdiction of the Department of State. No biological agents are moved from the CCL to the USML as a result of this rulemaking, nor was such movement suggested in the proposed rule. The ECCNs are referenced merely in order to better define the articles subject to control, to which the criteria of both subparagraphs (b)(2)(i) and (b)(2)(ii) must apply.

Two commenting parties observed that the use of “e.g.” in subparagraph (b)(2)(ii)(A) suggests that the parenthetical examples of persistence in a field environment is not complete. The Department changed “e.g.” to “i.e.,” and updated the parenthetical list accordingly.

Similarly, two commenting parties observed that the use of “e.g.” in subparagraph (b)(2)(ii)(B) indicates that the list of possible dispersal characteristics is not complete. In this case, the Department confirms that the parenthetical list is intended to be exemplary in nature.

One commenter stated that Note 2 to paragraph (b)'s limitation to wild type agents is still unnecessarily restrictive with respect to the agents listed in subparagraph (b)(1)(ii). The Department disagreed with this comment because, as indicated previously, to be subject to the ITAR an agent listed in subparagraph (b)(2)(ii) must also meet the criteria of subparagraph (b)(2)(i).

A commenter remarked that the controls described in the proposed rule would establish ITAR control over technical data and research and development activities related to, inter alia, biological agents described in paragraph (b). Bearing in mind the fact that all agents controlled under revised paragraph (b) were subject to control under former paragraph (b), the Department believes that control over such information and activities is appropriate given the narrowed scope of revised paragraph (b) to specific weaponized biological agents.

A commenting party identified typographical errors in subparagraphs (c)(4) and (c)(5). The Department made the appropriate corrections.

Two commenters requested clarification regarding the phrase “Department of Defense contract or funding authorization,” as it appears in subparagraphs (f)(1)(ii), (f)(2), and (f)(2)(ii). The Department clarifies that the quoted language captures a range of possible Department of Defense funding authorization mechanisms that extend beyond contracts, such as grants. While these subparagraphs do not require exclusive funding by the Department of Defense to cause the articles to become subject to ITAR control, and there is no de minimis funding level that triggers control, the use of “specially designed” in certain of these subparagraphs limits the scope of control, in addition to other specific criteria set forth in the subparagraphs.

A commenting party questioned the intent and meaning of Note 3 to paragraph (f)(2). The Department deleted the note.

Two commenting parties recommended a revision to subparagraph (f)(2)(i) to control only relevant equipment for chemical or biological agents specified in the Department of Defense contract or other funding authorization as intended for control under USML Category XIV, or to clarify the funding mechanism that specifies the chemical or biological agent and thus triggers the provision. The Department disagreed with the former comment because it would introduce a discretionary contract mechanism that could allow for the subjective application or removal of ITAR control, but modified the subparagraph to better define the scope of control. The modifications clarify the link between the funding mechanisms referenced in subparagraph (f)(2) and (f)(2)(ii).

One commenting party recommended the movement to the EAR of all articles controlled in subparagraph (f)(4), or the removal of the Significant Military Equipment (SME) designation at a minimum. The Department disagreed with this comment because the commenter did not provide a sufficient rationale to compel removal from the USML or the SME designation for these articles.

A comment recommended that subparagraph (f)(4)(iii) be revised to remove the trade name ASZM-TEDA and instead specify the parameters or criteria that merit control for activated carbon products. The Department revised the subparagraph to reference the specification that merits control.

Two commenters observed that paragraph (f)(4)(iv) would not distinguish between military and non-military protective apparel, but would rely on a “breakthrough test” that could capture garments designed to National Fire Protection Association standards or designed to integrate with civil gas masks if they met breakthrough levels. The Department has refined subparagraph (f)(4)(iv) to the same paragraph to more precisely describe the articles that warrant control and incorporated the elements described in the prior Note into the control parameters.

One commenting party recommended that Chemical Agent Resistant Coatings (CARC) be moved from subparagraph (f)(7) to the EAR. The Department updated the subparagraph to control the appropriate specification, but disagreed with the remainder of the comment in order to maintain ITAR control over coatings that have been qualified to military specifications.

A commenter suggested the replacement of the word “qualified” in subparagraph (f)(7) with the phrase “meet the requirements of.” The Department disagreed with this comment because the phrasing used is intended to mean that the article has in fact been qualified by the Department of Defense to the relevant standard.

One commenting party recommended the removal of the SME designation for subparagraph (f)(7). The Department disagreed with this comment because the commenter did not provide a sufficient rationale for removal of the designation.

Three commenting parties suggested that subparagraph (g)(1) should control relevant articles based on parameters or criteria other than the funding source. The Department notes that subparagraph (g)(1) controls only those relevant articles that are exclusively funded by the Department of Defense, for detection of the biological agents listed in subparagraph (b)(1)(ii). The Department believes that this is an appropriately tailored subparagraph, particularly in light of the requirement that Department of Defense funding be exclusive.

One commenter presented a similar comment with respect to the analogous exclusive funding provision in subparagraph (h). Again, the Department disagrees with this comment because the exclusive funding requirement narrows the range of controlled vaccines to an appropriate scope.

A commenting party suggested that the use of specially designed in paragraph (h) undermines the notion of control due to funding source, as certain vaccines could be released through ITAR § 120.41(b). The Department disagrees with this comment because it is not likely that ITAR § 120.41(b) would allow for the release of vaccines that were exclusively funded by the Department of Defense to protect against biological agents controlled under paragraph (b).

A commenter requested clarification as to whether subparagraph (h)(4) is subject to the requirement that the vaccine be funded exclusively by a Department of Defense contract or other funding authorization. Since this exclusive funding requirement appears in subparagraph (h), the Department confirms that this is the case.

This final rule revises USML Category XVIII, covering directed energy weapons. As with USML Category XIV, the revisions are undertaken in order to more accurately describe the articles within the subject categories, and to establish a “bright line” between the USML and the CCL for the control of these articles. This final rule revises paragraph (a) to control only those articles that, other than as a result of incidental, accidental, or collateral effect, achieve the effects described in the paragraph by way of non-acoustic techniques.

The articles controlled previously in paragraphs (c) and (d) are moved to the export control jurisdiction of the Department of Commerce.

The remaining paragraphs in this category underwent conforming changes to bring their structures into alignment with the analogous provisions found in other revised USML categories.

A commenting party suggested that the reference in proposed paragraph (a) to the “primary purpose” of system or equipment at issue was unclear. The Department revised the paragraph to remove this language and clarify the intended scope of control.

Two commenting parties recommended revisions to the structure of paragraph (a). The Department revised the paragraph text to enhance clarity and readability.

A commenter noted that “flash blindness,” as used in proposed paragraph (a), has no commonly understood meaning. The Department revised the subject language to clarify the intended scope of control.

One commenting party recommended the addition of a note to paragraph (a) to confirm that the paragraph does not control articles subject to control under subparagraphs XI(a)(4)(iii) or XII(b)(9). The Department disagrees with this comment because the USML Order of Review establishes that the paragraph that most specifically identifies a given article will control that article; accordingly, it is not necessary to add clarifying notes of this nature.

A commenter observed that it was not clear what “associated systems or equipment” meant in proposed paragraph (e). The Department revised the paragraph to match the structure of analogous paragraphs found in other revised USML categories.

A commenting party recommended a note to paragraph (e) that would indicate that components, parts, accessories, attachments and associated systems or equipment specially designed for articles controlled under paragraph XVIII(e) are subject to the EAR. Noting that no such note has been applied to the analogous paragraphs in other revised USML categories, the Department disagrees with this comment because the inclusion of “specially designed” in paragraph (e) provides the intended scope of control for the articles at issue.

The Department of State is of the opinion that controlling the import and export of defense articles and services is a foreign affairs function of the United States Government and that rules implementing this function are exempt from sections 553 (Rulemaking) and 554 (Adjudications) of the Administrative Procedure Act. Although the Department is of the opinion that this rule is exempt from the rulemaking provisions of the APA, the Department published this rule as a proposed rule (80 FR 34572) with a 60-day provision for public comment and without prejudice to its determination that controlling the import and export of defense services is a foreign affairs function.

Since the Department is of the opinion that this rule is exempt from the rulemaking provisions of 5 U.S.C. 553, it does not require analysis under the Regulatory Flexibility Act.

This amendment does not involve a mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This amendment has been found not to be a major rule within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996.

This amendment will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, it is determined that this amendment does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this amendment.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributed impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget (OMB).

The Department of State has reviewed the amendment in light of sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.

The Department of State has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not preempt tribal law. Accordingly, Executive Order 13175 does not apply to this rulemaking.

Following is a listing of approved collections that will be affected by revision of the U.S. Munitions List (USML) and the Commerce Control List pursuant to the President's Export Control Reform (ECR) initiative. This rule continues the implementation of ECR. The list of collections pertains to revision of the USML in its entirety, not only to the categories published in this rule. The Department is not proposing or making changes to these collections in this rule. The information collections impacted by the ECR initiative are as follows:

(1) Statement of Registration, DS-2032, OMB No. 1405-0002.

(2) Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data, DSP-5, OMB No. 1405-0003.

(3) Application/License for Temporary Import of Unclassified Defense Articles, DSP-61, OMB No. 1405-0013.

(4) Application/License for Temporary Export of Unclassified Defense Articles, DSP-73, OMB No. 1405-0023.

(5) Application for Amendment to License for Export or Import of Classified or Unclassified Defense Articles and Related Technical Data, DSP-6, -62, -74, -119, OMB No. 1405-0092.

(6) Request for Approval of Manufacturing License Agreements, Technical Assistance Agreements, and Other Agreements, DSP-5, OMB No. 1405-0093.

(7) Maintenance of Records by Registrants, OMB No. 1405-0111.

Accordingly, for the reasons set forth above, title 22, chapter I, subchapter M, part 121 is amended as follows:

Acronyms and Abbreviations. The following acronyms and abbreviations are used in this document.

EPA is publishing this rule without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comments. The actions are intended to improve the practical utility of the program, minimize burden, and clarify requirements that have been the subject of questions from recipients of EPA financial assistance and from disadvantaged business enterprises. However, in the “Proposed Rules” section of this Federal Register, we are publishing a separate document that will serve as the proposed rule to amend these regulations, if EPA receives signification adverse comments on this direct final rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information about commenting on this rule, see the ADDRESSES section of this document.

If EPA receives adverse comment, we will publish a timely withdrawal in the Federal Register informing the public that this direct final rule will not take effect. We will address all public comments in any subsequent final rule based on the proposed rule.

If you are a recipient of an EPA financial assistance agreement; an entity receiving an identified loan under a financial assistance agreement capitalizing a revolving loan fund; or a minority-owned, woman-owned, or small business, this rule may affect you. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

A. Submitting CBI. Do not submit this information to EPA through www.regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI). In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

B. Tips for Preparing Your Comments. When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified.

The EPA's DBE Program is implemented through 40 CFR part 33, which was promulgated on March 26, 2008 (73 FR 15904) (hereafter referred to as “part 33”). The DBE program arose out of a review of affirmative action programs in the federal government following the Supreme Court's decision in Adarand Constructors, Inc. v. Federico Pena, Secretary of Transportation, 515 U.S. 200. The rule sets forth a narrowly tailored EPA program that serves the compelling government interest of remedying past and current racial discrimination, by establishing agency-wide DBE procurement objectives.

The DBE Program has four major components designed to ensure that minority and women-owned businesses have the opportunity to participate in procurements funded by EPA financial assistance agreements. These components are as follows:

• DBE Certification: The current DBE Program requires that in order to be counted as an MBE or WBE under an EPA financial assistance agreement, an entity will have to be certified as such. The EPA requires an MBE/WBE to first seek certification by a federal agency (e.g., the Small Business Administration (SBA), the Department of Transportation (DOT)), or by a State, locality, Indian Tribe, or independent private organization provided their applicable criteria match those under section 8(a) (5) and (6) of the Small Business Act and SBA's applicable 8(a) Business Development Program regulations. The EPA then provides for certification of firms that cannot get certified by one of these entities. The EPA certification program provides an option for businesses that may not fall into a classification that is certified by other sources and provides for these businesses to participate in EPA's DBE program.

• Negotiating Fair Share Goals: The current DBE program requires all recipients of EPA financial assistance agreements to negotiate goals with the Agency for the utilization of MBEs/WBEs for procurements funded by EPA financial assistance agreements. The goals are based on disparity studies or availability analyses showing the availability of MBEs or WBEs in the financial assistance recipient's relevant geographic buying market. These goals do not operate as quotas.

• Using the “Good Faith Efforts”: The “Good Faith Efforts” are measures implored by all EPA financial assistance agreement recipients to ensure that all DBEs have the opportunity to compete for procurements funded by EPA financial assistance dollars, and contain measures a financial assistance recipient may undertake to make procurements more open to MBEs and WBEs.

• Reporting Accomplishments: Under the current DBE program, recipients of EPA financial assistance agreements are required to report on their accomplishments with the program using EPA Form 5700-52A. Reporting is the tool the EPA uses to assess whether or not the program is effective and actually translating into increased opportunities for MBEs and WBEs.

When the final rule was promulgated, the EPA stated that the agency will “evaluate the propriety of the Disadvantaged Business Enterprise program in 7 years through subsequent rulemaking” (73 FR 15904). On August 13, 2013, OMB approved the information collection request supporting the DBE Program with the following Terms of Clearance: “This ICR is approved for a period of 2 years until 2015, when EPA will undertake a comprehensive review of the Disadvantaged Business Enterprise rule.” The EPA Office of Small Business Programs (OSBP) has subsequently worked collaboratively with various program offices within the Agency and EPA regional DBE coordinators through various face-to-face meetings and conference calls from May-December 2014.

The EPA is amending subparts A through E of part 33 to improve the practical utility of the EPA's DBE program and minimize the burden to affected entities. The EPA made three major revisions in the rule that will significantly impact the way the DBE program currently operates. These changes, which are described in detail in section IV of this preamble, include:

1. Establishing a self-certification platform for MBEs and WBEs. The EPA removed existing EPA certification requirements in subpart B of part 33 for firms that cannot be certified by another federal agency, and will instead allow qualified firms to self-certify as an MBE or WBE.

2. Updating the exemption threshold for fair share negotiations. The EPA increased the threshold for recipients exempted from negotiating fair share objectives in subpart D of part 33 from $250,000 to $1 million.

3. Revising the reporting frequency and applicability. The EPA revised subpart E of part 33 to change the frequency of DBE reporting to annual for all recipients, and limit reporting to financial assistance agreements with funds budgeted for procurements above the simplified acquisition threshold of $150,000.

In addition to these changes, the EPA made minor changes to part 33 to minimize information collection, clarify requirements, update references, and harmonize requirements with uniform administrative requirements published by the Office of Management and Budget (OMB).

Additional details for the revisions to subparts A through E of part 33 and the rationale for these revisions are described respectively in the sections below.

The EPA has made several changes to the General Provisions (subpart A) of part 33 to clarify the objectives, applicability, and implementation procedures of the DBE Program. The changes are intended primarily to clarify the requirements that apply to recipients and will not impose any new requirements or burdens that do not already exist.

First, we changed the first statement of DBE program objectives in 40 CFR 33.101(a) from: “To ensure nondiscrimination in the award of contracts under EPA assistance agreements” to: “To foster nondiscrimination in the award and administration of procurements under EPA financial assistance agreements”. The purpose of this change is to clarify that the program is not limited to particular types of procurements by a recipient of EPA financial assistance (e.g., only to contracts issued), but applies to all goods or services procured by a recipient under any type of financial instrument.

Second, we clarified to whom the requirements of part 33 apply. We changed the title of 40 CFR 33.102 to “To Whom Does This Part Apply?”. The EPA further amended the text to specify that part 33 applies to recipients of any of four different types of financial assistance agreements issued by the EPA, which are as follows: EPA financial assistance agreements, grants, or cooperative agreements used to capitalize revolving loan funds, Special Appropriations Act Projects, and subawards from an EPA recipient of any such funds. The revision still specifies that part 33 does not apply to work that is conducted outside the United States or its territories and insular possessions, or that is not funded under an EPA financial assistance agreement. Next, the EPA updated the definitions of terms in 40 CFR 33.103. One goal of the revisions to part 33 incorporates the principles established by 2 CFR part 200—Uniform Administrative Requirements, Cost Principles, And Audit Requirements for Federal Awards (hereafter referred to as “part 200”). Part 200 was finalized on October 9, 2015, and supersedes a number of OMB circulars governing the administration of federal financial awards. The reforms adopted by part 200 were intended (1) to streamline OMB guidance for the administration of financial awards to ease burden, and (2) to strengthen oversight of federal awards to increase efficiency and effectiveness of the awards. The rule applies both to federal agencies that issue financial assistance, encompassing the types of financial assistance provided by the EPA, and to recipients of the awards. We made minor amendments throughout Part 33 to incorporate these changes. In 40 CFR 33.104, we amended and added several definitions to be consistent with part 200, as well as update the introduction to the section to state that terms not defined in Part 33 will have the meaning given to them in part 200.

We also consolidated several existing definitions in 40 CFR 33.104. For example, we added the term “procurement” as “the acquisition of goods and services under a financial assistance agreement as defined by applicable regulations for the particular type of financial assistance received”. The term encompasses all forms of procurement and will replace the current definitions for “construction”, “equipment”, “services”, and “supplies” in subpart A and throughout part 33. To improve readability, we consolidated the definitions of all terms in Part 33 into subpart A by moving all the terms that are defined in 40 CFR part 33, subparts B, C, D, and E into 40 CFR 33.103. For example, we revised 40 CFR 33.202 and 33.303 to move the definitions of “ownership or control,” “socially disadvantaged individual”, and “economically disadvantaged individual” to 40 CFR 33.103. Also, we amended certain definitions to be consistent with the rules of the Small Business Administration (13 CFR part 124) Department of Transportation (DOT) DBE Program, and Title X of the Clean Air Act Amendments of 1990 (42 U.S.C. 7601 note), as well as to add minor clarifications.

The EPA also made changes to the provisions of 40 CFR 33.104 for recipients to obtain a waiver from any of the requirements of part 33. We made a substantive change that will place a 5 year limitation on the duration of each waiver and a recipient will need to reapply for the waiver at least 60 days prior to the expiration date. Previously, waivers were granted for “a reasonable duration” to be determined by the Director of the Office of Small and Disadvantaged Business Utilization, and could be terminated at any time at the Director's discretion. Providing specific time frames for waiver duration ensures equity and consistency in issuing waivers across all recipients. The rule also changes the title of Director of the Office of Small and Disadvantaged Business Utilization to Director of Small Business Programs to reflect current EPA organizational structure. We made similar harmonizing changes throughout part 33 to update all references to the Office of Small and Disadvantaged Business Utilization (OSDBU) to the Office of Small Business Programs (OSBP).

The rule also revises 40 CFR 33.105, “What are the compliance and enforcement provisions of this part?” to more clearly parallel the applicable noncompliance remedies available to the EPA under regulations of the Office of Management and Budget for federal awards in 2 CFR 200.338. We changed a reference in 40 CFR 33.105 from 2 CFR part 200 to the more specific applicable reference of 2 CFR 200.338, and to edit the list of examples of remedial actions in 40 CFR 33.105 to be identical to the examples provided in 2 CFR 200.338. The EPA incorporated a new requirement into 40 CFR 33.107 for recordkeeping and records access. We incorporated by reference the recordkeeping and records access provisions of 2 CFR 200.33 through 200.337. These provisions, in general, require recipients of federal awards to retain all records that are relevant to the award for a period of 3 years and to allow the government access to the records for purposes of auditing. These changes are part of the EPA's effort to update part 33 to incorporate the principles established by part 200, as described in section IV.1 of this preamble. Finally, we revised appendix A to part 33. First, we revised appendix A from an appendix of part 33 (following subpart E) to an appendix of the General Provisions. The term and condition of appendix A is a reference of the requirements of 40 CFR 33.106; therefore, including the term and condition as an appendix of subpart A improves the readability of the subpart. We also amended appendix A to add the additional stipulation that any procurement contract signed by a recipient must include the contract provisions of 2 CFR part 200, appendix II. Appendix II clarifies all of the contract provisions that are required by other applicable statutes and regulations for contracts issued by recipients of federal financial assistance. The requirement to comply with appendix II is not a new requirement but adding this stipulation in appendix A to part 33 makes the requirement clearer to recipients and reduces the risk of unintentional noncompliance.

The rule will implement several significant changes to the existing certification requirements of subpart B of part 33. First, the EPA revised the certification requirements of 40 CFR 33.204 through 33.211 to revise the EPA's existing certification process for firms that cannot be certified by another federal agency. Under the current requirements of part 33, the EPA requires an MBE or WBE to first seek certification by a federal agency (e.g., the Small Business Administration (SBA), the Department of Transportation (DOT)), or by a State, locality, Indian Tribe, or independent private organization (provided their applicable criteria match those under section 8(a)(5) and (6) of the Small Business Act and SBA's applicable 8(a) Business Development Program regulations). The EPA only considers certifying firms that cannot get certified by one of these entities. The EPA has previously required firms to first seek certification from other sources because an EPA certification is limited in that it is only accepted for opportunities funded by EPA financial assistance agreements. Conversely, certifications from other sources are beneficial for the business entity because they have broader applications. In implementing the DBE program over the past seven years, the EPA has received applications from various entities requesting EPA certification of their MBE/WBE status. For an EPA certification, the current rule requires that entities submit a paper application with evidence demonstrating that the entity meets the requirements of 40 CFR 33.202 and 33.203 (i.e., the entity is owned or controlled by one or more individuals claiming disadvantaged status under the EPA's 8 percent statute or owned and controlled by one or more individuals claiming disadvantaged status under the EPA's 10 percent statute), along with evidence regarding the disadvantaged status of such individuals and documentation of a denial of certification from another certifying entity. The application is then evaluated according to by the EPA within 30 days for approval. A review of this process, including the applications that the EPA has approved or denied for certification, determined that the overall demand for EPA certification has been nominal. In addition, the majority of firms seeking an EPA certification under 40 CFR 33.205 were already certified under other programs, and further EPA certification was unnecessary. Further, the current process, including the period for EPA review, is resource intensive and extends the time in which a facility receives its certification. For these reasons, the EPA removed the existing EPA certification requirements in 40 CFR 33.205 and will no longer processes paper applications.

In lieu of the current application and evaluation requirements, revised 40 CFR 33.204 and 33.205 to accept and implement a self-certification process for firms who are not otherwise certified by another entity. The requirements will allow qualified firms to self-certify under the EPA's DBE program as an MBE or WBE, using the EPA's Small Business Vendor Profile System (SBVPS). Under this approach, firms seeking an EPA certification will register in the online SBVPS. Registration in the SBVPS will require the firm to provide their firm name and contact information, federal tax ID, DUNS no., type of business, date of start, annual sales, company size and classification, ethnicity, any other prior certifications. Firms will then self-attest to meeting the eligibility requirements set forth in 40 CFR 33.202 and 33.203. The self-certification provided through the SBVPS will be legally-binding. This approach, which is consistent with the certification requirements of other federal agencies including the SBA, does not require submittal of additional information, or require EPA review of an application. However, the EPA could request entities to provide evidence that they meet the eligibility requirements at any time. These self-certification requirements will reduce burden on firms by removing the current paper application process and decreasing the time spent by entities acquiring certification. These changes will also streamline agency activities related to maintaining forms, conducting reviews, and responding to applicants, resulting in an overall burden reduction.

The approach will no longer require businesses to first seek certification from other entities before requesting EPA DBE certification. All businesses who meet the EPA DBE program certification requirements will be able to participate in self-certifying. The EPA will still accept certifications from other sources, including a federal agency, state, locality, Indian Tribe, or independent private organization, provided their standards for certification meet or exceed the EPA's. The EPA DBE self-certification will also remain only applicable to opportunities funded by EPA financial assistance agreements; 40 CFR 33.405 will clarify that the EPA's DBE certification will be not recognized by other federal, state or local organizations. Therefore, the EPA will continue to encourage businesses to obtain certifications from these sources. The self-certification approach will also provide for proof of certification for such facilities under EPA's DBE program. We revised 40 CFR 33.206 to provide for firms who self-certify through the SBVPS to be listed on the EPA's SBVPS through the OBSP Web site. The list will be publically available and provide assurance to recipients of EPA funding that the entities listed are certified and eligible for participation.

Similar to the existing EPA certification, EPA self-certifications under this new approach will be valid for a period of three years. We revised 40 CFR 33.207 to specify that this period will begin from the date an entity is self-certified in the EPA's SBVPS. The SBVPS database will automatically purge data every three years, therefore firms will be required to re-register every three years to maintain their MBE or WBE status. Because facilities will be responsible for their registration and are self-certifying, we removed the requirements of 40 CFR 33.207, 33.209, and 33.211, which apply to re-application, re-evaluation, and appeal of EPA determinations for certified entities. We also revised 40 CFR 33.210 to clarify that facilities are responsible for keeping the EPA informed of any changes which may affect the entity's certification, including requiring the entity to remove its self-certification from the SBVPS database within 30 days of any changes to its eligibility status. This timeline is consistent with current requirements. The EPA also made several minor revisions to subpart B of Part 33 that will clarify existing requirements or provide for additional flexibility for affected entities. As discussed in section IV.1 of this preamble, we consolidated the definitions for “ownership or control,” “socially disadvantaged individual”, and “economically disadvantaged individual” in 40 CFR 33.202 and 33.203 under subpart A of part 33. We removed the definitions for “HBCU” and “Women” in paragraphs (d) and (e) of 40 CFR 33.203; the definition of “HBCU” is already included in 40 CFR 33.103, and a specific definition for “Women” is no longer necessary as women are included within the definitions for “socially disadvantaged individual” and “economically disadvantaged individual.”

We made several clarifications to 40 CFR 33.204, including clarifying the content by revising the title to read “What certifications are acceptable for establishing MBE or WBE status under the EPA DBE Program?” We also clarified the rule references for those outside certifications currently accepted by the EPA (e.g., the SBA's 8(a) Business Development Program or its Small Disadvantaged Business (SDB) Program), and adding a reference to the Economically Disadvantaged Woman Owned Small Business (EDWOSB) Program (13 CFR part 127, subpart B). The EDWOSB was established on Oct. 7, 2010 (75 FR 62282) and provides certification requirements that meet or exceed the EPA's standards; the change will benefit entities by providing an additional certification option. Finally, we are clarifying that the certifications under the United States Department of Transportation (DOT) Participation by Disadvantaged Business Enterprises in DOT Programs are acceptable only with U.S. citizenship. The change clarifies that the existing U.S. citizenship requirement under Part 33 applies to these certifications.

The EPA made several changes to the Good Faith Efforts requirements of subpart C of 40 CFR part 33 to clarify the requirements. The revisions will not impose any new requirements or burdens, but primarily reorganizes the subpart in a more logical order to make the goals and obligations more apparent. We made one change to reduce burden.

We made several changes to 40 CFR 33.301. First, we replaced the introduction to 40 CFR 33.301 (“What does this subpart require?”) with a statement of purpose to clarify that good faith efforts are methods used by EPA recipients to ensure that DBEs have the opportunity to compete for procurements funded by EPA financial assistance dollars. A new paragraph (h) will consolidate in one place and clarify the actions that constitute good faith efforts. Paragraph (h) is a result of reorganization and will not change any existing requirements. For example, we codified that recipients must use the services of available minority/women community organizations; minority/women contractors' groups; local, state, and Federal minority/women business assistance offices; and other organizations, when feasible, when conducting the good faith efforts. This requirement is based on the existing good faith efforts, as outlined in the July 24, 2003 proposed DBE rule (68 FR 43824). We made one minor harmonizing change to 40 CFR 33.408 for consistency.

The rule will also add several new paragraphs to 40 CFR 33.301 to clarify the administrative requirements for meeting the good faith efforts. First, we are adding new text in paragraphs (b) and (c) to clarify that no recipients are exempted from the good faith efforts requirements, including recipients that are exempt from the fair share objectives of 40 CFR part 33, subpart D. We also added a new paragraph (e) to clarify that recipients are required to ensure that all sub-recipients/prime contractors meet these requirements. These stipulations are inferred in the current provisions but were added to 40 CFR 33.301 for clarity. The changes to 40 CFR 33.301 will also clarify that subpart C does not negate the post federal award requirements of part 200.

We also clarified in 40 CFR 33.301(d) that recipients must retain records of the methods used to adhere to good faith efforts. This provision already is required by the existing recordkeeping requirements of 40 CFR 33.501(a), but was added to 40 CFR 33.301(d) for clarity and better organizational placement. In a related change, we added a new paragraph (i) to clarify what constitutes non-compliance with subpart C. Paragraph (i) specifies that recipients that fail to meet all the fair share goals will not be penalized if they document the circumstances that prohibited full execution of each requirement, but that failure to retain proper documentation may constitute noncompliance.

Next, for 40 CFR 33.302 (“Are there any additional contract administration requirements?”), we reduced a reporting requirement by eliminating Form 6100-2. Under the current rule, prime contractors are required to provide Form 6100-2 to DBE subcontractors. Form 6100-2 is an optional form that gives a DBE subcontractor the opportunity to inform the EPA about the work received and/or report any concerns regarding the EPA-funded project (e.g., termination by prime contractor, late payments, et al.). We are eliminating this form because the EPA has no legal authority or other leverage to intervene on behalf of the DBE to resolve any such problems. Eliminating this form will not hinder effective implementation of the program, but will reduce burden on recipients, prime contractors, DBEs, and the EPA. We also added a stipulation to 40 CFR 33.302 that failure to include EPA Forms 6100-3 and 6100-4 may constitute non-responsiveness and that the recipient may consider this non-responsiveness in evaluating a prime contractor's proposal. Forms 6100-3 and 6100-4 document the intended degree of DBE utilization under any prime contract issued by the recipient. This change is intended to provide clarification of compliance under subpart C and does not change any existing requirements. To ensure that a recipient is aware of all required contracting provisions, text was added to point out that all procurement contracts awarded by a recipient must contain the provisions specified in 2 CFR part 200, appendix II, as applicable.

We made one editorial correction to 40 CFR 33.303 (“Are there special rules for loans under EPA financial assistance agreements?”) by changing the clause beginning with “such as . . .” to “including but not limited to . . .” so that the clause clarifies but does not limit applicability of the section.

Finally, we clarified 40 CFR 33.304 to more accurately reflect the contents of the provisions and to clarify that a Native American recipient includes a consortium. The title will be “What special rules apply to a Native American (either as an individual, organization, Tribe or Tribal Government or consortium) Recipient or Prime Contractor when following the six good faith efforts?” We also made a harmonizing change to 40 CFR 33.304(a).

The EPA made revisions to subpart D of part 33 to revise the requirements for recipients of EPA financial assistance agreements to negotiate fair share objectives for MBE and WBE participation. The changes will generally reduce burden for recipients by reducing the number of recipients required to negotiate fair share objectives or revising the information that must be submitted by recipients. We also provided additional clarifications and harmonizing changes that will not impose any new requirements or burdens that do not already exist.

First, the EPA revised 40 CFR 33.401 and 33.402 to clarify that in addition to negotiating its own fair share objectives, a recipient may use the approved fair share objective of another recipient with the same or similar relevant geographic buying market, purchasing the same or similar items. The EPA made one related harmonizing change to 40 CFR 33.405(a). These amendments harmonizes the requirements for recipients of EPA financial assistance agreements and financial agreements to capitalize revolving loan funds with the existing requirements of 40 CFR 33.405(b)(3), which allow recipients to use the fair share objectives of another recipient when determining a base figure for the relative availability of MBEs and WBEs. The EPA also revised 40 CFR 33.402 to clarify that for loan procurements that will occur over more than one year, the recipient should apply the fair share objectives in place to the year in which the procurement action occurs. Previously, the recipient could choose to apply the fair share objective in place either for the year in which the identified loan was awarded or for the year in which the procurement action occurred. These two options resulted in frequent questions from recipients; the change implements the former option and provides a consistent approach for all recipients.

We made one minor revision to 40 CFR 33.403 (“What is a fair share objective?”) to remove the categories of construction, equipment, services and supplies, consistent with the changes to the definition of “procurement” discussed in section IV.1 of this preamble.

Next, we revised the timeline for submittal of proposed fair share objectives and the EPA's subsequent review schedule. Specifically, we made revisions to 40 CFR 33.404 to shorten the time for recipients to submit their proposed MBE and WBE fair share objectives from 120 days to 90 days after acceptance of a financial assistance award. Because MBE and WBE fair share objectives must be agreed upon by the recipient and EPA before funds may be expended for procurement, the EPA has determined that recipients must submit their fair share objectives sooner in order to ensure that projects are commenced in a timely manner. These revisions will affect only those recipients that exceed the exemption threshold in 40 CFR 33.411. We also revised the timeframe for the EPA to respond in writing to the recipient's submission from 30 days to 45. We included these extra 15 days because the agency typically reviews a high number of applicants at one time. This time frame still allows for projects to commence earlier, as the rule provides that if EPA does not provide a response within 45 days then the fair share objectives submitted by the recipient are automatically agreed upon.

We made two substantive revisions to 40 CFR 33.405, which provides for how recipients must determine MBE and WBE fair share objectives. First, we made revisions to 40 CFR 33.405(a) to require recipients to propose two separate MBE and WBE fair share objectives. Under the current rule, recipients are required to determine separate MBE and WBE fair share objectives for each of the four procurement categories, with the option to combine the four categories into one weighted objective. The revision is a harmonizing change with the changes to the definition of “procurement” discussed in section IV.1 of this preamble, which removes the four procurement categories from part 33. The revisions will significantly reduce the burden required of recipients by reducing the number of fair share objectives that must be determined. We made related minor harmonizing changes to 40 CFR 33.405(b)(1) and (2). Additionally, we made revisions to 40 CFR 33.405(c) to clearly state the applicable noncompliance remedies available to the EPA for recipients that fail to determine and implement fair share objectives. The rule references the applicable remedies under OMB regulations for federal awards in 2 CFR 200.338, including the specific applicable reference of 2 CFR 200.338, and the list of examples provided in 2 CFR 200.338. The EPA made the same changes to 40 CFR 33.410 to clarify the remedial actions that may be taken when a recipient fails to meet the requirements of subpart D.

The EPA made amendments to 40 CFR 33.407 to revise the length of the period that a recipient's negotiated fair share objectives are effective from 3 fiscal years to 5 fiscal years. The increase reflects the typical award period for grants, which are 3 to 5 years in length. By increasing the period for which fair share objectives are effective to five years, the change eliminates the possibility of a grant recipient having to renegotiate its fair share objectives midway through a project. This revision reduces the burden on recipients by reducing the frequency and time needed to revise their objectives.

We made a significant change to 40 CFR 33.411 to revise the exemption threshold for recipients required to meet the fair share objectives of subpart D. Currently, recipients of any single EPA financial assistance agreement in the amount of $250,000 or less or recipients of more than one EPA financial assistance agreement with a combined total of $250,000 or less in any one fiscal year is not required to apply the fair share objective requirements. In its implementation of the DBE program, the EPA has received feedback from stakeholders receiving smaller financial assistance rewards regarding the burden associated with collecting data for the determination of fair share objectives. Typically, the recipients of funding awards totaling in an amount lesser than $1 million are smaller entities who have very limited resources and personnel available to collect directory and census bureau data, perform disparity studies, develop alternative methods, or collect evidence from related fields or recipients to calculate the fair share goals. Given these limitations, such recipients have expressed difficulty in meeting the fair share objectives in a timely manner to guarantee funding of the assistance agreement. In such cases, these recipients have been unable to take advantage of the awarded funds and experienced delays or failures in completing EPA projects. In order to reduce the burden for these recipients and ensure that these smaller entities are able to expend funds under their awarded financial assistance agreement, we revised the exemption threshold from $250,000 to $1 million. The EPA identified a new threshold of $1 million based on a review of funding awarded to all entities during implementation of the program. Through this review, the EPA determined that the majority of funding award by the EPA (over 90 percent) is allotted to larger entities who received financial assistance agreements of greater than $1 million or a combination of financial assistance agreements whose total exceeds $1 million. Therefore, the EPA determined that a $1 million threshold will provide relief for smaller entities while ensuring that those recipients that receive the majority of funding from financial assistance agreements awarded by the EPA will continue to develop fair share objectives. These larger entities typically have the resources and personnel to conduct the data gathering steps required for development of the fair share goals. As such, the new threshold will ensure that for the majority of financial assistance agreements awarded by the EPA, recipients will continue to set goals for MBE and WBE participation in procurement.

The EPA made additional minor revisions to 40 CFR 33.411. We revised 40 CFR 33.411(b) to clarify that the recipients of loans other than loans from the Clean Water State Revolving Fund (CWSRF) Program, Drinking Water State Revolving Fund (DWSRF) Program, and Brownfields Cleanup Revolving Loan Fund (BCRLF) Program who are below the exemption threshold of $1 million are not required to meet the fair share objective requirements of subpart D. We also revised 40 CFR 33.411(c) to clarify the reference for Performance Partnership Grants (PPGs) and to consolidate the requirements of 40 CFR 33.412. We removed 40 CFR 33.412 and revised 40 CFR 33.411 to include all exemptions to the fair share objectives in one place. Finally, we revised the term “grant” to “assistance agreement” in 40 CFR 33.411(c) to clarify that the exemptions apply to recipients of annual assistance agreements other than grants.

The EPA made one significant change and several minor clarifications to the recordkeeping and reporting requirements of subpart E of part 33. Notably, we revised the reporting requirements of 40 CFR 33.502 to incorporate a Class Deviation previously issued by the EPA to grant exceptions from the reporting requirements of Part 33 (hereafter referred to as the “Deviation”). The Deviation changed the frequency of DBE reporting in 40 CFR 33.502 to annual for all recipients, and limited reporting to financial assistance agreements with funds budgeted for procurements above the simplified acquisition threshold. Specifically, the Deviation established that recipients, including recipients of financial assistance agreements that capitalize revolving loan programs, are required to report MBE/WBE participation annually on EPA Form 5700-52A when one or more of the following conditions are met: (1) There are funds budgeted for procurements, including funds budgeted for direct procurement by the recipient or procurement under sub-awards or loans in the “Other” category that exceed the simplified acquisition threshold amount of $150,000; (2) if at the time of award the budgeted funds for procurement exceed $150,000, but actual expenditures fall below, or; (3) if subsequent amendments and funding cause the total amount of procurement to surpass the $150,000 threshold. The Deviation also directed that where reporting is required, all procurement actions are reportable, not just the portion which exceeds $150,000. Reporting is not required if at the time of award, funds budgeted for procurements are less than or equal to $150,000 and are maintained below the threshold. The changes established in the Deviation have been effective since December 4, 2014, and are only being codified in this rule. We also added a provision to 40 CFR 33.502 to clarify that reports must be submitted by October 30th of each fiscal year, or 30 days after the end of the project period, whichever comes first. This revision is consistent with the reporting due date(s) established in the terms and conditions for assistance agreement recipients revised February 5, 2015. The change will incorporate terms that shortened the submission date from 90 days after the end of the project period to 30 days. The EPA previously incorporated these changes into existing agreements to ensure that final reports were received in a timely fashion to facilitate the close out process. The EPA cannot close out an assistance agreement until the final report is received. The changes codifies these terms and conditions for all assistance agreements for which reporting is required.

We made only minor revisions to 40 CFR 33.501. We revised 40 CFR 33.501(a) to change the term “grant” to “assistance agreement” to clarify that recipients of annual assistance agreements other than grants must maintain a bidder's list. We also removed the requirement for recipients to include the mailing address of any prime- or subcontractors in the bidder's list; a mailing address is no longer necessary because the information in the bidder's list is only handled electronically. Finally, revised 40 CFR 33.501(c) to change the phrase “a recipient under the CWSRF, DWSRF, or BCRLF Program” to “a recipient under the CWSRF, DWSRF, BCRLF, or other identified loan program” to clarify that the requirements are not limited to recipients of the programs currently listed in the rule; these changes are consistent with the changes to 40 CFR 33.303 and 40 CFR 33.411(b) discussed in sections IV.A and IV.D of this preamble, respectively.

Finally, we made one minor revision to 40 CFR 33.503 to clarify when reporting amounts of MBE and WBE participation as a percentage of total financial assistance agreement project procurement cost, recipients should only report funds used for procurements. This change is consistent with the existing requirements.

This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.

The information collection activities in this rule will be submitted for approval to the Office of Management and Budget (OMB) under the PRA. The Information Collection Request (ICR) document that the EPA prepared has been assigned EPA ICR number 2536.01. You can find a copy of the ICR in the docket for this rule, and it is briefly summarized here. The information collection requirements are not enforceable until OMB approves them.

Information requested as a result of the revisions relate to (1) the Contract Administration Forms which are required if there are DBE subcontractors involved in a procurement under 40 CFR 33.302 (d) and (e) (formerly 40 CFR 33.302(f) and (g)), (2) the EPA DBE Self Certification process, and (3) fair share objectives required of certain recipients of EPA financial assistance. The information that will be collected allows EPA to evaluate and ensure the effectiveness of, and compliance with, the program's requirements. Information gathered that may reasonably be regarded as proprietary or other confidential business information will be safeguarded from disclosure to unauthorized persons, consistent with applicable federal, state and local law. EPA has regulations concerning confidential business information. See 40 CFR part 2, subpart B.

Respondents/affected entities: Recipients of EPA financial assistance agreements and entities in the fields of construction, equipment, services and supplies who are intent on being prime contractors or subcontractors on EPA funded projects.

Respondent's obligation to respond: Contract Administration: Pursuant to 40 CFR 33.302, a recipient must require its prime contractor to have its DBE subcontractors complete EPA Form 6100-3—DBE Program Subcontractor Performance Form as part of the prime contractor's bid or proposal package. Furthermore, a recipient must require its prime contractor to complete and submit EPA Form 6100-4—DBE Program Subcontractor Utilization Form as part of the prime contractor's bid or proposal package.

Certification: Obtaining EPA DBE Certification is voluntary, however, in order to qualify and participate as an MBE or WBE prime or subcontractor for EPA recipients under EPA's DBE Program, an entity must be properly certified as detailed in 40 CFR 33.201.

Fair Share Negotiations: It is required that all financial assistance recipients, unless exempt under 40 CFR 33.411, negotiate objectives/goals for MBE/WBE utilization pursuant to 40 CFR 33.401.

Estimated number of respondents: 2,132.

Frequency of response: Contract Administration: Once during bid or proposal. Certification: Once during initial DBE certification and every three years as needed for re-certification. Fair Share Negotiations: Once Every Five Years.

Total estimated burden: 2,973 hours (per year). Burden is defined at 5 CFR 1320.3(b).

Total estimated cost: $92,840 (per year), includes $0 annualized capital or operation & maintenance costs.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves this ICR, the Agency will announce that approval in the Federal Register and publish a technical amendment to 40 CFR part 9 to display the OMB control number for the approved information collection activities contained in this final rule.

This is rule being published as a direct final action. A public comment period prior to this publication was not required.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. This action will improve the practical utility of the EPA's DBE program and minimize the burden to small entities. We have therefore concluded that this action will relieve regulatory burden for all directly regulated small entities.

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The costs involved in this action are imposed only by conditions of federal assistance. UMRA excludes from the definition[s] of “federal intergovernmental mandate” duties that arise from conditions of federal assistance. Additionally, this action imposes no enforceable duty on any state, local or tribal governments or the private sector.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Because this rule conditions the use of federal assistance, it will not impose substantial direct compliance costs on State and local governments.

This action has tribal implications. However, it will neither impose substantial direct compliance costs on federally recognized tribal governments, nor preempt tribal law. The amendments generally reduce the burden and compliance costs associated with 40 CFR part 33.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

This rulemaking does not involve technical standards.

The EPA believes this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations. The EPA made this determination because this rule does not affect the level of protection provided to human health or the environment.

This action is subject to the CRA, and EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

For the reasons stated in the preamble, the Environmental Protection Agency is amending title 40, chapter I, of the Code of Federal Regulations as follows:

Public Participation Viewing Documents

To view comments submitted to previous rulemaking documents on this subject, go to http://www.regulations.gov and click on the “Read Comments” box in the upper right hand side of the screen. Then, in the “Keyword” box, insert “FMCSA-1997-2349” and click “Search.” Next, click “Open Docket Folder” in the “Actions” column. Finally, in the “Title” column, click on the document you would like to review. If you do not have access to the Internet, you may view the docket online by visiting the Docket Management Facility in Room W12-140 on the ground floor of the DOT West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., ET, Monday through Friday, except Federal holidays.

All comments received were posted without change to http://www.regulations.gov. In accordance with 5 U.S.C. 553(c), DOT previously solicited comments from the public to better inform its rulemaking process. DOT posted these comments, without edit, including any personal information the commenter provides, to www.regulations.gov, as described in the system of records notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.

The FMCSA is correcting the effective and compliance dates for its August 23, 2013, Unified Registration System (URS) final rule, as revised on October 21, 2015, in order to delay implementation of the URS provisions. While the FMCSA had hoped to be able to reach full implementation by September 30, 2016, unforeseen delays and complications in the IT development process require that we push the full implementation back until January 14, 2017. These delays include added complexities due to an unrelated system migration to the cloud and also due to the logistics of transferring millions of records.

In order to make this change, FMCSA must correct regulatory provisions that have not yet gone into effect, as well as several temporary sections that are in effect already. The method for making corrections differs depending upon whether or not the provision being corrected has gone into effect. First, under the heading “Federal Register corrections,” we provide the corrections for those provisions that are not yet in effect; these corrections will update the effective date for those provisions from September 30, 2016, to January 14, 2017. This will also update the compliance dates for certain provisions from December 31, 2016, to April 14, 2017.

We are also making minor corrections to fix errors found in the final rule published on October 21, 2015. In § 366.4, we are adding a sentence to clarify the requirements for motor carriers operating in Hawaii or Alaska, as these were inadvertently not covered in the original text. In § 385.305, we are correcting the reference to the online registration form MCSA-1, which was published without the “1” after the hyphen. In § 387.301, we are correcting the text in paragraph (a)(1) to clarify the financial responsibility requirements for school buses, including third parties providing school bus services. We have identified this as an area causing confusion, so a correction is needed.

After those corrections, numbered 1 through 6, we present the corrections to those provisions that came into effect on December 12, 2015. These corrections, which follow the “CFR amendments” heading, are presented as you would see amendatory instructions in any final rule. The result of these corrections will be to extend the effective dates of the temporary provisions in parts 365, 368, and 390 to January 14, 2017.

In FR Doc. 2015-26625 appearing on page 63695 in the Federal Register of Wednesday, October 21, 2015 (80 FR 63695), make the following corrections:

1. Beginning on page 63702, in the first column, in amendatory instruction #1 and continuing through all of the amendatory instructions except for #5, #24, and #59, the date “September 30, 2016” is corrected to read “January 14, 2017”.

2. On page 63706, in the first column, in § 366.2, the date “December 31, 2016” is corrected to read “April 14, 2017”.

3. On page 63706, in the first column, in § 366.4(a), the text is corrected to read “Every motor carrier, except a motor carrier operating exclusively in Alaska or Hawaii, must designate process agents for all 48 contiguous States and the District of Columbia, unless its operating authority registration is limited to fewer than 48 States and DC. When a motor carrier's operating authority registration is limited to fewer than 48 States and DC, it must designate process agents for each State in which it is authorized to operate and for each State traversed during such operations. Every motor carrier operating in the United States in the course of transportation between points in a foreign country shall file a designation for each State traversed. Every motor carrier maintaining a principal place of business and operating exclusively in Alaska or Hawaii must designate a process agent for the State where operations are conducted.”

4. On page 63707, in the second column, in § 385.305(b)(2), the phrase “Form MCSA-,” is corrected to read “Form MCSA-1,”.

5. On page 63709, in the first column, in § 387.19, the date “December 31, 2016” is corrected to read “April 14, 2017”.

6. On page 63709, in the third column, in § 387.301(a)(1), the text is corrected by adding the following sentence at the end of the paragraph: “Passenger motor carriers exempt under § 387.27 of this part are not subject to this limitation on transportation or required to file evidence of financial responsibility.”

In consideration of the foregoing, FMCSA is amending 49 CFR chapter III, subchapter B, parts 365, 368, and 390 are corrected by making the following correcting amendments: