[Federal Register Volume 77, Number 118 (Tuesday, June 19, 2012)]
[Proposed Rules]
[Pages 36409-36419]
[FR Doc No: 2012-14475]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

Federal Register / Vol. 77, No. 118 / Tuesday, June 19, 2012 /
Proposed Rules

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 772 and 774

[Docket No. 120403245-1034-01]
RIN 0694-AF66

``Specially Designed'' Definition

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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

SUMMARY: As part of the President's Export Control Reform (ECR)
Initiative, this proposed rule, and a separate proposed rule from the
Department of State, Directorate of Defense Trade Controls, being
published in conjunction with this document, sets forth, as much as
possible, a common definition of the term ``specially designed'' for
use in the Export Administration Regulations (EAR) and the
International Traffic in Arms Regulations (ITAR). The term ``specially
designed'' is used widely in the Commerce Control List (CCL) and would
play an important role in the ``600 series'' that the Bureau of
Industry and Security (BIS) has proposed to create to control less
sensitive defense articles transferred from the United States Munitions
List (USML) to the Commerce Control List (CCL). The revisions in this
rule are part of Commerce's retrospective plan under EO 13563 completed
in August 2011. Commerce's full plan can be accessed at: http://open.commerce.gov/news/2011/08/23/commerce-plan-retrospective-analysis-existing-rules.

DATES: Comments must be received by BIS no later than August 3, 2012.

ADDRESSES: Comments on this rule may be submitted to the Federal
rulemaking portal (www.regulations.gov). The regulations.gov ID for
this rule is: BIS-2012-0021. Comments may also be submitted via email
to<EMAIL_ADDRESS>or on paper to Regulatory Policy
Division, Bureau of Industry and Security, Room 2099B, U.S. Department
of Commerce, 14th St. and Pennsylvania Ave. NW., Washington, DC 20230.
Please refer to RIN 0694-AF66 in all comments and in the subject line
of email comments. All comments must be in writing. All comments
(including any personal identifiable information) will be available for
public inspection and copying. Those wishing to comment anonymously may
do so by submitting their comment via regulations.gov and leaving the
fields for identifying information blank.

FOR FURTHER INFORMATION CONTACT: Timothy Mooney, Regulatory Policy
Division, Bureau of Industry and Security, Department of Commerce,
Phone:<PHONE_NUMBER>, Fax:<PHONE_NUMBER>, Email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The revisions in this proposed rule are part
of Commerce's retrospective plan under EO 13563 completed in August
2011.
    Elsewhere in this issue of the Federal Register, BIS publishes an
advanced notice of proposed rulemaking, Feasibility of Enumerating
``Specially Designed'' Components, requesting comments on the
feasibility of positively identifying ``specially designed'' components
on the CCL. That proposal is a part of a longer term project the U.S.
Government intends to undertake with the multilateral export control
regimes.

Background

    On July 15, 2011, BIS proposed a single definition of the term
``specially designed'' as it would be used in the proposed ``600
series'' and the rest of the Commerce Control List (CCL) (the ``July 15
proposed rule'') (76 FR 41958). This action would revise that proposed
definition. Additionally, the State Department is concurrently
publishing a proposed rule to create, to the extent possible, a common
definition of ``specially designed'' in the International Traffic in
Arms Regulations (ITAR). After reviewing comments received in response
to both proposed rules, the Departments of Commerce and State plan to
publish final rules amending the Export Administration Regulations
(EAR) and ITAR so that they have, to the extent possible, common
definitions of the term. The revisions in this rule are part of
Commerce's retrospective plan under EO 13563 completed in August 2011.
Commerce's full plan can be accessed at: http://open.commerce.gov/news/2011/08/23/commerce-plan-retrospective-analysis-existing-rules.
    All references to the United States Munitions List (USML) in this
rule are to the list of defense articles that are controlled for
purposes of export pursuant to the ITAR, 22 CFR Parts 120 et seq., and
not to the list of defense articles on the United States Munitions
Import List (USMIL) controlled by the Bureau of Alcohol, Tobacco,
Firearms and Explosives (ATF) for purposes of import, under its
regulations at 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, but, for the sake
of clarity, the list of defense articles controlled by ATF for purposes
of import are on the USMIL. 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 controlled on the USMIL under the
AECA for purposes of import controls.
    A common definition of the term ``specially designed'' that is as
clear and objective as possible is vital to the Administration's ECR
Initiative. Many of the controls in the CCL use the term. Most of the
new ``600 series'' ECCNs that have been proposed to control items the
President determines no longer warrant control under the ITAR pursuant
to AECA section 38(f) use the term. Several of the USML categories the
State Department proposes to revise use the term as well.
    The State Department has decided to revise the USML to make it more
``positive.'' A ``positive'' list uses more objective parameters to
describe the items controlled. As described in the ANPR referenced in
the summary of this rule, BIS plans to continue the process of revising
the CCL so that it is more ``positive'' as well.
    BIS cannot, however, immediately remove all references to the term
in the CCL and replace them with lists of specific items that warrant
control because the lists of items controlled by the multilateral
export control regimes rely on the term extensively. Most of the CCL is
based on and implements these regime lists. Moreover, BIS has not
developed lists of which specific items would be ``specially
designed.'' Such an

effort would take many years to complete and would require BIS to
prepare and submit proposals to the regimes and then receive approval
of those proposals to change the relevant control text.
    In addition, the new ``600 series'' ECCNs that have been proposed
to control items that the President determines no longer warrant
control on the USML must use a catch-all ``specially designed'' term to
avoid inadvertently de-controlling items other than common, single
unassembled parts that are now ITAR-controlled as ``specifically
designed, modified or configured'' for a military application. As the
State Department has described in its previous ANPR and proposed rules,
much of the ITAR now relies upon catch-all controls. For example, the
control for military electronic components, parts, components,
accessories, and associated equipment is in USML Category XI(c), which
controls ``[c]omponents, parts, accessories, attachments, and
associated equipment specifically designed or modified for use with
equipment in paragraphs (a) and (b) of this category, except for such
items as are in normal commercial use.'' No other detail is provided.
USML (22 CFR Part 121) Category XI(a) similarly uses a broad catch-all
control phrase to control ``[e]lectronic equipment not included in
Category XII of the [USML] which is specifically designed, modified or
configured for military applications.'' The examples provided in the
rule are not an exhaustive list of controlled items. USML Category
VIII(h) similarly controls all ``[c]omponents, parts, accessories,
attachments and associated equipment (including ground support
equipment) specifically designed or modified for the articles in
paragraphs (a) through (d) of [Category VIII], excluding aircraft tires
and propellers used with reciprocating engines,'' other than the parts
and components that are standard equipment in civil aircraft as
described in the ``Note'' to USML Category VIII. Similarly, USML
Category XII(e) controls ``[c]omponents, parts, accessories,
attachments and associated equipment specifically designed or modified
for the [fire control, range finding, optical, night vision and other
articles enumerated in] paragraphs (a) through (d) of this category,
except for such items as are in normal commercial use.''
    The ``specially designed'' definition proposed here would capture
the items currently captured under the ITAR ``specifically designed,
modified or configured'' for a military application catch-all. BIS
understands that the issues associated with catch-all control text
would largely be transferred from one set of regulations to another.
However, the Administration believes that industry and government would
benefit from adopting this new definition because doing so would
confine the term's use to a single set of regulations for a large
volume of parts, components, and other items that do not warrant the
worldwide and collateral controls of the ITAR. Moreover, this action
would objectively define the catch-all term ``specially designed'' for
such items, consistently apply the ``normal commercial use'' carve-outs
described above, and also implement the statement of policy in ITAR
section 120.3, consistent with the AECA. Under that policy, the ITAR,
and by implication, the new ``600 series'' ECCNs, should not control
items that (a) have predominant civil applications and performance
equivalents to those used for civil applications and (b) do not have
significant military or intelligence applicability such that control
under the ITAR (or a new ``600 series'' ECCN) is warranted.
    This proposed definition would also provide the public with an as
objective as possible basis for determining whether any other item on
the CCL is ``specially designed,'' thus responding to a common industry
suggestion for improving the CCL. In addition, the proposed definition
responds to a common industry request to clarify that ``specially
designed'' does not mean merely ``capable of use in'' or ``capable of
use for'' another item. For example, non-application specific general
purpose integrated circuits that are not designed for a particular
application would not be ``specially designed'' items, even if they are
used in controlled end items. Rather, the extent of the controls on
such circuits would be described by the technical and other parameters
in Category 3 of the CCL.
    Although BIS does not propose to remove references to ``specially
designed'' that are part of multilateral control texts, it does have
the discretion to define the term so long as the definition is not
inconsistent with how the regimes define the term. The Missile
Technology Control Regime (MTCR) is the only one of the four
multilateral export control regimes to define the term. BIS believes
that the proposed definition is not inconsistent with the MTCR
definition, which is in EAR Sec.  772.1. BIS asks the public to comment
in particular on whether this proposed definition would result in
specific items that are not now controlled for Missile Technology (MT)
reasons on the CCL to become controlled for MT reasons. We also ask for
public comments on whether this definition would remove from control
items that are now controlled for MT reasons on the CCL as a result of
the application of the MTCR definition. Additionally, as in the July 15
proposed rule, BIS asks the public to test this proposed definition to
determine its ease of use, whether it meets the nine objectives
identified for the term, and how it corresponds to what the public
considers ``specially designed'' items.

Objectives for the ``Specially Designed'' Definition

    The July 15 proposed rule included nine objectives for the revised
``specially designed'' definition. These objectives have not changed.
The U.S. Government is committed to adopting a ``specially designed''
definition under the EAR and ITAR that would achieve these objectives.
The nine objectives are to:
    (i) Preclude multiple or overlapping controls of similar items
within and across the two control lists;
    (ii) Be easily understood and applied by exporters, prosecutors,
juries, and the U.S. Government--e.g., by using objective, knowable,
and clear requirements that do not rely upon a need to investigate and
divine the intentions of the original designer of a part or the
predominant market applications for such items;
    (iii) Be consistent with definitions used by the multilateral
export control regimes;
    (iv) Not include any item specifically enumerated on either the
USML or the CCL and, in order to avoid a definitional loop, do not use
``specially designed'' as a control criterion;
    (v) Be capable of excluding from control simple or multi-use parts
such as springs, bolts, and rivets, and other types of items the U.S.
Government determines do not warrant significant export controls;
    (vi) Apply to both descriptions of end items that are ``specially
designed'' to have particular characteristics and to parts and
components that were ``specially designed'' for particular end items;
    (vii) Apply to materials and software because they are ``specially
designed'' to have a particular characteristic or for a particular type
of end item;
    (viii) Not increase the current control level to ``600 series''
control or other higher end controls of items (i.e., not move items
currently subject to a lower control status to a higher level control
status), particularly current EAR99 items, which are now controlled at
lower levels; and

    (ix) Not, merely as a result of the definition, cause historically
EAR-controlled items to become ITAR controlled.
    BIS believes that this proposed definition, and its counterpart
published by the State Department, achieves these nine objectives.
However, we invite public comments and ideas for how to define the term
to meet or exceed all these objectives, and to provide additional
objectives for such a term.
    BIS received many responses to the proposed ``specially designed''
definition in the July 15 proposed rule. The comments, along with the
additional review of this issue the U.S. Government conducted in
conjunction with BIS's Technical Advisory Committees (TACs) and State's
Defense Trade Advisory Group (DTAG), identified additional changes
necessary to achieve the nine objectives for ``specially designed.''
This rule proposes a revised definition of ``specially designed'' to
allow this term to play the key role envisioned for it under the ECR
Initiative.
    Similar to the July 15 proposed definition, this proposed
definition adopts a ``catch and release'' approach. Paragraph (a) of
the definition contains broad bases for items to be ``specially
designed''--the ``catch''--and paragraph (b) contains various
exceptions to an item's being ``specially designed''--the ``release.''
BIS believes that this structure creates an objective and common
definition for both the EAR and ITAR, which nonetheless can be tailored
and refined over time as necessary. This definition also simultaneously
meets the nine objectives defined above while, with respect to the
``600 series'' items, also remains consistent with the policy standards
set out in ITAR section 120.3 and the carve-outs in various USML
categories that do not control items ``in normal commercial use.'' BIS
believes that this approach more readily lends itself to analysis in a
decision tree format, i.e., with a series of ``yes'' and ``no''
questions leading to a conclusion about whether an item is ``specially
designed.'' BIS further believes that this format will contribute to a
more orderly and efficient determination about whether an item is
``specially designed.'' This change would, then, eventually facilitate
enhanced public understanding of the definition of the term.

Summary of Public Comments on ``Specially Designed''

    Generally, public comments on the July 15 proposed rule supported
the overall ECR Initiative and the proposed rule. In particular,
commenters supported creating the ``600 series,'' which most commenters
characterized as a sensible approach to addressing a fairly complicated
problem. However, most commenters expressed concerns about the proposed
``specially designed'' definition, along with transition-related
concerns that are being addressed in a separate proposed rule to be
published in the Federal Register. For example, commenters felt that
the new definition was difficult to understand and would capture items
that should not be considered ``specially designed.'' The comments are
discussed in greater detail below in regards to the specific concerns
with the July 15 proposed rule. The comments can be reviewed at: http://efoia.bis.doc.gov/pubcomm/records-of-comments/record_of_comments_usml.pdf.
    BIS took into account the comments from the July 15 proposed rule
when developing the revised definition of ``specially designed''
proposed here. BIS intends this revised definition to be evaluated on
its own merits, and the public need not review the July 15 proposed
rule to understand this action. Once the public comments on this rule
are reviewed and responded to, BIS intends to publish a final
``specially designed'' definition.
    However, a general summary of the July 15 definition and the
responses to it provides context for this proposed definition. In the
July 15 proposed rule, BIS suggested defining ``specially designed'' in
four paragraphs. Paragraph (a) would have identified what items would
be ``specially designed'' except for ``parts'' and ``components.''
Paragraph (b) would have identified which ``parts'' and ``components''
would be ``specially designed.'' The paragraph (c) and (d) exclusion
paragraphs would have identified certain items that would not be
``specially designed.'' Most commenters supported paragraph (a) of the
proposed definition. The majority of commenters suggested also adopting
paragraph (a) for ``parts'' and ``components.'' Additionally, the
majority of comments received indicated the public could understand and
apply the paragraph (a) criteria, so BIS decided to include the same
type of criteria as part of the proposed paragraph (a)(1) criteria
included in this rule's proposed definition of ``specially designed.''
However, a small number of commenters indicated that the proposed
paragraph (a) could result in confusion over whether an item was
``specially designed,'' because the definition still relied on design
intent. This proposed ``specially designed'' definition addresses that
concern by adopting a single paragraph (a) for determining what items
are ``specially designed.'' Under the proposed structure, an item
meeting one of the three listed criteria would be considered
``specially designed.''
    Most of the concerns with the definition related to paragraphs (b),
(c), and (d), which defined non-specific ``parts'' or ``components''
could be considered ``specially designed.'' Of the commenters
criticizing these paragraphs, most believed the exclusions in
paragraphs (c) and (d) were difficult to understand and, once
understood, would have resulted in items that they had not historically
considered to be ``specially designed'' to become controlled as a
result of the definition. In particular, the definition would have
caused non-specific ``parts'' and ``components'' designed for
controlled and uncontrolled applications or no particular application
to become ``specially designed,'' and therefore subject to control.
Thus, the definition would have resulted in some items' control status
being undefined until the items first were used in a controlled, or
uncontrolled item. BIS believes the paragraphs (b)(4) and (b)(5)
proposed here address those concerns.

I. Proposed Adoption of a Revised ``Specially Designed'' Definition

A. Discussion of Each Element of the Proposed Definition and Its Notes

    The definition begins with introductory text to provide guidance on
the proper steps for analyzing the definiton. This brief introductory
text would assist the public in understanding that they must follow the
sequential analysis set forth below. Specifically, the public is to
begin with paragraph (a)(1) and proceed through each subsequent
paragraph. This introductory text would also specify that commodities
subject to the EAR described in any paragraph (b) subparagraph are not
``specially designed'' under this definition.
1. Paragraph (a) Identifies ``Specially Designed'' Items
    Paragraph (a) begins with the phrase ``Except for items described
in (b), an `item' is `specially designed' if, as a result of
`development,' it [is within the scope of any one of three
subparagraphs discussed below].'' It is the beginning of the ``catch''
in the ``catch and release'' structure of the definition. With respect
to ECCNs containing the term ``specially designed,'' an item is
``caught'' as ``specially designed'' if any of the three

elements of paragraph (a) apply and none of the elements of paragraph
(b) apply. The word ``items'' refers to how the term is defined in the
EAR, i.e., any ``commodity,'' ``software,'' or ``technology.''
    Paragraph (a) is limited by the phrase ``if, as a result of
`development.''' The EAR defines ``development'' as ``related to all
stages prior to serial production, such as: design, design research,
design analyses, design concepts, assembly and testing of prototypes,
pilot production schemes, design data, process of transforming design
data into a product, configuration design, integration design,
layouts.'' Determining whether an item is ``a result of development''
is a threshold question for whether an item is ``specially designed;''
an item is considered to be ``specially designed'' under this paragraph
only if someone engaged in any of these ``development'' activities with
respect to that item.
    Thus, there are three questions an exporter, reexporter or
transferor must ask to determine if an item is within the scope of
paragraph (a):
    1. Does the item, as a result of ``development,'' have properties
``peculiarly responsible for'' achieving or exceeding the performance
levels, characteristics, or functions described in the relevant ECCN or
USML paragraph?
    2. If the item is a part or component, is it, as a result of
``development,'' necessary for an enumerated or referenced commodity or
defense article to function as designed?
    3. If the item is an accessory or attachment, is it, as a result of
``development,'' used with an enumerated or referenced commodity or
defense article to enhance its usefulness or effectiveness?
    If the answer to all three questions is ``no,'' then the item is
not ``specially designed'' and no further analysis of paragraph (b) is
necessary. If the answer to any one of the questions is ``yes,'' then
the exporter, reexporter or transferor must determine whether any one
of the five paragraph (b) exclusions applies. If any one of the five
paragraph (b) exclusions apply, then the item is not ``specially
designed.'' If none do, then the item is ``specially designed.''
    Paragraph (a)(1). Paragraph (a)(1) would capture an item if, as a
result of ``development,'' it ``has properties peculiarly responsible
for achieving or exceeding the performance levels, characteristics, or
functions described in the relevant ECCN or U.S. Munitions List (USML)
paragraph.'' This criterion is essentially the same as the one that was
proposed in the July 15 rule. Based on the comments, the public found
this part of the definition clear. The positive response was, perhaps,
due to the fact that it is taken from the EAR's current definition of
``required'' at Sec.  772.1. Although that definition, by its terms,
applies only to technology and software, BIS believes that the
principle of that definition--which is that items are not controlled
merely because they are somehow capable of use with a controlled item--
equally applies to commodities for purposes of the proposed definition.
Therefore, even if something is capable of being used with a controlled
item, it is not captured by this part of paragraph (a) unless someone
did something during the item's development so that it would achieve or
exceed the performance levels, characteristics, or functions described
in a referenced ECCN or USML paragraph.

    Example for paragraph (a)(1): ECCN 1A007 controls equipment and
devices specially designed to initiate charges and devices
containing energetic materials, by electrical means. If a piece of
equipment or device, as a result of ``development,'' has properties
peculiarly responsible for initiating energetic materials by
electrical means, such equipment or device would be ``specially
designed'' under paragraph (a)(1) of the proposed definition. For
example, if the equipment was designed to communicate electronically
with devices containing energetic materials, such as sending a
detonation signal and having safety features to ensure other
electronic equipment could not detonate the device containing the
energetic material, such equipment or device would be ``specially
designed'' under this proposal.

    Note to paragraph (a)(1).  This rule would add a note to
paragraph (a)(1) to provide an example of an item that would, as a
result of ``development,'' meet the paragraph (a)(1) criterion. This
note would also include an example of an item that would not, as a
result of ``development,'' meeting the paragraph (a)(1) criterion.
In addition to providing two concrete examples under ECCN 2B007,
this note would also specify that similar to the definition of
``required'' the peculiarly responsible for criterion in paragraph
(a)(1) would not be limited to exclusive use.

    Paragraph (a)(2). Paragraph (a) would capture a part or component
if, as a result of ``development,'' it ``is necessary for an enumerated
or referenced commodity or defense article to function as designed.''
This element is similar to (a)(1), but it must be listed separately
because not all descriptions of commodities on the USML and the CCL
include performance levels, characteristics, or functions as a basis
for control. Paragraph (a)(2) would capture parts and components that
are necessary for another item on the CCL or the USML to function ``as
designed.'' If an item would function ``as designed'' without the part
or component at issue, then that part or component is not captured by
paragraph (a)(2).
    BIS has deliberately separated the terms `enumerated' and
`referenced' in paragraph (a)(2), which are unique to the EAR's
definition of the term. As described below, an `enumerated' item is one
that is controlled on the USML or the CCL (except for AT-only items)
for reasons other than being ``specially designed.'' The CCL, however,
contains notes that exclude from control parts and components
``specially designed'' for uncontrolled items. Such uncontrolled items
are merely `referenced' but not `enumerated.' Note 2 to ECCN 1A002
provides an example of items excluded from control based on being
``specially designed'' for a referenced item. Under Note 2 to 1A002, if
the semi-finished item was ``specially designed'' for a referenced
sporting goods item, such as a golf club designated as EAR99, such a
semi-finished item is excluded from 1A002.

    Example for paragraph (a)(2): ECCN 7A001.b controls angular or
rotational accelerometers specified to function at linear
acceleration levels exceeding 100 g and, according to the heading,
specially designed components therefor. The heading of 7A001 is an
example of a catch-all control for ``specially designed'' components
for the accelerometers subject to control in 7A001.b. In this case,
if a component, as a result of ``development,'' is necessary for an
accelerometer enumerated in 7A001.b to function as designed, such
component would be considered ``specially designed'' as a result of
paragraph (a)(2), unless the component was excluded from ``specially
designed'' on the basis of paragraph (b) of the proposed definition.

    Paragraph (a)(3). Paragraph (a)(3) would capture an accessory or
attachment if, as a result of ``development,'' it ``is used with an
enumerated or referenced commodity or defense article to enhance its
usefulness or effectiveness.'' BIS takes this phrase from the ITAR's
current and the EAR's proposed definition of ``accessory'' and
``attachment.''

    Example for paragraph (a)(3): ECCN 3B001 controls specific types
of equipment for manufacturing semiconductor devices or materials,
and specially designed components and accessories therefor. ECCN
3B001.i controls imprint lithography templates designed for
integrated circuits by 3A001. If, as a result of ``development,'' an
accessory is used with equipment enumerated in 3B001.i to enhance
its usefulness or effectiveness, such an accessory would be
``specially designed'' under the catch-all control for ``specially
designed'' accessory included in the heading of 3B001, unless the
accessory was excluded from ``specially designed'' on the basis of
paragraph (b) of the proposed definition.

2. Paragraph (b) Identifies Exclusions From ``Specially Designed''
    BIS proposes adopting a simplified, single paragraph structure for
excluding certain parts, components, accessories and attachments from
the ``specially designed'' definition. Under this proposal, any
``part,'' ``component,'' ``accessory,'' or ``attachment'' described in
an exclusion paragraph under (b)(1), (b)(2), (b)(3), (b)(4) or (b)(5),
would not be controlled by a `catch-all' provision of an ECCN.
    The five exclusions under paragraph (b) would refine the set of
``parts,'' ``components,'' ``accessories'' and ``attachments'' that
would be subject to the `catch-all' controls on the CCL. In this way,
paragraph (a) and (b) are inextricably linked and together identify the
``parts,'' ``components,'' ``accessories,'' and ``attachments'' that
are ``specially designed'' for purposes of the `catch-all' controls on
the CCL.
    Paragraph (a), described above, would create objective tests for
what ``items,'' as a result of ``development,'' would be ``specially
designed'' based on the criteria identified in (a)(1), (a)(2) or
(a)(3). Paragraph (b) would create objective tests for what ``parts,''
``components,'' ``accessories,'' and ``attachments'' are excluded from
``specially designed'' under the exclusion criteria identified in
(b)(1), (b)(2), (b)(3), (b)(4) or (b)(5). Together, the objective
criteria identified in paragraph (a) and the objective exclusion
criteria identified in paragraph (b) allow the proposed ``specially
designed'' definition to achieve the nine objectives identified above
for the definition.
    Paragraph (b) codifies the principle in ITAR section 120.3 that, in
general, a commodity should not be ITAR controlled if it has a
predominant civil application or has performance equivalent (defined by
form, fit, and function) to articles used for civil applications. If
such an article nonetheless warrants control under the ITAR because it
provides the U.S. with a critical military or intelligence advantage or
for another reason, then it is or should be enumerated on the USML, as
described in the ``bright line,'' ``positive list'' objectives listed
in the Department of State's December 10, 2010 Federal Register notice,
Revisions to the United States Munitions List (75 FR 76935).
    Another purpose of paragraph (b) is to apply the ITAR concept of
``in normal commercial use'' equally and consistently to all non-
specific, catch-all controls with respect to the ``600 series.'' Under
the current USML, this concept of exclusions for certain items ``in
normal commercial use'' is variously worded in multiple catch-all
paragraphs in the current USML. For example, Category XI(c), by its
terms, does not control electronic components, parts, accessories,
attachments or associated equipment specifically designed or modified
for military electronics if they are ``in normal commercial use.''
Similarly, Category XII(e) does not control components, parts,
accessories, attachments or associated equipment specifically designed
or modified for fire control systems, military lasers, ITAR-controlled
night vision equipment, military inertial navigation equipment, and
other items controlled by Category XII(a) through (d) that are ``in
normal commercial use.'' Categories XVI(b) and XIV(n)(2) have similar
carve-outs for items in normal commercial use. In addition, Category
VIII(h), by virtue of a note, does not control parts, components,
accessories, or attachments specifically designed or modified for
military aircraft or engines if they are, among other things, standard
equipment in certain civil aircraft.
    These five exclusions under paragraph (b) play an important role in
the proposed ``specially designed'' definition and are described below
in greater detail. The description below includes examples of parts,
components, accessories and attachments that would be excluded from
``specially designed'' under each of the respective paragraph (b)
exclusions.
    Exclusion paragraph (b)(1). Paragraph (b)(1) would exclude any
``part,'' ``component,'' ``accessory,'' or ``attachment'' from a
`catch-all' provision of an ECCN if the ``part,'' ``component,''
``accessory'' or ``attachment'' is enumerated in a USML paragraph. This
exclusion also addresses an important concept regarding how the USML
and CCL relate to each other, and the correct order in which the public
should review the two control lists. When determining an item's proper
jurisdiction and classification, before reviewing the CCL, a person
must examine the ITAR to determine that the item is not subject to the
ITAR, or to the exclusive jurisdiction of any of the other departments
or agencies of the U.S. Government identified in Sec.  734.3(b)(1)(i)
of the EAR.
    Paragraph (b)(1) would clarify that any ``part,'' ``component,''
``accessory,'' or ``attachment'' enumerated on the USML, is excluded
from the definition of ``specially designed,'' because it would remain
subject to the ITAR and would not be controlled under a catch-all
provision of an ECCN. Under the current USML, most of its categories
end with a broad catch-all control on ``parts,'' ``components,''
``accessories,'' and ``attachments'' that were specifically designed or
modified for the particular USML category. Under the USML categories
being proposed under the USML-to-CCL process, in most cases these broad
catch-all controls would no longer be used. Instead, these items would
be enumerated on the revised USML's ``positive'' control list. This
change will make the paragraph (b)(1) exclusion more useful by more
clearly defining the line between control under the USML and CCL. The
items in former `catch-all' controls found at the end of most of the
USML categories would be added to the CCL under the ``600 series'' .x
paragraphs that are being created under the USML-to-CCL process and
would include ``specially designed'' criteria.

    Example of a ``component'' excluded under paragraph (b)(1): On
December 6, 2011, the Department of State proposed a rule, Amendment
to the International Traffic in Arms Regulations: Revision of U.S.
Munitions List Category VII (76 FR 76100) that, among other things,
would control ground vehicle components, parts, accessories,
attachments, and associated equipment identified in paragraphs
(g)(1)-(14) of the rule. Under proposed paragraph (g)(5), reactive
armor parts and components would be controlled under USML Category
VII. If a company uses reactive armor components enumerated on the
USML in producing the EAR item, such a component would not be
captured under a `catch-all' control on the CCL, because the
reactive armor components would be enumerated on the USML and would
therefore be subject to the ITAR, not the EAR. Paragraph (b)(1) of
this proposed rule would make this existing policy explicit by
excluding such USML enumerated ``parts,'' ``components,''
``accessories,'' or ``attachments'' from the definition of
``specially designed.''

    Exclusion paragraph (b)(2). Paragraph (b)(2) would exclude any
single unassembled ``part'' that is of a type commonly used in multiple
types of commodities not enumerated on the USML or the CCL. The
paragraph (b)(2) exclusion would include an illustrative list of the
types of ``parts'' excluded under this paragraph. These ``parts''
include threaded fasteners (e.g., screws, bolts, nuts, nut plates,
studs, inserts), other fasteners (e.g., clips, rivets, pins), basic
hardware (e.g., washers, spacers, insulators, grommets, bushings,
springs), wire, and solder.
    In preparing this proposed rule, BIS evaluated the merits of
expanding the scope of this exclusion to cover minor components, but
ultimately determined that the expansion would not be

warranted, particularly in light of the other exclusions and the
proposed criterion in paragraph (a)(2). However, BIS determined it
should clarify the illustrative list of single unassembled ``parts''
that would be excluded from the definition of ``specially designed'' on
the basis of the exclusion paragraph (b)(2).
    Paragraph (b)(2) would adopt the phrase ``used in multiple types of
commodities not enumerated on the CCL or the USML'' instead of the
phrase ``used in multiple types of civil items.'' BIS believes the
former phrase is more specific than the latter, and would clarify this
exclusion. BIS also proposes to change the illustrative list of single
unassembled ``parts'' that may be excluded from ``specially designed''
on the basis of paragraph (b)(2). BIS further proposes using the term
``basic hardware'' instead of the term ``common hardware,'' and to
include the term ``springs'' in the parenthetical examples of basic
hardware. Finally, BIS proposes to add the term ``solder'' as another
type of ``part'' that would be within the scope of this exclusion
paragraph (b)(2).

    Example of a ``part'' excluded under paragraph (b)(2): ECCN
8A992 controls vessels, marine systems or equipment, not controlled
by 8A001, 8A002 or 8A018, and specially designed parts therefor. A
company developing a new vessel that would be controlled under 8A992
needs to modify nut plates for use in it. The modified nut plate is
an example of a single unassembled ``part'' that meets the necessary
criteria in paragraph (a)(2). However, if the modified nut plate is
of a type commonly used in multiple types of commodities not
enumerated on the USML or the CCL, it would not be ``specially
designed'' on the basis of paragraph (b)(2). Although, as a result
of ``development'' the ``part'' may have some unique characteristic,
such as being a cut-to-length nut plate, substantively the ``part''
is common to multiple types of commodities not enumerated on the
USML or the CCL. For example, a similar type of nut plate may also
be used for assembling self-assembled furniture designated as EAR99.

    Exclusion paragraph (b)(3). Under paragraph (b)(3), a ``part,''
``component,'' ``accessory,'' or ``attachment'' that would otherwise be
controlled by a `catch-all' provision of an ECCN would not be
controlled if it has the same performance capabilities as a ``part,''
``component,'' ``accessory,'' or ``attachment'' used in or with a
commodity that (i) is or was in ``production'' (i.e., not in
``development'') and (ii) is either not enumerated on the CCL or USML,
or is enumerated in an ECCN controlled only for Anti-Terrorism (AT)
reasons. In the context of paragraph (b)(3), an item in an ECCN
controlled only for AT reasons is considered enumerated provided it is
not controlled in a `catch-all' paragraph.
    Proposed paragraph (b)(3) would use the phrase ``performance
capabilities'' instead of the term ``function,'' which was in the July
15 proposal. Several comments to the July 15 proposed rule suggested
using this alternative term because performance capabilities is a well
understood concept under the EAR, and is easier to understand than
function. BIS agrees.
    In addition, paragraph (b)(3)(i) would simplify the exclusion by
removing the term ``serial production,'' and substituting the EAR-
defined term ``production,'' along with a parenthetical explanation
that if an item is in ``production'' it is no longer in
``development.'' Some of the comments in response to the July 15
proposed rule did not see a sufficient distinction between serial
production and ``production'' to warrant adding a new EAR definition
and creating another concept the public would need to understand to
apply the ``specially designed'' definition. After further
consideration, BIS agrees that this suggested change would clarify the
intent of exclusion paragraph (b)(3) and further simplify the
definition.
    Paragraph (b)(3)(ii) would expand the scope of what was included in
the July 15 proposed rule with the second criterion extending to ECCNs
controlled only for Anti-Terrorism (AT) reasons. The July 15 exclusion
was limited to EAR99 items. BIS made this change because such a
``part,'' ``component,'' accessory'' or ``attachment'' crosses over
into broader commercial applicability and thus does not warrant being
treated as ``specially designed.'' This crossing over into broader
commercial applicability occurs when a ``part,'' ``component,''
``accessory,'' or ``attachment'' has the same form, fit and performance
capabilities as a ``part,'' ``component,'' ``accessory,'' or
``attachment'' used in or with an item that is either not enumerated on
the CCL or USML or is only controlled for AT reasons. If such an item
nonetheless warranted control because of certain capabilities or
potential uses of concern for national security, foreign policy, or
other reasons, then the item would be enumerated on either the USML or
the CCL.

    Note to paragraph (b)(3). This proposed rule would add a note to
clarify the applicability of paragraph (b)(3). This note would
specify that commodities in ``production'' that are subsequently
subject to ``development'' activities, such as those pertaining to
quality improvements, cost reductions, or feature enhancements,
remain in ``production.'' However, any new models or versions of
such commodities developed from such efforts that change the basic
performance or capability of the commodity are in ``development''
until and unless they enter into ``production.'' This proposed rule
would use the term ``production'' instead of ``serial production''
to conform to the use of ``production'' in paragraph (b)(3).

    This Note to paragraph (b)(3) further clarifies the relationship
between ``production'' and ``development'' in the context of this
exclusion. When an item enters ``production,'' there may still be some
peripheral ``development'' activities for the next generation of the
item in which the ``part,'' ``component,'' ``accessory,'' or
``attachment'' is used. This note would provide guidance on when the
exclusion would no longer apply and when a separate determination would
need to be made regarding whether a particular ``part,'' ``component,''
``accessory,'' or ``attachment'' would no longer be excluded.

    Example of excluded component under paragraph (b)(3): A company
manufactures a fire truck designated as EAR99. The manufacturer uses
a radiator originally designed in the 1980s for use in large
military transport vehicles. The cost of the original 1980s radiator
has now dropped significantly, so the company incorporates that same
radiator into a fire truck that went into ``production'' in 2010.
Under this example, although the radiator is not a ``specially
designed'' ``component'' because it is necessary for large military
transport vehicles to function as designed, it might nonetheless be
caught by the criteria in paragraph (a)(2). However, because the
``component'' with the same form, fit and performance capabilities
is used in the ``production'' of an EAR99 fire truck, it would be
excluded from the ``specially designed'' definition by paragraph
(b)(3). If, for some reason, such radiators warranted control for
national security, foreign policy, or other reasons, then it would
be enumerated on either the USML or the CCL. It would thus be
controlled regardless of its use in a civil or military end item.

    Exclusion paragraph (b)(4) and (b)(5). This proposed rule would add
paragraphs (b)(4) and (b)(5) to address aspects of unintended
overreaching identified in the definition of ``specially designed'' in
the July 15 proposed rule. The comments identified one unintended
result of eliminating design intent from the criteria used to identify
a ``specially designed'' ``component'' or ``part'' is that the first
use of a part or component could result in a part or component being
considered ``specially designed'' under the rule. This result could
occur even if the ``part'' or ``component'' had been originally
developed for a general purpose that was not specific to the
`enumerated' item for which the ``part'' or

``component'' would have been ``specially designed'' under the July 15
definition.
    To address this unintended overreach, BIS decided that some element
of design intent should be included in the proposed ``specially
designed'' definition. Through paragraph (b)(4), this rule proposes
excluding ``parts,'' ``components,'' ``accessories'' and
``attachments'' if they were or are being developed with a reasonable
expectation of (i) use in or with commodities described on the CCL and
commodities not enumerated on the CCL or the USML, or (ii) use in or
with commodities not enumerated on the CCL or the USML. As discussed
below, through paragraph (b)(5), this rule proposes excluding
``parts,'' ``components,'' ``accessories,'' and ``attachments'' if they
were or are being developed for no particular application.
    Although these exclusion concepts under paragraphs (b)(4) and
(b)(5) are new to the proposed definition of ``specially designed,''
they are little more than a restatement of BIS's application of the
term ``specially designed'' now. BIS had not included these two
exclusions in the July 15 proposed rule in an effort to avoid overtly
design-intent based aspects of the definition. The public comments,
however, as noted above made it clear that without such carve-outs
proposed in this rule under (b)(4) and (b)(5), the EAR would likely
over-control items based on their first uses. Thus, the proposed
paragraphs (b)(4) and (b)(5) are intended to allow people who know or
who can determine the design intent of their ``part,'' ``component,''
``accessory,'' or ``attachment'' to exclude it from the definition of
``specially designed'' when it was or is being developed for the items
identified in (b)(4)(i), or (ii), or (b)(5). These exclusion paragraphs
(b)(4) and (b)(5) would not create a burden to know the original design
intent, but they would allow those who know the original design intent
to exclude those ``parts,'' ``components,'' ``accessories,'' or
``attachments'' from being controlled as ``specially designed.'' This
change is not a departure from the current BIS position on the subject.
It is, however, a specific, precise written articulation of the
practice that would become part of the EAR.

    Example of a ``component'' excluded under paragraph (b)(4)(i):
An example of a component that would not be ``specially designed''
and excluded under (b)(4)(i) is one that was or is being developed
to be interchangeable between a military vehicle enumerated in ECCN
0A606.a and also a vehicle that is not described on the USML or the
CCL, such as an EAR99 civilian vehicle. One example would be a
component that a company designs that is used in both military
vehicles as well as in firetrucks. Another example of a component
that would not be ``specially designed'' as a result of (b)(4)(i) is
one that was or is being developed to be interchangeable between a
military aircraft enumerated in ECCN 9A610.a and also a civilian
aircraft that is controlled for AT-only reasons in ECCN 9A991.b,
such as an aircraft actuator developed for use in military aircraft
in ECCN 9A610.a and civil transport aircraft in 9A991.b.

    Even though a component may be used interchangeably and meet the
paragraph (b)(4) exclusion and thus not be ``specially designed,'' it
does not necessarily mean that the component is exempt from export
controls. The component may, for example, be positively identified on
the USML and ITAR controlled, regardless of whether it is common to a
vehicle or aircraft not enumerated on the CCL. The jurisdictional and
classification status of any particular component must be determined by
reviewing the full scope of the control lists to determine the
appropriate jurisdiction and classification. Paragraph (b)(4)(i) merely
states that such a component would not be within the scope of a `catch-
all' paragraph of an ECCN (i.e., would not be ``specially designed)''
based on its commonality with components not identified on the CCL or
controlled for AT-only reasons.

    Example of a ``part'' excluded under paragraph (b)(4)(ii): An
example of a ``part'' that would not be ``specially designed'' as a
result of (b)(4)(ii) is one that was or is being developed for use
in or with commodities not enumerated on the CCL or the USML, such
as a ``part'' being developed for use in a mining truck designated
as EAR99. Again, the application of (b)(4)(ii) does not necessarily
mean that such a part is uncontrolled. As a result of its
characteristics or capabilities it may be positively listed on the
USML or CCL and, as such, controlled by the applicable provisions.
The jurisdictional and classification status of any particular
component must be determined by reviewing the full scope of the
control lists to determine the appropriate jurisdiction and
classification. Paragraph (b)(4)(ii) merely states that such a part
would not be within the scope of a `catch-all' paragraph of an ECCN
(i.e., would not be ``specially designed)'' based on its development
for use in or with commodities not enumerated on the CCL or the
USML.

    Exclusion paragraph (b)(5). As noted above, this rule would also
add a paragraph (b)(5) to address another aspect of the unintended
overreach identified in the definition of ``specially designed'' in the
July 15 proposed rule. This paragraph (b)(5) exclusion is intended to
address potential overreach that could occur even if the ``part'' or
``component'' had been originally developed for a general purpose that
was not specific to the `enumerated' item for which the ``part'' or
``component'' would have been ``specially designed'' under the July 15
definition. BIS would address this by excluding from ``specially
designed'' on the basis of paragraph (b)(5) ``parts,'' ``components,''
``accessories'' and ``attachments'' if they were or are being developed
with no reasonable expectation of use for a particular application.

    Example of a ``component'' excluded under paragraph (b)(5): An
example of a component that would not be ``specially designed'' as a
result of (b)(5) is one that was developed for general or multi-
purpose applications. For example, many catalog electronic
components are designed as basic building blocks for other
equipment, regardless of whether the equipment is military or
civilian, controlled or uncontrolled. Again, application of (b)(5)
does not necessarily mean that such a component is uncontrolled, and
as result of its characteristics or capabilities it may be
positively listed on the USML or CCL and, as such, controlled by the
applicable provisions. The jurisdictional and classification status
of any particular component must be determined by reviewing the full
scope of the control lists to determine the appropriate jurisdiction
and classification. Paragraph (b)(5) merely states that such a
component would not be within the scope of a `catch-all' paragraph
of an ECCN (i.e., would not be ``specially designed)'' based on its
not having been designed for a particular application.

    Note to paragraph (b)(4) and (b)(5): This proposed rule would
also add a note to paragraph (b)(4) and (b)(5) to specify for a
commodity not to be ``specially designed'' on the basis of paragraph
(b)(4) or (b)(5), documents contemporaneous with its
``development,'' in their totality, must establish the elements of
paragraph (b)(4) or (b)(5). The proposed note would also provide an
illustrative list of documents that may be pointed to to demonstrate
the applicability of the exclusions under (b)(4) or (b)(5). Such
documents may include concept design information, marketing plans,
declarations in patent applications, or contracts. Lastly, the note
would specify that absent such documents, the ``commodity'' may not
be determined to be excluded from the definition of ``specially
design'' by virtue of paragraphs (b)(4) or (b)(5).

    Proposed paragraphs (b)(4) and (b)(5) would create an incentive for
parties responsible for making jurisdictional and classification
determinations to maintain such documents for the life of the product
in order to be able to demonstrate without ambiguity that it was or was
not ``specially designed'' for a controlled item or application. The

creation of such incentives would help national security by emphasizing
the need for those responsible for making jurisdictional and
classification self-determinations to do so in a reliable, consistent,
documented way that is consistent with the relevant export control
regulations. The creation of such incentives would also help make U.S.
exporters more reliable and predictable because they would be able to
make and demonstrate with more certainty determinations regarding
whether a commodity is or is not controlled by virtue of a ``specially
designed'' catch-all in the regulations.

    Note to paragraph (b)(5): This rule would also add another note
to paragraph (b)(5) to specify that if one has ``knowledge'' that
the commodity was or is being developed for a particular
application, one cannot rely on paragraph (b)(5) to determine that a
commodity was not ``specially designed.'' BIS would use the EAR
defined term ``knowledge'' in this note to paragraph (b)(5) to
establish a clear standard for when the commodity would not be
eligible for being excluded from ``specially designed'' on the basis
of paragraph (b)(5).

    Note 1: This proposed rule would also add a new Note 1 to define
`enumerated' for purposes of the proposed ``specially designed''
definition. This note would read: `Enumerated' means any item (i) on
either the USML or CCL not controlled in a `catch-all' paragraph and
(ii) when on the CCL, controlled for more than AT-only reasons,
except in the context of paragraph (b)(3), where an item in an ECCN
controlled only for AT reasons is considered enumerated when it is
not controlled in a `catch-all' paragraph.

    Examples of enumerated items: The law enforcement end items
controlled in the heading of ECCN 0A978 are examples of enumerated
commodities on the CCL. ECCN 0A978 specifies that it controls law
enforcement striking weapons and includes six examples for the types
of law enforcement striking weapons that are subject to control
under 0A978. The fiber optic hull penetrators and connectors
controlled in ECCN 8A002.c are additional examples of enumerated
commodities on the CCL. The ECCN specifies the hull penetrators
controlled are limited to fiber optic hull penetrators or
connectors.

    Note 2: This proposed rule would also add a Note 2 to define
`catch-all' for purposes of the proposed ``specially designed''
definition. This note would read as follows: A `catch-all' paragraph
is one that does not refer to specific types of parts, components,
accessories, or attachments but rather controls non-specific
``parts,'' ``components,'' ``accessories,'' or ``attachments''
because they were ``specially designed'' for an enumerated item. BIS
is aware that the term `catch-all' has also been used informally by
the public to refer to the part 744 end-use and end-user controls
that impose a license requirement on all items subject to the EAR.
In preparing this proposed rule, BIS considered adding a new part
772 definition to clarify the two different contexts under which the
term `catch-all' would be used, but decided simply noting this in
the preamble of this proposed rule would be sufficient.

    Examples of catch-all controls: The phrase ``and specially
designed components therefor'' in the heading of ECCN 1A005 is an
example of a catch-all control on the CCL; it reaches all components
that have been ``specially designed'' for the body armor enumerated
in 1A005. The phrase ``and specially designed components therefor''
used in ECCN 3A001.c is another example of a catch-all control on
the CCL. That catch-all control reaches all components that have
been ``specially designed'' for the acoustic wave devices enumerated
in 3A001.c.
3. Guidance for ``Specially Designed'' in the Context of De-Control
Notes
    Some ECCNs, such as 1A002, state that an item is not controlled if
it is ``specially designed'' for a particular type of item, purpose, or
application. As indicated by the introduction to paragraph (b)
explained above, an item that would be ``specially designed'' under
paragraph (a) and would not be controlled as a result of such a de-
control provision in an ECCN nonetheless remains ``specially designed''
and, thus, uncontrolled regardless of whether any aspect of paragraph
(b) would apply to it. The basis for this conclusion is that paragraph
(b) states that it only applies to items that ``would be controlled by
a catch-all provision of an ECCN.''

II. Other Definition To Assist Public's Review of the ``Specially
Designed'' definition

    This rule proposes to revise the definition of ``end item''
included in the July 15 proposed rule by proposing a definition that
would more closely correspond with the ITAR definition of end item,
although be EAR specific. BIS made this change because several
commenters indicated that the July 15 definition, with the inclusion of
the term `stand-alone,' would cause confusion over whether an item was
an ``end item'' or a ``component.'' BIS determined the best and
simplest approach would be to revise the definition to more closely
correspond to the ``end item'' definition used in the ITAR. This rule
proposes defining ``end item'' as follows:
    End item. This is an assembled commodity ready for its intended
use. Only ammunition, fuel or other energy source is required to place
it in an operating state. Examples of end items include ships,
aircraft, firearms, and milling machines.
    This rule also proposes splitting the proposed definition of
``accessories and attachments'' included in the July 15 proposed rule
into separate but identical definitions for the terms ``accessories''
and ``attachments.'' As there will be locations in the EAR where either
``accessories'' or ``attachments'' but not both will be used, this
change would avoid any potential confusion as to whether the definition
applies to the terms when used separately. While ``accessories'' and
``attachments'' would have the same definitions, both would include a
note at the end of each definition to indicate that the definition of
``accessories'' and ``attachments'' are the same. This rule proposes
defining ``accessories'' and ``attachments'' as follows:
    Accessories. These are associated items for any ``component,''
``end item,'' or ``system,'' and which are not necessary for their
operation, but which enhance their usefulness or effectiveness. For
example, for a riding lawnmower, accessories and attachments will
include the bag to capture the cut grass, and a canopy to protect the
operator from the sun and rain. For purposes of this definition,
accessories and attachments are the same.
    Attachments. These are associated items for any ``component,''
``end item,'' or ``system,'' and which are not necessary for their
operation, but which enhance their usefulness or effectiveness. For
example, for a riding lawnmower, accessories and attachments will
include the bag to capture the cut grass, and a canopy to protect the
operator from the sun and rain. For purposes of this definition,
attachments and accessories are the same.
    As with the proposed ``specially designed'' definition, BIS
requests comments on the proposed definitions of ``end item,''
``accessories,'' and ``attachments.'' Any comments received on these
three proposed definitions will be considered and addressed in the
final rule adding these three definitions to the EAR.
    BIS does not propose here to re-define the terms ``part,'' and
``component,'' that were included in the July 15 proposed rule.
    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 extended by the Notice of August 12,
2011, 76 FR 50661 (August 16, 2011), has continued the Export
Administration Regulations in effect under the International Emergency
Economic Powers Act. 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.

Rulemaking Requirements

    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,'' but 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).
    2. Notwithstanding any other provision of law, no person is
required to respond to, nor is 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 proposed rule would affect two approved
collections: Simplified Network Application Processing + System
(control number 0694-0088), which includes, among other things, license
applications, and License Exceptions and Exclusions (0694-0137). Total
burden hours associated with the PRA and OMB control numbers 0694-0088
and 0694-0137 are not expected to increase as a result of this rule. As
part of the President's Export Control Reform (ECR) Initiative, this
proposed rule, and a separate proposed rule from the Department of
State, Directorate of Defense Trade Controls being published in
conjunction with this rule, sets forth, as much as possible, a common
definition of ``specially designed'' for use in the EAR and the ITAR.
This proposed rule would not move any items from the USML to the CCL,
although the revised definition included here would play an important
role in the ``600 series'' that would be used to control items
transitioned from the USML to the CCL.
    As stated in the July 15 proposed rule (76 FR 41958), BIS believed
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 submitted by approximately 16,000
annually. 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 whether those items would be
eligible for export under license exception. As of June 19, 2012, BIS
believes the increase in license applications may be 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.
    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 a regulatory
flexibility analysis of 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 statute does not
require the agency to prepare a regulatory flexibility analysis.
Pursuant to section 605(b), the Chief Counsel for Regulations,
Department of Commerce, submitted a memorandum to the Chief Counsel for
Advocacy, Small Business Administration, certifying that proposed rule
published on July 15, 2011, will not have a significant impact on a
substantial number of small entities.
    This proposed rule re-proposes, with certain changes, the
definitions of ``specially designed,'' of ``end item,'' and of
``accessories and attachments'' that BIS originally proposed in the
July 15 proposed rule. The changes proposed here do not impact the
original certification. Consequently, BIS has not prepared a regulatory
flexibility analysis. A summary of the factual basis for the
certification is provided below.

Number of Small Entities

    The Bureau of Industry and Security (BIS) does not collect data on
the size of entities that apply for and are issued export licenses.
Although BIS is unable to estimate the exact number of small entities
that would be affected by this rule, it acknowledges that this rule
would affect some unknown number.

Economic Impact

    This rule will not have a significant impact on a small number of
entities, and in fact will reduce the burden on small entities by
facilitating enhanced public understanding of a key term used
extensively on the Commerce Control List (CCL). This rule proposes a
single definition for the term ``special designed'' and slightly
revised definitions for the terms ``end item,'' ``accessories,'' and
``attachments'' BIS proposed in the July 15 proposed rule.
    The proposed definition of ``specially designed'' would provide
clear guidance to small entities, and all other entities, on the
meaning of this term wherever it is used on the CCL. The term
``specially designed'' is used extensively throughout the CCL, but up
to this point the only definition included in the EAR has been under
the Missile Technology Control Regime (MTCR) context. Outside of the
MTCR context, the First Circuit's ruling in United States v. Lachman,
387 F.3d 42, 52-53 (2004) provides a definition of the term ``specially
designed,'' but for small entities, and all other entities, this
requires reviewing the Lachman decision to understand the court-
provided definition outside the MTCR context.
    BIS is aware that some small entities, and other entities, instead
of relying on the Lachman definition for the term ``specially
designed'' outside the MTCR context have simply decided to submit
classification requests to BIS for ECCNs where the term ``specially
designed'' is used. Others have made subjective determinations of which
types of items are ``special'' to or for a controlled end item. The CCL
is intended to allow exporters to self-classify their items. If the
status quo, where the term is not defined in the regulations, creates
an incentive for the public to submit additional classification
requests or make self-determinations that expose exporters to
compliance risks, then the rule places a burden on all entities, large
and small. All entities should be able to confidently self-classify
their items on the CCL. BIS believes it should take steps to alleviate
any concerns the public may have with self-classifying their items,
including providing definitions for key terms used on the CCL, which is
being done in this proposed rule and not making small entities and
other entities to consult outside legal decisions in order to determine
the meaning of a key term used under the EAR.
    This proposed rule would reduce burdens on small entities and all
other entities by proposing a single definition

of the term ``specially designed'' to part 772 that would apply
wherever the term is used. In the past, small entities, and other
entities, have urged BIS to add a single definition of the term
``specially designed'' to the EAR. This proposed definition is
consistent with the scope of the other two definitions of the term
``specially designed'' that are currently in use. Specifically, this
rule's proposed definition is consistent with the ``specially
designed'' MTCR definition defined at Sec.  772.1 of the EAR, and with
the Lachman decision. BIS believes this rule's proposed ``specially
designed'' definition comes closest to encompassing the scope and
intent of both the Lachman and the MTCR definitions, while also
allowing this term to play the key role envisioned for it under the
larger Export Control Reform (ECR) Initiative. This proposed rule
identifies nine objectives for the term ``specially designed'' and
encourages the public to submit comments on whether they agree with BIS
that this proposed definition best achieves the nine objectives and
whether the public may have any alternative that would better achieve
the nine stated objectives.
    The ECR Initiative is making fundamental changes to the U.S. export
control system. These fundamental changes will protect and enhance U.S.
national security interests, while at the same time also easing the
burdens on small entities and all other entities. One of the key
objectives of the ECR Initiative is to draw a bright-line between the
USML and the CCL, including transitioning items that no longer warrant
ITAR control to the CCL.
    A bright-line between the two control lists will be a key benefit
to small entities and all other entities. When small entities, and
other entities, have difficulty in determining the jurisdiction and/or
classification of their item, it creates a burden on such entities. The
proposed definition of ``specially designed'' included in this rule is
a key term being used to develop the bright-line between the USML and
the CCL. Using this proposed ``specially designed'' definition in the
``600 series'' .x and .y paragraphs is a key structural element that
will create a more ``positive'' USML and ensure that munitions items
transitioned from the USML to the CCL are appropriately controlled in
the applicable ``600 series'' ECCNs.
    This rule is based on a simple catch-and-release concept. The
proposed definition would allow for small entities, and all other
entities, to use a simple set of ``yes/no'' questions to make
determinations whether an item is or is not ``specially designed.'' The
``release'' portion of the proposed definition will also allow for
items that no longer warrant being considered ``specially designed'' to
be removed from ``specially designed'' once they have crossed over into
broader commercial applicability. The five proposed paragraph (b)
exclusions included in the proposed rule would allow the public to
objectively know when an item would no longer be ``specially
designed.''

Conclusion

    BIS is unable to determine the precise number of small entities
that would be affected by this rule. Based on the facts and conclusions
set forth above, BIS believes that any burdens imposed by this rule
would be offset by the benefits that will occur with the fundamental
changes being made to the U.S. export control system under the Export
Control Reform Initiative and the USML-to-CCL process, which the
definition of ``specially designed'' will be an important role. In
addition, any burdens would be offset by the benefits of defining this
key term used extensively on the CCL. For these reasons, the Chief
Counsel for Regulations of the Department of Commerce certified to the
Chief Counsel for Advocacy of the Small Business Administration that
this rule, if adopted in final form, would not have a significant
economic impact on a substantial number of small entities.

List of Subjects

15 CFR Part 772

    Exports.

15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.

    Accordingly, parts 772 and 774 of the Export Administration
Regulations (15 CFR parts 730-774) are proposed to be amended as
follows:

PART 772--[AMENDED]

    1. The authority citation for 15 CFR part 772 continues to read as
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
12, 2011, 76 FR 50661 (August 16, 2011).

    2. Section 772.1 is amended:
    a. By revising the definition of ``specially designed;'' and
    b. By adding definitions for the terms ``accessories,''
``attachments,'' and ``end item''.
    The revision and additions read as follows:

Sec.  772.1  Definitions of terms as used in the Export Administration
Regulations (EAR).

* * * * *
    Accessories. These are associated items for any ``component,''
``end item,'' or ``system,'' and which are not necessary for their
operation, but which enhance their usefulness or effectiveness. For
example, for a riding lawnmower, accessories and attachments will
include the bag to capture the cut grass, and a canopy to protect the
operator from the sun and rain. For purposes of this definition,
accessories and attachments are the same.
* * * * *
    Attachments. These are associated items for any ``component,''
``end item,'' or ``system,'' and which are not necessary for their
operation, but which enhance their usefulness or effectiveness. For
example, for a riding lawnmower, accessories and attachments will
include the bag to capture the cut grass, and a canopy to protect the
operator from the sun and rain. For purposes of this definition,
attachments and accessories are the same.
* * * * *
    End item. This is an assembled commodity ready for its intended
use. Only ammunition, fuel or other energy source is required to place
it in an operating state. Examples of end items include ships,
aircraft, firearms, and milling machines.
* * * * *
    Specially designed. When applying this definition, follow this
sequential analysis: Begin with paragraph (a)(1) of this definition and
proceed through each subsequent paragraph. If an item would not be
controlled as a result of the application of the standards in paragraph
(a) of this definition, then it is not necessary to work through
paragraph (b) of this definition. If an item would be controlled as a
result of paragraph (a), then it is necessary to work through each of
the elements of paragraph (b). Items subject to the EAR described in
any of paragraphs (b)(1) through (5) of this definition are not
``specially designed'' items subject to the EAR.
    (a) Except for items described in (b) of this definition, an
``item'' is ``specially designed'' if, as a result of ``development,''
it:
    (1) Has properties peculiarly responsible for achieving or
exceeding the performance levels, characteristics, or functions in the
relevant ECCN or U.S. Munitions List (USML) paragraph;
    (2) Is a part or component necessary for an enumerated or
referenced

commodity or defense article to function as designed; or
    (3) Is an accessory or attachment used with an enumerated or
referenced commodity or defense article to enhance its usefulness or
effectiveness.
    (b) A ``part,'' ``component,'' ``accessory,'' or ``attachment''
that would be controlled by paragraph (a) of this paragraph is not
``specially designed'' if it:
    (1) Is enumerated in a USML paragraph;
    (2) Is a single unassembled ``part'' that is of a type commonly
used in multiple types of commodities not enumerated on the CCL or the
USML, such as threaded fasteners (e.g., screws, bolts, nuts, nut
plates, studs, inserts), other fasteners (e.g., clips, rivets, pins),
basic hardware (e.g., washers, spacers, insulators, grommets, bushings,
springs), wire, and solder;
    (3) Has the same form, fit, and performance capabilities as a part,
component, accessory, or attachment used in or with a commodity that:
    (i) Is or was in ``production'' (i.e., not in ``development''); and
    (ii) Is either not enumerated on the CCL or USML, or is enumerated
in an ECCN controlled only for Anti-Terrorism (AT) reasons;
    (4) Was or is being developed with a reasonable expectation of:
    (i) Use in or with commodities described on the CCL and commodities
not enumerated on the CCL or the USML; or
    (ii) Use in or with commodities not enumerated on the CCL or the
USML; or
    (5) Was or is being developed with no reasonable expectation of use
for a particular application.

    Note 1: `Enumerated' means any item (i) on either the USML or
CCL not controlled in a `catch-all' paragraph and (ii) when on the
CCL, controlled by an ECCN for more than AT-only reasons, except in
the context of paragraph (b)(3), where an item in an ECCN controlled
only for AT reasons is considered enumerated when it is not
controlled in a `catch-all' paragraph. An example of an `enumerated'
ECCN is 2A226, which controls valves with the following three
characteristics: a ``nominal size'' of 5 mm or greater; having a
bellows seal; and wholly made of or lined with aluminum, aluminum
alloy, nickel, or nickel alloy containing more than 60% nickel by
weight. The CCL also contains notes excluding from control parts and
components ``specially designed'' for uncontrolled items. Such
uncontrolled items are merely `referenced' and are not `enumerated.'
Note 2 to ECCN 1A002 is an example of items excluded from control
based on being ``specially designed'' for a referenced item.

    Note 2: A `catch-all' paragraph is one that does not refer to
specific types of parts, components, accessories, or attachments but
rather controls non-specific ``parts,'' ``components,''
``accessories,'' or ``attachments'' because they were ``specially
designed'' for an enumerated item. For example, ECCN paragraph
9A610.x is a catch-all, because it controls ``parts,''
``components,'' ``accessories,'' and ``attachments'' ``specially
designed'' for military aircraft, but does not identify specific
types of parts, components, accessories, or attachments within its
control. Another example of a `catch-all' is the heading of 7A102,
which controls ``specially designed'' components for the gyros
enumerated in 7A102, but does not identify the specific types of
components within its control.

    Note to paragraph (a)(1): Items that as a result of
``development'' have properties peculiarly responsible for achieving
or exceeding the performance levels, functions or characteristics in
a relevant ECCN paragraph may have properties shared by different
products. For example, ECCN 2B007.a controls ``robots'' capable in
real time of full three-dimensional image processing or full-three
dimensional `scene analysis' to generate or modify ``programs'' or
to generate or modify numerical program data [and specially designed
controllers and ``end effectors'' therefor]. An example of a
component not meeting the peculiarly responsible standard under
paragraph (a)(1) is a component that as a result of ``development''
has properties that allow the component to conduct 2D image
processing for use in a ``robot.'' This component is not ``specially
designed'' for purposes of 2B007.a because the component even if
used in a ``robot'' does not have properties peculiarly responsible
for a ``robot'' achieving or exceeding the performance levels,
functions or characteristics in 2B207.a. Conversely, another
component that as a result of ``development,'' has properties that
allow the component to perform in real time of full three-
dimensional image processing for use in a ``robot,'' is an example
of a component that is peculiarly responsible because as a result of
``development'' the component has a direct and proximate causal
relationship in the ``robot'' that is central or special for
achieving or exceeding the performance levels, functions or
characteristics identified in 2B207.a.

    Note to paragraph (b)(3): Commodities in ``production'' that are
subsequently subject to ``development'' activities, such as those
pertaining to quality improvements, cost reductions, or feature
enhancements, remain in ``production.'' However, any new models or
versions of such commodities developed from such efforts that change
the basic performance or capability of the commodity are in
``development'' until and unless they enter into ``production.''

    Note to paragraph (b)(4) and (b)(5): For a commodity not to be
``specially designed'' on the basis of paragraphs (b)(4) or (b)(5),
documents contemporaneous with its ``development,'' in their
totality, must establish the elements of paragraphs (b)(4) or
(b)(5). Such documents may include concept design information,
marketing plans, declarations in patent applications, or contracts.
Absent such documents, the ``commodity'' may not be excluded from
being ``specially designed'' by either paragraph (b)(4) or (b)(5).

    Note to paragraph (b)(5): If you have ``knowledge'' that the
commodity was or is being developed for a particular application,
you may not rely on paragraph (b)(5) to conclude that the commodity
was or is not ``specially designed.''

* * * * *

PART 774--[AMENDED]

    3. The authority citation for 15 CFR part 774 continues to read as
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et
seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42
U.S.C. 6212; 43 U.S.C. 1354; 15 U.S.C. 1824a; 50 U.S.C. app. 5; 22
U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 13026, 61 FR 58767, 3 CFR,
1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p.
783; Notice of August 12, 2011, 76 FR 50661 (August 16, 2011).

Supplement No. 1 to Part 774 [Amended]

    4. In Supplement No. 1 to part 774 (the Commerce Control List)
wherever the term ``specially designed'' occurs, add quotation marks
around the term ``specially designed.''

    Dated: June 6, 2012.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2012-14475 Filed 6-15-12; 11:15 am]
BILLING CODE 3510-33-P


[Federal Register: July 29, 2009 (Volume 74, Number 144)]
[Rules and Regulations]
[Page 37653-37654]
[DOCID:fr29jy09-33]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

49 CFR Part 390

Regulatory Guidance on the Definition of ``Principal Place of
Business''

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of regulatory guidance.

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

SUMMARY: The FMCSA announces regulatory guidance concerning its
definition of ``principal place of business.'' The regulatory guidance
is presented in a question-and-answer format and is generally
applicable to motor carrier operations subject to the Federal Motor
Carrier Safety Regulations. No prior interpretations or regulatory
guidance concerning the term ``principal place of business,'' whether
published or unpublished may be relied upon as authoritative if they
are inconsistent with the guidance published today. This guidance will
provide the motor carrier industry and Federal, State and local law
enforcement officials with uniform information for use in determining
which locations may be designated by a motor carrier as its principal
place of business.

DATES: Effective Date: This regulatory guidance is effective on August
12, 2009.

FOR FURTHER INFORMATION CONTACT: Mr. Bill Mahorney, Chief, Enforcement
and Compliance Division,<PHONE_NUMBER>. Federal Motor Carrier Safety
Administration, Department of Transportation, 1200 New Jersey Ave.,
SE., Washington, DC 20590. Office hours are from 9 a.m. to 5:30 p.m.
EST, Monday through Friday, except legal holidays.

SUPPLEMENTARY INFORMATION:

Legal Basis

    The Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98
Stat. 2832, October 30, 1984) (the 1984 Act) provides authority to
regulate drivers, motor carriers, and vehicle equipment. It requires
the Secretary of Transportation to prescribe regulations on commercial
motor vehicle safety. The regulations shall prescribe minimum safety
standards for commercial motor vehicles. At a minimum, the regulations
shall ensure that--(1) Commercial motor vehicles are maintained,
equipped, loaded, and operated safely; (2) the responsibilities imposed
on operators of commercial motor vehicles do not impair their ability
to operate the vehicles safely; (3) the physical condition of operators
of commercial motor vehicles is adequate to enable them to operate the
vehicles safely; and (4) the operation of commercial motor vehicles
does not have a deleterious effect on the physical condition of the
operators. (49 U.S.C. 31136(a)). Section 211 of the 1984 Act also
grants the Secretary broad power, in carrying out motor carrier safety
statutes and regulations, to ``prescribe recordkeeping and reporting
requirements'' and to ``perform other acts the Secretary considers
appropriate.'' (49 U.S.C. 31133(a)(8) and (10)).
    The Administrator of FMCSA has been delegated authority under 49
CFR 1.73(g) to carry out the functions vested in the Secretary of
Transportation by 49 U.S.C. chapter 311, subchapters I and III,
relating to commercial motor vehicle programs and safety regulation.
    This document provides regulatory guidance to the public with
respect to the definition of ``principal place of business'' in 49 CFR
390.5 of the Federal Motor Carrier Safety Regulations (FMCSRs).
    Members of the motor carrier industry and other interested parties
may also access the guidance in this document through the FMCSA's
Internet site at: http://www.fmcsa.dot.gov.
    Specific questions addressing any of the interpretive material
published in this document should be directed to the contact person
listed above or the FMCSA Division Office in each State.

Basis for This Guidance

    The regulatory guidance in this notice responds to recurring
questions FMCSA has received concerning the definition of ``principal
place of business'' in 49 CFR 390.5: What location may a motor carrier
designate as its principal place of business?
    Section 390.5 defines principal place of business as ``the single
location designated by the motor carrier, normally its headquarters,
for purposes of identification under this subchapter. The motor carrier
must make records required by parts 382, 387, 390, 391, 395, 396, and
397 of this subchapter available for inspection at this location within
48 hours (Saturdays, Sundays, and Federal holidays excluded) after a
request has been made by a special agent or authorized representative
of the Federal Motor Carrier Safety Administration.''
    The original definition of ``principal place of business'' in Sec.
390.5 required that the motor carrier designate a single location where
records required by Parts 387, 391, 394, 395, and 396 would be
maintained. However, other provisions of the regulations permitted
certain records to be maintained at other locations. (53 FR 18054). In
1993, the definition was revised to remove part 394 from the regulatory
text and to add part 390. (58 FR 33777). In 1995, the definition was
revised again. However, it still required that the location designated
by the carrier be a location where records were maintained and
available for inspection. (60 FR 38744). The current definition of
``principal place of business'' was adopted in 1998 in order to allow
motor carriers with multiple terminals and business locations to
maintain records, such as driver records of duty status or vehicle
maintenance records, at a location where activity related to the
records took place rather than at a company's headquarters. The
definition was revised to accompany a new Sec.  390.29 allowing motor
carriers with multiple terminals or offices to maintain all records
required by Subchapter B at regional offices, driver work reporting
stations or the principal place of business. Nonetheless, it was still
anticipated that in most cases the ``principal place of business''
would also be the company headquarters. (63 FR 33254).
    It has been the position of FMCSA and its predecessor agencies that
a

motor carrier's principal place of business is a physical location
where the motor carrier conducts a significant portion of its business
and maintains company records and where management reports to work. In
many instances, the principal place of business identified by a motor
carrier will be the location where FMCSA conducts a safety audit or
compliance review pursuant to part 385. For this reason, it is
necessary to emphasize that the definition of ``principal place of
business'' has always required that a motor carrier designate a single
physical location operated, controlled, or owned by the motor carrier
where the carrier conducts operations relating to the transportation of
persons or property and where some if not all of the records required
by parts 382, 387, 390, 391, 395, 396 and 397 are regularly maintained.
It has long been understood that the principal place of business is the
location designated by the motor carrier for the purpose of managing
and administering its safety and regulatory compliance programs.
Activities conducted at the principal place of business include
oversight, retention, and retrieval of records required to be
maintained by the FMCSRs.

Regulatory Guidance

PART 390--FEDERAL MOTOR CARRIER SAFETY REGULATIONS; GENERAL

Sections Interpreted

Section 390.5 Definitions

    Question: What location may a motor carrier designate as its
``principal place of business''?
    Guidance: In instances where a motor carrier has more than one
terminal or office, the regulations do not explicitly place a
restriction on which location a motor carrier may designate as its
principal place of business. The definition states that such a location
is ``normally'' the carrier's headquarters; the rule does not require
motor carriers to use the company's corporate headquarters as its
principal place of business. However, motor carriers are limited to
using an actual place of business of the motor carrier. Moreover, a
motor carrier may designate as its principal place of business only
locations that contain offices of the motor carrier's senior-most
management executives, management officials or employees responsible
for the administration, management and oversight of safety operations
and compliance with the FMCSRs and Hazardous Materials Regulations. In
determining its principal place of business a motor carrier must
consider the following factors: (a) The relative importance of the
activities performed at each location, and, if this factor is not
determinative, then (b) time spent at each location by motor carrier
management or corporate officers.
    FMCSA authorized representatives will use the above two factors in
determining whether a motor carrier has designated an appropriate
location as its principal place of business. In addition, FMCSA may
also consider whether the location is operated, controlled or owned by
the motor carrier, whether operations relating to the transportation of
persons or property regularly take place at the designated location,
whether any of the employees of the motor carrier regularly report to
the location for duty, whether any leased or owned vehicles of the
company are maintained on the premises, and whether any of the records
required by parts 382, 387, 390, 391, 395, 396 and 397 are maintained
on the premises. In the event a carrier does not designate a qualifying
location as its principal place of business, FMCSA may initiate
appropriate enforcement action or take action regarding the carrier's
USDOT registration.
    A motor carrier with multiple business locations may maintain some
records at locations of the motor carrier other than, or in addition
to, its principal place of business. However, after a request has been
made by an FMCSA authorized representative, a motor carrier with
multiple business locations must make records required by parts 382,
387, 390, 391, 395, 396 and 397 available for inspection at the
principal place of business or other location specified by the special
agent or authorized representative within 48 hours. Pursuant to Sec.
390.29, ``Saturdays, Sundays, and Federal holidays are excluded from
the computation of the 48-hour period of time.'' A motor carrier with a
single business location must make records required by parts 382, 387,
390, 391, 395, 396 and 397 available upon request.
    A motor carrier may not designate as its principal place of
business any location where the motor carrier is not engaged in
business operations related to the transportation of persons or
property. For example, post office box centers or commercial courier
service establishments that receive and hold mail or packages for third
party pickup may not be designated a ``principal place of business''
(other than by the courier service provider itself). A motor carrier
may not designate the office of a consultant, service agent, or
attorney as the motor carrier's principal place of business if the
motor carrier is not engaged in operations related to the
transportation of persons or property at that location.
    Question: May a motor carrier with a single business location,
including a private residence, designate a different location as its
``principal place of business''?
    Guidance: No. The definition of ``principal place of business'' in
49 CFR 390.5 allows a carrier with multiple terminals or offices to
designate a single terminal or office as its primary business location
for identification purposes. Consistent with this definition, a motor
carrier with a single place of business may designate only its actual
place of business as the ``principal place of business.''
Notwithstanding this restriction, a motor carrier and an authorized
representative of FMCSA may agree that a compliance review or other
investigation of a motor carrier will be conducted at a mutually
acceptable location other than the motor carrier's principal place of
business.

    Issued on: July 24, 2009.
 Terry Shelton,
Acting Chief Safety Officer.
[FR Doc. E9-18142 Filed 7-28-09; 8:45 am]

BILLING CODE 4910-EX-P