[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Proposed Rules]
[Pages 5332-5353]
[FR Doc No: 2014-01613]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 700

[Docket No.<PHONE_NUMBER>-0016-01]
RIN 0694-AE81

Revisions to Defense Priorities and Allocations System
Regulations

AGENCY: Bureau of Industry and Security, Department of Commerce.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would clarify existing standards and
procedures by which the Bureau of Industry and Security (BIS) may
require that certain contracts or orders that promote the national
defense be given priority over other contracts or orders. It also
proposes new standards and procedures for such prioritization with
respect to contracts or orders for emergency preparedness activities.
Finally, this rule proposes new standards and procedures by which BIS
may allocate materials, services and facilities to promote the national
defense. This rule implements provisions in the Defense Production Act
Reauthorization of 2009 (123 Stat. 2006) (111 Pub. L. 67) (September
30, 2009) regarding publication of regulations providing standards and
procedures for prioritization of contracts and orders and for
allocation of materials, services, and facilities to promote the
national defense under emergency and non-emergency conditions.

DATES: Comments must be received by April 1, 2014.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
The ID number for this rulemaking is BIS-2010-0021.
     By email directly to<EMAIL_ADDRESS>Include
RIN 0694-AE81 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau
of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th
Street and Pennsylvania Avenue NW, Washington, DC 20230. Refer to RIN
0694-AE81.

FOR FURTHER INFORMATION CONTACT: Liam McMenanim at<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of the Regulatory Action

    This proposed rule would update the priorities and allocations
provisions set

forth in the Defense Priorities and Allocations System regulations (15
CFR part 700) (DPAS) and implemented by the Bureau of Industry and
Security (BIS) consistent with its authorities under Title I of the
Defense Production Act of 1950 (as amended) (DPA). This rule also would
establish certain new administrative procedures through which BIS will
implement the allocations provisions of the DPA. In addition, this
proposed rule would revise definitions found in Sec.  700.8 of the DPAS
regulations.
    This rule implements the provisions in the Defense Production Act
Reauthorization of 2009 (Pub. L. 111-67, 123 Stat. 2006, September 30,
2009) (Reauthorization Act), which require agencies with priorities and
allocations authorities to issue rules establishing standards and
procedures by which those authorities shall be used to promote the
national defense, under both emergency and non-emergency conditions.
This rule is part of a multi-agency effort that forms the Federal
priorities and allocations system.

Background

    The Reauthorization Act requires each Federal agency delegated
priorities and allocations authority consistent with section 101 of the
DPA to issue final rules establishing standards and procedures by which
that authority is used to promote the national defense, during both
emergency and non-emergency conditions. In the Reauthorization Act,
Congress further directed that, to the extent practicable, the Federal
agencies with priorities and allocations authoritiy should work
together to develop a consistent and unified Federal priorities and
allocations system.
    In order to meet this mandate, BIS worked in conjunction with the
Departments of Agriculture (USDA), Defense (DoD), Energy (DOE), Health
and Human Services (HHS), Homeland Security (DHS), and Transportation
(DOT) to develop common provisions based on the DPAS that can be used
by each Department in its own regulation. The six regulations to be
promulgated, one by each Department with delegated DPA Title I
authority, comprise the Federal priorities and allocations system.
    This proposed rule would update and expand the DPAS. BIS relies
upon and uses the DPAS to implement priority and allocation actions
involving industrial resources. BIS administers the DPAS pursuant to
authority under Title I of the DPA (50 U.S.C. app. 2071, et seq.) as
delegated by Executive Order 13603, March 16, 2012 (77 FR 16651, 3 CFR,
2012 Comp., p. 225). The DPAS has two principal components--priorities
and allocations. Under the priorities component, certain contracts
between the government and private parties or between private parties
for the production or delivery of industrial resources are required to
be given priority over other contracts to facilitate expedited delivery
in promotion of the U.S. national defense. Under the allocations
component, materials, services, and facilities may be allocated to
promote the national defense. For both components, the term ``national
defense'' means programs for military and energy production or
construction, homeland security, stockpiling, space, emergency
preparedness, and critical infrastructure protection and restoration.
The term also includes foreign military and critical infrastructure
assistance.
    The Reauthorization Act required that within 270 days of its
enactment, all agencies to which the President has delegated priorities
and allocations authority under Title I of the DPA must publish final
rules establishing standards and procedures by which that authority
will be used to promote the national defense in both emergency and non-
emergency situations. The act also required all such agencies to
consult ``as appropriate and to the extent practicable to develop a
consistent and unified Federal priorities and allocations system.''
(123 Stat. 2006, at 2009). This rule is one of several rules that have
been or will be published to implement the provisions of the
Reauthorization Act. The final rules of the agencies with
Reauthorization Act authorities, which are the USDA, DOE, HHS, DOT,
DoD, and DOC, will comprise the Federal priorities and allocations
system.

June 2010 Proposed Rule, Comment and Response.

Proposed Rule and Comment

    On June 7, 2010, BIS published a proposed rule to update and expand
15 CFR part 700 (75 FR 32122, June 7, 2010). BIS received one comment
on that proposed rule. The commenter noted that Section 700.11 of the
proposed rule discussed prioritization directives and referred to
Section 700.12. The commenter noted that Section 700.12 stated that
prioritization directives take precedence over all DX rated orders, DO
rated orders, and unrated orders but that allocation orders take
precedence over all. The commenter also noted the inference that
prioritization directives may be different from DX rated orders. The
commenter stated that he could find no provision that told how to mark
an order as a prioritization directive so that the contractor could
clearly tell that it was dealing with a prioritization directive.

Response

    The June 7, 2010, proposed rule, the existing DPAS, and this
proposed rule contemplate that directives will be issued by BIS to
specific persons. BIS will provide the directive to the person to whom
it applies. To the extent that directives modify or conflict with a DO
or DX rated order or unrated order, the directive takes precedence. As
will be further discussed below, this proposed rule does not draw a
distinction between prioritization directives and allocation
directives.
    Due to the limited response to the June 2010 proposed rule and
because BIS has reassessed some aspects of the June 2010 proposed rule,
BIS has made several amendments and issued this second proposed rule
for public consideration.

Summary of Principal Differences Between This Proposed Rule and the
June 2010 Proposed Rule

Retention of Existing DPAS Format

    The June 2010 proposed rule would have substantially reorganized
the format of the DPAS. This proposed rule would largely retain the
existing format. Upon reconsideration, BIS has concluded that the
benefits of the revised format did not outweigh its drawbacks.
Companies and government agencies that use the current DPAS are
familiar with the current regulatory structure. They would have to
incur the cost of learning any new structure that might be imposed. For
example, the Department of Defense uses DPAS authority delegated to it
by the Department of Commerce to place ratings on approximately 300,000
contracts annually. The Departments of Commerce and Defense estimate
that, in addition, approximately 400,000 rated contracts are placed
annually to satisfy national defense requirements. Parties who receive
these rated contracts have not expressed to BIS any desire to reformat
the regulations.
    In addition to familiarity by current users, retaining the existing
DPAS format simplifies identifying the substantive and procedural
changes that this proposed rule would make and distinguishing those
changes from the editorial changes that this proposed rule would also
make.

Complementary Roles of Priorities and Allocations and Single Set of
Deadlines

    Although the June 2010 proposed rule did not explicitly state that
priority

authority and allocations authority were mutually exclusive, it
strongly implied that such was the case. For example, Sec.  700.62 in
the June 2010 proposed rule indicated that allocation orders would take
precedent over priority ratings. BIS does not intend to issue
conflicting orders or ratings. Currently, BIS issues only priority
ratings. However, BIS can envision situations in which some combination
of priorities and allocations would be needed. Accordingly, this
proposed rule would not assign precedence between priorities and
allocations by regulation. Instead, it would opt for flexibility when
dealing with the situations that call for allocation orders. A
description of the relationship between allocation orders and
previously or subsequently received rated orders and unrated orders
would be included in any allocation orders issued.
    In connection with BIS' judgment that priorities authority and
allocations authority might be used in a complementary manner, BIS has
now concluded that shorter time limits than what the June 2010 proposed
rule would have imposed with respect to filing requests for exception
or adjustment of allocation orders, appeals of decisions denying those
requests and BIS responses to those filings are not necessary.
Therefore this proposed rule would apply, to both priorities and
allocations, the time limits that the current DPAS applies to filing
requests for exception or adjustment of priority rated orders, appeals
of decisions denying those requests, and BIS responses to those
filings. Although allocations would be used only in the circumstances
described in the paragraph immediately below, BIS does not believe that
such circumstances would necessarily require shorter time limits for
the above-noted actions.
    BIS does not intend or expect that allocations will be issued
routinely or frequently. Under this proposed rule, allocations may be
used to control the distribution of a material in the civilian market
only upon approval by the President of a finding by the Secretary of
Commerce or his or her designee that such material is a scarce and
critical material essential to the national defense, and that the
requirements of the national defense for such material cannot otherwise
be met without creating a significant dislocation of the normal
distribution of such material in the civilian market to such a degree
as to create appreciable hardship. The June 2010 rule proposed that
such findings be made by the Secretary of Commerce. This proposed rule
adds language that would allow the Secretary or a designee of the
Secretary to make such findings. This change recognizes that a
Department Organization Order of the Department of Commerce delegates
to the Under Secretary for Industry and Security those DPA authorities
that have been delegated to the Secretary of Commerce. Even a narrower
use of allocations authority under this proposed rule would also be
subject to the policy set forth in Sec.  700.30 which provides that
allocations will be used only when there is insufficient supply of a
material, service, or facility to satisfy national defense requirements
through use of priorities authority or when the use of priorities
authority would cause a severe and prolonged disruption in the supply
of materials, services or facilities available to support normal U.S.
economic activity. Given these requirements and its past practice, BIS
anticipates that use of allocations will be a rare event.

Reduced Time for Written Follow-Up of Verbal Notice That a Party is
Unable To Comply With An Order

    Under the current DPAS, a party who gives verbal notice that
performance of a priority rated order will be delayed must provide a
written confirmation within five working days. The June 2010 proposed
rule would have retained this provision and would have imposed the same
time limit for written confirmation that a party is unable to comply
with an allocation order. Upon further consideration, BIS has concluded
that such written confirmation should be transmitted within one working
day of the verbal notice. A party making such a notice would know at
the time of the verbal notice the reasons that it cannot meet the
specified delivery date or comply with the order. Rated orders are
issued to satisfy requirements related to military and energy
production or construction, military or critical infrastructure
assistance to any foreign nation, homeland security, stockpiling,
space, emergency preparedness, and critical infrastructure protection
and restoration. Reducing the reason to writing should not take longer
than one working day and the nature of these orders justifies requiring
expeditious communication.

Issuance of Allocations Orders by an Authorized Employee or Official
Other Than the Secretary

    The June 2010 proposed rule stated that allocations orders would be
signed by or include the name of the Secretary of Commerce and be
addressed to the person to whom the order applies. This proposed rule
would provide that an authorized official or employee sign allocations
orders, consistent with existing practices. Both the June 2010 proposed
rule and this proposed rule would require the President's approval of
the finding before allocations could be used to control the general
distribution of a material in the civilian market. BIS believes that,
given this requirement, a requirement that the Secretary sign every
order that may be issued to implement an allocation decision would
serve no purpose.

Constructive Notice of Allocations Orders Through Federal Register
Publication

    The June 2010 proposed rule would have required that allocations
orders (and modifications or cancellations of such orders) be issued
directly to affected persons. This proposed rule would permit such
orders to be issued directly to affected persons or by constructive
notice through publication in the Federal Register. The Federal
Register notice might apply to a specified class of persons rather than
naming all affected persons. For example, an allocation order published
in the Federal Register might apply to all manufacturers of a specified
product but not name every manufacturer of that product in the order.
BIS believes that situations might arise in which allocations are
justified and that, although BIS would be able to identify the material
to be allocated, it would not be able to identify all of the suppliers
of that material. In such situations, constructive notice to the
affected class of persons by publication in the Federal Register would
be consistent with the procedure that the government uses generally
when notice must be given to large numbers of persons or to persons not
all of whom can be individually identified.

Use of Rated Orders for Emergency Preparedness Activities

    This proposed rule would authorize use of rated orders for
emergency preparedness activities and would authorize such orders to
require acceptance or rejection within a shorter time than the 10 or 15
working days required for acceptance or rejection of other DX and DO
rated orders. Emergency preparedness rated orders may require
acceptance or rejection in as little as six hours after receipt of the
order if the order is in response to a hazard that has occurred or 12
hours if the order is to prepare for an imminent hazard. This proposed
rule would also require use of rated orders to obtain items needed to
fill an emergency preparedness rated order and would require use of the
reduced times for

acceptance or rejection noted above. The June 2010 proposed rule did
not provide the option of imposing a shorter timeframe for acceptance
or rejection of rated orders for emergency preparedness activities
issued by the Department of Commerce, although it did note that rated
orders issued by other agencies that are delegated authority by the
Department of Commerce might have shorter timeframes for acceptance or
rejection. This proposed rule provides for the option of shorter
timeframes for all orders issued for emergency preparedness activities.

Removal of Limits on Use of do Rated Orders for the Metalworking
Machine Industry

    As discussed more fully in the description of the proposed changes
to Sec.  700.31 below, this proposed rule would remove completely the
special treatment of the metalworking machine industry currently found
in Sec.  700.31. That section limits the amount of DO rated orders that
metal working machine producers are required to accept. In recent
years, there have been so few DO rated orders for metalworking machines
that the maximum set by Sec.  700.31 has never been met. Therefore, BIS
believes that the maximum limitation is not needed. The June 2010
proposed rule made no changes to these limits.

Removal of Mandatory Criteria for Evaluating Whether Certain Materials,
Equipment, and Services Used To Maximize Energy Supplies Are ``Scarce''

    As discussed more fully in the description of the proposed changes
to Sec.  700.21 below, this proposed rule would clarify that the
criteria listed for determining whether certain materials, equipment,
and services related to energy production are ``scarce'' and whether
priorities authority is needed are illustrative lists of criteria that
the Department of Commerce may use. The June 2010 proposed rule would
have retained the language currently in Sec.  700.21.

Procedure for Requesting Assistance in Obtaining Rated Items or
Priority Rating Authority for Homeland Security, Emergency
Preparedness, and Critical Infrastructure Protection and Restoration
Assistance Programs Within the United States

    As discussed more fully in the description of proposed Sec.  700.55
below, this proposed rule would provide a procedure for requesting
assistance in obtaining rated items or priority rating authority for
homeland security, emergency preparedness, and critical infrastructure
protection and restoration assistance programs within the United
States.

Revision to Schedule I

    This proposed rule would revise Schedule I to part 700 to provide a
program symbol for programs intended to provide critical infrastructure
assistance to foreign nations. Additionally, this proposed rule would
make format changes and a clarification, both of which are more fully
described below.

Section-by-Section Analysis of the Changes That This Proposed Rule
Would Make to the Existing DPAS

    The following discussion explains the changes that this proposed
rule would make to the existing DPAS.

Revisions to Subpart A--Purpose

    Proposed Sec.  700.1--Purpose of this part. The header of this
section would be changed from ``Purpose'' to ``Purpose of this part''
to be more specific. This section would state the purpose of the DPAS
in general terms and would largely restate information that appears at
15 CFR 700.1 in the existing regulations. However, extensive language
about the source of BIS' legal authority would not be incorporated into
the proposed Sec.  700.1 on the grounds that such language is not
regulatory in nature. BIS believes that the language regarding the
DPAS's purpose would be clearer if it is not submerged in extensive
discussions of legal authority.

Revisions to Subpart B--Overview

    Section 700.2--Introduction. This rule would add references to
homeland security and critical infrastructure protection and
restoration activities to paragraph (a) to conform to the current
definition of national defense in the DPA. Paragraph (b) would
explicitly state that the Department of Commerce may exercise
priorities and allocations authority. Paragraph (c) would state that
recipients of rated orders have authority to place ratings on contracts
with contractors, subcontractors, or suppliers. BIS is proposing to
make these changes so that the introductory paragraph will give a more
complete description of the DPAS and will reflect changes brought about
by the 2009 amendments to the DPA under the Reauthorization Act. BIS
believes that these changes would make this introduction more
descriptive and useful.
    Section 700.3--Priority ratings and rated orders. This section
would be shortened to remove material that is covered elsewhere in 15
CFR part 700. References to ``these regulations'' would be changed to
``this part'' to make clear that the regulations referred to are 15 CFR
part 700.
    Sections 700.4, 700.5, 700.6 and 700.7 would be removed because the
information that they contain is duplicated elsewhere the DPAS.

Revisions to Subpart C--Definitions

    Section 700.8--Definitions. This rule would remove the reference to
definitions in the DPA and Stafford Act. Definitions from those acts
that also apply to the DPAS would be set forth separately in this
section.
    New definitions would be added for ``allocation,'' ``allocation
order'' and ``allotment.'' These definitions relate to the expanded
allocations provisions in Subpart F, which is needed to implement the
amendments set forth in the Reauthorization Act.
    A new definition for ``working day'' also would be added. This term
currently is in the DPAS, but is not defined. The term would be defined
as ``any day that the recipient of an order is open for business.''
    As newly defined, this term would apply to time limits for
acceptance or rejection of rated orders (other than orders placed for
emergency preparedness activities), written confirmation of verbal
notice that delivery or performance of a rated order will be delayed,
and written confirmation of verbal notice of inability to comply with
an allocation order.
    The definitions of ``critical infrastructure,'' ``homeland
security'' and ``national defense'' that appear in the DPA would be
added so that readers would not need to refer to the statute for the
definitions.
    The definition of ``Maintenance, repair and operating supplies
(MRO)'' would be amended by replacing the term ``Maintenance, repair
and operating supplies'' with the term ``Maintenance, repair and/or
operating supplies.'' For years, BIS has interpreted the term MRO to
apply to maintenance, to repair, to operating supplies, to any
combination of two of the three, or to all three. BIS is proposing to
revise the language because it believes that the proposed language more
clearly expresses the meaning that BIS has applied for years. In other
respects, the definition is unchanged.
    The new definitions of ``emergency preparedness'' and ``hazard''
relate primarily to the issuance of rated orders for emergency
preparedness requirements, a topic addressed in Sec. Sec.  700.13 and
700.15 of this proposed rule. The definitions of ``emergency

preparedness'' and ``hazard'' are taken from the Stafford Act.
    The definition of ``official action'' would be changed to cover
actions related to allocations as well as priorities. This change is
needed to address the expanded material regarding allocations in
Sec. Sec.  700.30 through 700.34 and references to allocations in other
sections of this proposed rule.
    New definitions would be added for the terms ``priority rating''
and ``program identification symbols.'' These definitions are not
substantively different than the descriptions of priority ratings and
program identification symbols that currently appear in Sec.  700.11 of
the DPAS. BIS believes that priority ratings and program identification
symbols are sufficiently central to the concept of priorities under the
DPAS to warrant inclusion in the definitions section.
    The definition of ``person'' would be expanded to include
international organizations to conform to proposed new Sec. Sec.
700.57 and 700.58, which address military and critical infrastructure
assistance to international organizations as well as to foreign
governments.
    The definition of ``set-aside'' would be revised to match the text
of the definition of this term in each agency's regulations (noted
above) that together will comprise the Federal priorities and
allocations system.
    This proposed rule would remove the text currently at the beginning
of the first sentence in Sec.  700.8, which reads ``In addition to the
definitions provided in Section 702 of the Defense Production Act
(excepting the definition of ``industrial resources'' and Section
602(a) of the Stafford Act) . . .'' because the relevant definitions
from those Acts would be added to Sec.  700.8 of the DPAS under this
proposed rule. This change would spare readers of the DPAS from the
need to consult those two statutes to understand the meaning of terms
used in 15 CFR part 700.

Revisions to Subpart D--Industrial Priorities

    Section 700.10--Authority. Paragraph (a) would be revised to
replace the reference to Executive Order 12919 with a reference
Executive Order 13603, which revoked and superseded Executive Order
12919. Paragraph (b) would be revised to remove a reference to an
internal delegation by the Department of Commerce, because that
reference is unnecessary. The description of the priorities and
allocations authority conveyed by statute or executive order to other
government agencies currently found in Sec.  700.18(b)(1) would be
moved to a new paragraph (c) of Section 700.10. The language describing
the authority of the Department of Agriculture would be revised to
conform to the language in Executive Order 13603. The information
currently in Sec.  700.18(b)(2) would be removed because it merely
describes an internal government procedure. The text regarding
communications services would be revised to cite Executive Order 13618
of July 6, 2012. That executive order revoked Executive Order 12472,
which currently is cited in Sec.  700.18(b)(2). BIS believes that
placing all of the statements of agency authority in a single section
would aid understanding of the Defense Priorities and Allocations
System Regulations.
    700.11--Priority ratings. The phrase ``to this part'' would be
added immediately following ``Schedule I'' in the second sentence of
paragraph (b) to precisely identify the schedule. This is not a
substantive change.
    700.12--Elements of a rated order. Revised paragraph (a) of this
section would be headed ``Elements required for all rated orders'' and
would incorporate all of the elements of current paragraphs (a), (b)
and (c) of Sec.  700.12. In addition, in paragraph (a), this proposed
rule would revise the parenthetical listing of rated order symbol
examples by replacing ``DO-H1'', which is rarely used, with ``DO-N1'',
which is more commonly used and which indicates a Federal emergency
preparedness, mitigation, response and recovery action approved for
DPAS support by the Department of Homeland Security.
    Paragraph (b), headed ``Additional element required for certain
emergency preparedness rated orders,'' would be added. This new
paragraph would provide that if a rated order is placed for the purpose
of emergency preparedness requirements, and if expedited action is
necessary or appropriate to meet those requirements, the order must
include a statement informing the recipient that the order is for the
purpose of emergency preparedness and of the amount of time within
which the recipient must accept or reject the order. The minimum amount
of time that must be allowed for acceptance or rejection would be
governed by proposed Sec.  700.13(d)(2).
    Section 700.13--Acceptance and rejection of rated orders. In
paragraph (c), introductory text, the word ``Commerce'' would be
replaced with the phrase ``the Department of Commerce.''
    Paragraph (d)--Customer notification requirements. This paragraph
would be changed in the following manner. Paragraph (d)(1) would
continue to apply to most rated orders and would be substantively
unchanged from existing paragraph (d)(1). The currently undefined term
``working days'' would be subject to the definition proposed in Sec.
700.8 of this proposed rule. DO rated orders would have to be accepted
or rejected within 15 working days after receipt, and DX rated orders
would have to be accepted or rejected within 10 working days after
receipt. Paragraph (d)(2) would be revised to address customer
notification requirements for orders placed for emergency preparedness
requirements where expedited action is necessary or appropriate to meet
those requirements. Such orders would have to be accepted or rejected
in the time frame noted in the order. That time frame could be as short
as six hours if the order is issued by an authorized person in response
to a hazard that has occurred, or 12 hours if the order is issued by an
authorized person in response to an imminent hazard. Existing paragraph
(d)(2), which requires persons who have accepted rated orders to give
notice if performance will be delayed, would become paragraph (d)(3).
The time limit in which to provide written confirmation of a verbal
notice would be changed from five working days to one working day. BIS
believes that the nature of rated orders, supporting national defense
requirements, justifies expeditious communications and that once a
verbal notice of delayed performance has been given, putting that
notice into writing should not take more than one working day.
    Section 700.14--Preferential scheduling. The proposed changes to
this section are all non-substantive. To enhance clarity, an additional
sentence emphasizing the priority of DX rated orders over DO rated
orders would be added to the example at the end of paragraph (b).
Paragraph (c) which addresses conflicting rated orders would be amended
by changing references to ``Sec. Sec.  700.50 through 700.54'' to
``Subpart H of this part'' to more completely state the provisions that
deal with resolution of conflicting rated orders.
    Section 700.15--Extension of priority ratings. This section
requires persons who receive rated orders to use rated orders with
suppliers to obtain items needed to fill a rated order. This proposed
rule makes non-substantive changes to paragraphs (a) and (b). The term
``this regulation'' in paragraph (a) is replaced with ``this part'' to
make clear that the regulation to which the sentence refers is 15 CFR
part 700. The second sentence of paragraph (b) is revised to state
expressly that the rating

continues throughout the entire supply chain.
    Paragraph (c) would be added. The new paragraph would require use
of rated orders to obtain items needed to fill an emergency
preparedness rated order. It would require persons who have received
emergency preparedness rated orders that have shortened timeframes for
acceptance or rejection to impose shortened time frames for
transmission of acceptance or rejection on rated orders placed with
suppliers.
    Section 700.16--Changes or cancellations of priority ratings and
rated orders.
    A substantive change would be made to paragraph (d), which lists
amendments to a rated order that do not constitute a new rated order.
The phrase ``prior to the start of production'' would be added
immediately following the phrase ``a minor variation in size or
design.'' Once production of an item is commenced, changes in design
that would be minor prior to production can become significant.
Therefore, BIS believes that the rule should allow for only changes in
size or design that are specified before production starts to be
considered merely an amendment to an existing rated order rather than a
new rated order.
    Paragraph (e), which imposes a duty to cancel rated orders that
have been placed with suppliers, or to cancel the ratings on those
orders if the items so ordered are no longer needed to fill a rated
order, would be modified. This rule would amend this paragraph to make
it clear that the person who placed the rated orders with the suppliers
(or that person's successor in interest) has the duty to cancel them.
    Paragraph (f), which imposes a duty to inform suppliers when a
priority rating is placed on an order or when a priority rating is
changed or cancelled, would be modified to make clear that the person
who placed the rating on the order or who changed or cancelled the
rating has the duty to inform the suppliers of the priority rating
activity.
    Section 700.17--Use of rated orders. Currently Sec.  700.17(f)
provides that a person is not required to place a priority rating on an
order for items with a value of less than $50,000 or one half the
Federal Acquisition Regulation (FAR) Simplified Acquisition Threshold,
whichever is larger, if delivery can be obtained in a timely fashion
without the priority rating. This proposed rule would raise the
threshold from the current value of $50,000 to a new value of $75,000--
which is one half the FAR Simplified Acquisition Threshold. None of the
other changes to this section are substantive. Paragraph (d) describes
combining rated and unrated orders. In paragraph (d)(1)(ii), which
refers to the elements of a rated order as set forth in Sec.  700.12,
the word ``four'' would be removed because under this proposed rule, a
rated order could have either four or five elements depending on
whether or not the order is for certain emergency preparedness
activities
    Section 700.18--Limitations on placing rated orders. This proposed
rule would make several clarifying and stylistic changes to this
section. Paragraph (a)(1) would be revised to apply only to rated
orders that are made pursuant to 15 CFR part 700 because some rated
orders may be issued pursuant to regulations of other agencies. A more
explicit description of the authorizations to place rated orders would
be added.
    The sentence in paragraph (a)(1)(ii), which begins: ``Separate
rated orders . . .'' would be moved to a separate paragraph (a)(3) and
revised to read: ``Separate rated orders may not be placed solely for
obtaining minimum procurable quantities on each order if the minimum
procurable quantity would be sufficient to cover more than one rated
order.'' BIS believes that this change improves syntax and more clearly
expresses the intent behind the sentence.
    Existing paragraph (b)(1) would be moved to a new paragraph (c) in
section 700.10 as discussed above.
    Existing paragraph (b)(2) would be eliminated entirely because it
refers to internal government documents and does not provide any useful
information to the public.
    Existing paragraph (b)(3) would become paragraph (b). The first
clause in this new paragraph (b) would be revised to state more clearly
the policy regarding the items listed in paragraph (b), which are:
Copper raw materials, crushed stone, gravel, scrap, slag, central steam
heat and waste paper. The new language would be: ``Notwithstanding
language authorizing or requiring the placement of rated orders found
elsewhere in this part, no person may place a rated order to obtain the
following items unless such order is authorized by an official action
of the Department of Commerce.'' BIS believes that the foregoing
proposed language is clearer than the corresponding language currently
in Sec.  700.18(b)(3), which reads: ``The following items under the
jurisdiction of Commerce are currently excluded from the rating
provisions of this regulation; however, these items are subject to
Commerce Directives.'' BIS does not regard this change as substantive.

Revisions to Subpart E--Industrial Priorities for Energy Programs

    Section 700.21--Application for priority rating authority. This
section sets forth the procedures to be used when applying for priority
rating authority and provides information about the criteria considered
by BIS in approving such applications. The proposed rule would make
three changes. First, the rule would remove existing paragraph (b),
which describes activities of the Department of Energy. BIS believes
that this information is unnecessary.
    Second, existing paragraph (c) would be the basis for new paragraph
(b). The rule would rephrase proposed new paragraph (b) to emphasize
that two Department of Commerce findings are needed to authorize
priorities authority. Those findings are whether the items in question
are scarce, and whether there is a need to use the priorities
authority. The rule would add language emphasizing that the list of
factors that the Department of Commerce may use in making those two
findings is illustrative. This proposed rule also would add language to
paragraph (b) making clear that if scarcity is not found, the
Department of Commerce will not consider whether priority authority is
needed. Applications for priority rating authority to maximize domestic
energy supplies are rare. BIS has not received one in more than a
decade. BIS recognizes that it must make fact-based decisions on these
applications in a consistent manner. However, the rarity of these
applications makes devising a list of all of the factors that could be
relevant to every application impossible. Therefore, BIS believes that
the list of factors in the rule must be illustrative and that the
actual relevant factors must be determined on a case-by-case basis.
    The proposed rule also would remove existing paragraph (d), which
provides that if the Department of Commerce does not find the items to
be scarce, it will not analyze the need for priorities and allocations
authorities because the concept would addressed in paragraph (b).
    Existing paragraph (e) would become paragraph (c) with minor
changes to add clarity and precision. Existing paragraph (f) would
become paragraph (d). The word ``Commerce'' would be replaced by ``the
Department of Commerce'' throughout the section.

Revisions to Subpart F--National Emergency Preparedness and Critical
Items. Subpart F Would Be Retitled Allocation Actions

    Section 700.30--Policy. This section would be rewritten. The
current heading, ``Priorities and allocations in a national emergency''
would be revised to ``Policy''.
    The section would state that allocations authority would be used
only when priority authority is unable to provide a sufficient supply
of a material, service, or facility to meet the national defense, or
when the use of priority authority would cause a severe and prolonged
disruption in the supply of materials, services, or facilities
available to support normal U.S. economic activities. This policy does
not mean that priorities and allocations would, in all instances, be
mutually exclusive. In some circumstances, the best course may be to
use priority authority and allocations authority in a complementary
manner. An example of such a situation is one in which national defense
activities need less than the entire supply of a particular material,
service or facility and priority authority could provide a sufficient
supply to meet that need but only by causing a severe and prolonged
disruption in the supply to support normal U.S. economic activities. If
the national defense need were sufficiently critical, the best course
overall might be to use priority authority to meet the national defense
need and use allocation authority to distribute the remaining supply
among other economic activities. Throughout this section, the
definition of ``national defense'' in Sec.  700.8 of this proposed rule
would apply. Allocation authority would not be used to ration materials
or services at the retail level.
    Section 700.31--General procedures. This section also would be
rewritten. The heading would be changed from ``Metalworking machines''
to ``General procedures.'' The proposed procedures set out in this
section and in proposed Sec.  700.32 are intended to provide a
reasonable assurance that allocations authority would be used only in
situations where use of such authority is justified. Section 700.31
would set a list of the elements that must be in a plan that the
Department of Commerce would be required to develop before using its
allocations authority to address a supply problem in all instances,
whether or not the allocation would control the general distribution of
a material in the civilian market. The section would not preclude the
Department of Commerce from including additional elements in the plan;
it would merely require that the following elements be included.
     A copy of the written determination made in accordance
with section 202 of Executive Order 13603, that the program or programs
that would be supported by the allocation action are necessary or
appropriate to promote the national defense;
     A detailed description of the situation to include any
unusual events or circumstances that have created the requirement for
an allocation action;
     A statement of the specific objective(s) of the allocation
action;
     A list of the materials, services, or facilities to be
allocated;
     A list or description of the sources of the materials,
services, or facilities that will be subject to the allocation action;
     A detailed description of the provisions that will be
included in the allocation order, including the type(s) of allocation
orders, the percentages or quantity of capacity or output to be
allocated for each purpose, the relationship with previously or
subsequently received priority rated and unrated contracts and orders,
and the duration of the allocation action (e.g., anticipated start and
end dates);
     An evaluation of the impact of the proposed allocation
action on the civilian market; and
     Proposed actions, if any, to mitigate disruptions to
civilian market operations.
    The text of existing Sec.  700.31--``Metalworking machines'' would
be removed from the DPAS. Section 700.31 of the DPAS applies only when
the metalworking machines that would be the subjects of a rated order
have a list price in excess of $2,500. Section 700.13 currently allows
any metalworking machine producer to reject any DO rated order that
calls for delivery in any one month of more than 60 percent of that
month's scheduled production of machines of the size called for in the
order. Section 700.13 also currently allows any metalworking machine
producer to reject any DO rated order that it receives less than three
months prior to the beginning of the month for which delivery is
requested.
    BIS previously published a notice of inquiry seeking comments on
the effects of eliminating this provision (73 FR 19666, April 17,
2006). BIS received no comments. Section 700.31, in effect, sets a
limit on the amount of production capacity that a producer of
metalworking machines could be required to set-aside in anticipation of
rated orders. BIS has issued no directives or other official actions
requiring such set-asides in many years. BIS believes that priority
ratings affect an insignificant portion of the metalworking machine
industry output. On that basis, BIS believes that a special provision
that sets, by regulation, the maximum allocation that may be applied to
this one industry, while allocations would be set for all other
industries through fact-based, case-by-case basis determinations, is
unwarranted.
    Section 700.32--Controlling the general distribution of a material
in the civilian market. This section would be new. It would set forth
the findings that the Secretary of Commerce (or the Secretary's
designee) must make and that the President must approve before the
Department of Commerce may use allocations to control the distribution
of a material in the civilian market. Those findings, which are
required by Sec.  101(b) of the DPA, are: Such material is a scarce and
critical material essential to the national defense, and the
requirements of the national defense for such material cannot otherwise
be met without creating a significant dislocation of the normal
distribution of such material in the civilian market to such a degree
as to create appreciable hardship. Section 201(e) of Executive Order
13603 directs each agency with delegated authority under section 101 of
the DPA to make the finding required by section 101(b) and submit the
finding for the President's approval through the Assistant to the
President and National Security Advisor and the Assistant to the
President for Homeland Security and Counterterrorism.
    Section 700.33--Types of allocation orders. This new section
proposes to describe the three types of allocations orders the
Department of Commerce might issue: A set-aside; a directive; or an
allotment. A set-aside is an official action that would require a
person to reserve a resource capacity in anticipation of receipt of
rated orders. A directive is an official action that would require a
person to take or refrain from taking certain actions in accordance
with its provisions. For example, a directive could require a person to
stop or reduce production of an item or service; prohibit the use of
selected materials, services or facilities; divert supply of one type
of material, service or facility to another; or to supply a specific
quantity, size, shape, and type of an item or service within a specific
time period. An allotment is an official action that would specify the
maximum quantity of a material, service, or facility authorized for use
in a specific program or application.

    Section 700.34--Elements of an allocation order. This section sets
forth certain elements that would be required in allocations orders
issued by the Department of Commerce. Two elements would be required
for all allocations orders: An explanation of the relationship between
the allocation order and any previously or subsequently issued rated or
unrated orders; and the specific start and end dates of each required
allocation action. If an order is issued directly to the person to whom
it applies, it must contain the written signature or name of an
authorized official or employee of the Department of Commerce and a
statement identifying the person to whom it applies by name. The order
must state that it is for national defense and state the obligation to
comply with the order and with the DPAS. If the order provides
constructive notice through publication in the Federal Register, the
order must be signed by an authorized official or employee of the
Department of Commerce and the statement may either refer to the
party(ies) to which the order applies by name or specify the class of
persons to whom the order applies. The order must state the requirement
to comply with the order itself and with the DPAS. Original signatures
are not reproduced in the Federal Register.
    Section 700.35--Mandatory acceptance of an allocation order.
Paragraph (a) of this section would require a person to accept and
comply with allocations orders. Paragraph (b) would state that a person
may not discriminate against an allocation order in any manner, such as
by charging higher prices or imposing terms and conditions on
allocations orders that are different from what the person imposed on
contracts or orders for the same resource prior to receiving the
allocation order. Paragraph (c) would provide that a person who is
unable to comply fully with the required actions specified in an
allocation order must notify the Office of Strategic Industries and
Economic Security immediately, explain the extent to which compliance
is possible, and give reasons why full compliance is not possible. Such
notice would not release the person from complying with the allocation
order to the fullest extent possible until notified by the Department
of Commerce that the order has been changed or cancelled. If the notice
is given verbally, written or electronic confirmation must be provided
within one working day.
    Section 700.36--Changes or cancellations of allocation orders. This
section would state that the Department of Commerce may change or
cancel an allocation order through an official action. Notice of such
changes or cancellations may be provided directly to persons to whom
the order being cancelled or modified applies or constructive notice
may be provided by publication in the Federal Register.

Revisions to Subpart H--Special Priorities Assistance

    Section 700.50--General Provisions. No substantive changes would be
made to this section. The first sentence of paragraph (a) would be
revised from ``The DPAS is designed to be largely self-executing'' to
``Once a priority rating has been authorized pursuant to this part,
further action by the Department of Commerce generally is not needed.''
BIS believes that the proposed revised sentence is a more precise
introduction to paragraph (a) because Sec.  700.50 applies to priority
ratings and not to the DPAS as a whole, which would include
allocations. In addition, the priority rating process is not truly
self-executing. A person must place ratings on orders and respond to
rated orders within the specified time limits. However, once the rating
is authorized, in most instances no further action by the Department of
Commerce or a Delegate Agency is needed.
    Paragraph (b) would be revised to replace the phrase ``in support
of this regulation'' with the phrase ``consistent with this part'' to
more precisely state the purposes of special priorities assistance. In
addition the phrase ``not automatically ratable under this regulation''
would be replaced with ``not otherwise ratable under this part''
because ratings do not occur automatically and to make clear that the
regulation referred to is 15 CFR Part 700. A new sentence would be
added to this paragraph to inform the public that if the Department of
Commerce is unable to resolve the problem or to authorize the use of a
priority rating and believes additional assistance is warranted, the
Department of Commerce may forward the request for assistance to
another resource agency, as appropriate, for action.
    Section 700.51--Requests for priority rating authority. This
proposed rule would remove one factor from the non-exclusive list of
factors that the Department of Commerce will consider in evaluating
requests for priority rating authority. The factor proposed for removal
is ``the political sensitivity of the project.'' BIS believes that
considering such a factor when evaluating a request for priority rating
authority is an extremely unlikely possibility and should be removed
from the list. This proposed rule also makes two non-substantive
editorial changes to Sec.  700.51. It changes ``Commerce'' to ``the
Department of Commerce'' and changes the phrase ``this regulation'' to
``this part'' to make clear that the regulation being referred to is 15
CFR part 700.
    Sections 700.53--Criteria for assistance, and 700.54 Instances
where assistance will not be provided. This proposed rule would make
only the non-substantive editorial revision of changing ``Commerce'' to
read ``the Department of Commerce'' in these two sections.
    Section 700.55--Homeland security, emergency preparedness, and
critical infrastructure protection and restoration assistance programs
within the United States. The text of this proposed section is entirely
new. The topic covered by Sec.  700.55 in the existing DPAS
``Assistance programs with Canada and other nations'' would be dealt
with in the new Sec. Sec.  700.56 and 700.57.
    Proposed Sec.  700.55 would direct persons seeking priority rating
authority or assistance in obtaining rated items supporting homeland
security, emergency preparedness and critical infrastructure protection
and restoration related activities, to direct their requests to the
Federal Emergency Management Agency. This section is in accordance with
Section 202(c) of Executive Order 13603, which authorizes the Secretary
of Homeland Security to determine whether ``all other defense programs,
including civil defense and continuity of Government'' are ``necessary
or appropriate to promote the national defense.'' A determination that
a program is necessary or appropriate to promote the national defense
must be made before the Department of Commerce may authorize issuance
of priority ratings for contracts in support of that program.
    Section 700.56--Military assistance programs with Canada. Proposed
section 700.56 addresses situations in which a person in Canada,
producing items for the Canadian government, seeks priorities
assistance for items produced in the United States. BIS is proposing to
create a new section that speaks only to military assistance with
respect to Canada because the Canadian Government has been authorized
to place priority ratings in the United States to support approved
defense programs. Persons in other foreign countries may place priority
ratings in the United States if their requests for military assistance
are sponsored by their government and have DOD approval and
endorsement. The existing DPAS address military assistance programs in
Canada and other foreign nations in a single section. However,

BIS believes that the unique procedures that apply to requesting
military assistance in Canada justify a separate section. Proposed
Sec.  700.56 also would update the contact information that applies to
the government of Canada.
    Section 700.57--Military assistance programs with other nations and
international organizations. Proposed Sec.  700.57 is little changed
from Sec.  700.55(c) and (d) of the existing DPAS. Contact information
for the Department of Defense would be updated. Also, this section
would expressly recognize that persons in international organizations
may seek assistance in obtaining items in the United States or priority
ratings for items to be purchased in the United States. BIS has
provided assistance to international organizations in the past and
believes that adding a reference to international organizations in
proposed Sec.  700.57 would merely codify existing agency practice and
would not represent a change in policy. Proposed Sec.  700.57(c) would
add Australia and Finland to the listing of countries that have entered
into bilateral security of supply arrangements with the United States
Department of Defense and revise Department of Defense contact
information to make both current.
    Section 700.58--Critical infrastructure assistance programs to
foreign nations and international organizations. This section directs
persons in foreign nations and international organizations who are
seeking assistance in obtaining items to be purchased in the United
States for support of critical infrastructure protection or restoration
to contact the Federal Emergency Management Agency. This section is
included in accordance with Section 202(c) of Executive Order 13603,
which authorizes the Secretary of Homeland Security to determine
whether ``all other defense programs, including civil defense and
continuity of Government'' are ``necessary or appropriate to promote
the national defense.'' A determination that a program is necessary or
appropriate to promote the national defense must be made before the
Department of Commerce may authorize issuance of priority ratings for
contracts in support of that program.

Revisions to Subpart I--Official Actions

    Section 700.60--General provisions. Only non-substantive changes
would be made to this section. References to ``Commerce'' would be
changed to ``the Department of Commerce'' and references to ``this
regulation'' would be changed to ``this part'' to make clear that the
regulation referred to is 15 CFR part 700. This section of the proposed
rule also would notify readers that directives are discussed in Sec.
700.62.
    Sections 700.61--Rating authorizations, 700.62 Directories, and
700.63 Letters of understanding. These sections would receive only non-
substantive editorial changes. The rule would correct capitalizations
and replace ``Commerce'' with ``the Department of Commerce.''

Revisions to Subpart J--Compliance

    Section 700.70--General provisions. This proposed rule would remove
paragraph (b) of the existing DPAS from this section. Paragraph (b)
provides that persons who place rated orders ``should'' be familiar
with the DPAS and must comply with its provisions. BIS believes that
the former is aspirational rather than mandatory, and that the latter
is redundant of specific language setting forth violations in section
700.74. This proposed rule would also make non-substantive editorial
changes to section 700.70 by replacing reference to ``this regulation''
with references to ``this part'' to make clear that the regulation
referred to is 15 CFR part 700.
    Section 700.71--Investigations and audits. This section would be
revised in several ways. The requirement for personal service of an
administrative subpoena would be revised to allow leaving a copy of the
document with someone at least 18 years old at the person's last known
dwelling or place of business. Currently, section 700.70 allows leaving
the document with a ``person of suitable age and discretion.'' BIS
believes that setting a minimum age is more precise and will help to
prevent misunderstandings about who is authorized to receive service.
This proposed rule would remove the term ``official action'' from
paragraphs (a), (c)(1), (c)(2) and (c)(3), because, as used in those
paragraphs, compliance with an ``official action'' would be subsumed by
a requirement to comply with the DPAS. References to ``this
regulation'' would be replaced with references to ``this part'' to make
clear that the regulation referred to is 15 CFR part 700.
    Section 700.72--Compulsory process. This section would be revised
to make clear that if a representative of the Department of Commerce is
denied access to premises or sources of information necessary to the
administration or for enforcement of the DPA or the DPAS, the
Department of Commerce may seek compulsory process. The current
language of Sec.  700.72 could be read as stating that only the
representative who was denied access may seek compulsory process. BIS
believes that such a reading would be erroneous. However, in an effort
to prevent confusion, the proposed rule would state that ``the
Department of Commerce may seek compulsory process. . . .'' This
proposed rule also would revise the word ``Commerce'' to read ``the
Department of Commerce'' and would replace the reference to ``this
regulation or official actions'' with ``this part.''
    Section 700.73--Notification of failure to comply. The phrase
``this regulation'' would be changed to read ``this part'' to make
clear that the regulation referred to is 15 CFR part 700.
    Section 700.74--Violations, penalties, and remedies. Only minor
changes would be made to this section. The phrase ``this regulation or
an official action,'' would be replaced with the phrase ``of this
part.'' In five additional places the word ``regulation'' would be
replaced with the word ``part'' to make clear that the regulation
referred to is 15 CFR part 700. The phrase ``this provision'' would be
replaced with ``this section'' to make clear that the provision
referred to is Sec.  700.74.

Revisions to Subpart K--Adjustments, Exceptions, and Appeals

    Section 700.80--Adjustments or exceptions. This proposed rule would
add a requirement that the Office of Strategic Industries and Economic
Security respond to requests for exceptions to or adjustments of the
requirements of 15 CFR part 700, or of any official action taken by the
Department of Commerce in connection with that part, within 25 days,
not including Saturdays, Sundays, or government holidays. All other
proposed changes to this section are non-substantive.
    Section 700.81--Appeals. Non-substantive changes would be made to
this section. The address to which appeals must be sent would be
updated and moved from paragraph (b) to paragraph (a). The phrase ``for
good cause shown'' currently at the end of last sentence of paragraph
(b) would be removed. That sentence addresses when, at the discretion
of the Assistant Secretary for Export Administration, appeals may be
accepted after the 45 day deadline. BIS believes that the phrase adds
nothing of substance to the rule. In paragraph (g) the phrase ``this
regulation'' would be replaced by ``this part'' to clarify that the
regulation referred to is 15 CFR part 700.

Revisions to Subpart L--Miscellaneous Provisions

    Section 700.90--Protection against claims. One non-substantive
change

would be made to this section. The phrase ``this regulation'' would be
replaced with ``this part'' to make clear that the regulation referred
to is 15 CFR part 700.
    Section 700.91--Records and reports. Only non-substantive changes
would be made to this section. The phrase ``this regulation'' would be
replaced with the phrase ``this part'' in four places to make clear
that the regulation referred to is 15 CFR part 700. The word
``Commerce'' would be replaced with ``the Department of Commerce.'' In
paragraph (e), which quotes the confidentiality provision of the DPA,
the references to Section 705(e) of the DPA would be corrected to read
Section 705(d), which is the section quoted.
    Section 700.92--Applicability of this part and official actions.
Only non-substantive changes would be made to Sec.  700.92. The phrase
``this regulation'' would be replaced with ``this part'' in the heading
and in paragraphs (a), (b) and (c) to clarify that the regulation
referred to is 15 CFR part 700. The phrase ``the Department of'' would
be added immediately preceding the word ``Commerce'' at both places
where the later appears in paragraph (c). The phrase ``the
regulations'' would be replaced with the phrase ``any provision of this
part'' in paragraph (d).
    Section 700.93--Communications. This section would be revised to
add an email address, delete the facsimile number, and clarify that the
email address and telephone number listed in Sec.  700.93 apply to
requests for general information such as how to obtain copies of the
DPAS, explanatory information, and requests for guidance or
clarification. The section would expressly state that requests for
special priorities assistance, adjustments, exceptions or appeals must
be submitted in the matter specified in the sections governing those
activities. The phrase ``this regulation'' would be replaced with the
phrase ``this part'' to make clear that the regulation referred to is
15 CFR part 700.

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

    This proposed rule would revise the table in Schedule I to provide
a new program symbol ``G4'' for a new topic heading ``Critical
Infrastructure Assistance to Other Nations.'' To improve readability,
the proposed rule would reformat the table by centering the topic
headings and revising the headings for ``Military Assistance to
Canada,'' ``Military Assistance to Other Foreign Nations'' and ``Co-
production'' into full stand-alone topic headings rather than
subheadings under the heading ``International Defense Programs.'' This
rule would spell out the name of the approving agency on each line that
identifies a program for which that agency has approval authority
rather than use the abbreviation ``Do.,'' which stands for ``ditto,''
and would revise the term ``this regulation'' that appears in the
footnote to read ``this part'' to make clear that the regulation
referred to is 15 CFR part 700. Additionally, a footnote would be added
to explain that program entries where the ``Department of Commerce''
appears in the third column require Department of Commerce
authorization even though strictly speaking, the Department of Commerce
is not a delegate agency.

Request for Comments

    BIS seeks comments on all aspects of this proposed rule. BIS will
consider all comments received on or before April 1, 2014. Comments
received after that date will be considered if feasible, but
consideration cannot be assured. All comments (including any personally
identifying information that those comments or transmittal emails
contain) will be made available for public inspection and copying.
Parties who wish to comment anonymously may do so by submitting their
comments via Regulations.gov, leaving the fields that would identify
the commenter blank and including no identifying information in the
comment itself.

Regulatory 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,'' although not economically significant, under section 3(f) of
Executive Order 12866. Accordingly, the rule has been reviewed by the
Office of Management and Budget (OMB).
    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 regulation contains two collections previously
approved by OMB. OMB control number 0694-0053 authorizes the
requirement that recipients of rated orders notify the party placing
the order whether or not they will fulfill the rated order. BIS
believes that this rule will not materially change the burden imposed
by this collection. OMB control number 0694-0057 authorizes the
collection of information that parties must send to BIS when seeking
special priorities assistance or priority rating authority. BIS
believes that this rule will not materially change the burden imposed
by this collection. Send comments regarding this burden estimate or any
other aspect of these collections of information, including suggestions
for reducing the burden, to Jasmeet K. Seehra, Office of Management and
Budget, by email at<EMAIL_ADDRESS>or by fax to<PHONE_NUMBER> and
to Liam McMenamin<EMAIL_ADDRESS>    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. 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, certified to the Chief Counsel for
Advocacy, Small Business Administration that this proposed rule, if
promulgated, will not have a significant impact on a substantial number
of small entities for the reasons explained below. Consequently, BIS
has not prepared a regulatory flexibility analysis. The factual support
for this certification is provided below.

Number of Small Entities

    Small entities include small businesses, small organizations and
small governmental jurisdictions. For purposes of assessing the impacts
of this proposed rule on small entities, a small business, as described
in the Small Business Administration's Table of Small Business Size
Standards Matched to North American Industry

Classification System Codes (Effective March 26, 2012), has a maximum
annual revenue of $35.5 million and a maximum of 1,500 employees (for
some business categories, these numbers are lower). A small
governmental jurisdiction is a government of a city, town, school
district or special district with a population of less than 50,000. A
small organization is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
    This rule sets criteria under which BIS (or agencies to which BIS
delegates authority) will authorize prioritization of certain orders or
contracts as well as criteria under which BIS would issue orders
allocating resources or production facilities. This rule would affect
organizations that enter into contracts to supply materials, services
and facilities that are necessary for the national defense (broadly
defined to include ``Programs for military and energy production or
construction, military or critical infrastructure assistance to any
foreign nation, homeland security, stockpiling, space, and any directly
related activity''). BIS's experience in administering its priorities
authority indicates that for-profit businesses are the organizations
that provide such materials, services and facilities. If it becomes
necessary to exercise allocations authority, the same types of
materials, services and facilities and the same types of providers are
the ones likely to be affected. Therefore, BIS believes that two of the
categories of small entities identified by the RFA, small organizations
and small government jurisdictions, are unlikely to experience any
economic impact as a result of this rule. However, BIS has no basis on
which to estimate the number of small businesses that are likely to be
affected by this rule.

Impact

    BIS believes that any impact that this rule might have on small
businesses would be minor. The rule has two principle components:
prioritization and allocation. Prioritization is the process that is,
by far, more likely to be used. Under prioritization, BIS designates
certain orders, which may be placed by Government or by private
entities, and assigned under one of two possible priority levels. Once
so designated, such orders are referred to as ``rated orders.'' The
recipient of a rated order must give it priority over an unrated order.
The recipient of a rated order with the higher priority rating must
give that order priority over any rated orders with the lower priority
rating and over unrated orders. A recipient of a rated order may place
one or more orders at the same priority level with suppliers and
subcontractors for supplies and services necessary to fulfill the
recipient's rated order and the suppliers and subcontractors must treat
the request from the rated order recipient as a rated order with the
same priority level as the original rated order. The rule does not
require recipients to fulfill rated orders if the price or terms of
sale are not consistent with the price or terms of sale of similar non-
rated orders. The rule provides a defense from liability for damages or
penalties for actions or inactions made in compliance with the rule.
BIS expects that this rule will not result in any increase in the use
of rated orders. The changes to the provisions of 15 CFR part 700 that
apply to rated orders are primarily simplifications and clarifications.
The standards under which a rated order would be issued are not changed
by this rule.
    Although rated orders could require a firm to fill one order prior
to filling another, they would not require a reduction in the total
volume of orders nor would they require the recipient to reduce prices
or provide rated orders with more favorable terms than a similar non-
rated order. Under these circumstances, the economic effects on the
rated order recipient of substituting one order for another are likely
to be offsetting, resulting in no net loss.
    Allocations could be used to control the general distribution of
materials or services in the civilian market. Specific allocation
actions that BIS might take are set-asides, directives and allotments.
A set-aside is an official action that requires a person to reserve
resource capacity in anticipation of receipt of rated orders. A
directive is an official action that requires a person to take or
refrain from taking certain actions in accordance with its provisions.
A directive can require a person to stop or reduce production of an
item, prohibit the use of selected items, or divert supply of one type
of product to another, or to supply a specific quantity, size, shape,
and type of an item within a specific time period. An allotment is an
official action that specifies the maximum quantity of a material,
service or facility authorized for use in a specific program or
application.
    According to available records, BIS has not taken any actions under
its existing allocations authority in decades and any future
allocations actions would be used only in extraordinary circumstances.
As required by section 101(b) of the Defense Production Act of 1950, as
amended, (50 U.S.C. app. 2071), hereinafter ``DPA,'' and by Section
201(e) of Executive Order 13603 of March 16, 2012, BIS may implement
allocations to control the general distribution of a material in the
civilian market only if the Department of Commerce made, and the
President approved, a finding (1) that the material [or service] is a
scarce and critical material [or service] essential to the national
defense, and (2) that the requirements of the national defense for such
material [or service] cannot otherwise be met without creating a
significant dislocation of the normal distribution of such material [or
service] in the civilian market to such a degree as to create
appreciable hardship. The term ``national defense'' is defined to mean
``programs for military and energy production or construction, military
or critical infrastructure assistance to any foreign nation, homeland
security, stockpiling, space, and any related activity. Such term
includes emergency preparedness activities conducted pursuant to title
IV of the Robert T. Stafford Disaster Relief and Emergency Assistance
Act (42 U.S.C. 5195 et seq.) and critical infrastructure protection and
restoration.''
    Even a narrower use of allocations authority under this proposed
rule would be subject to the policy set forth in Sec.  700.30 which
provides that allocations will be used only when there is insufficient
supply of a material, service, or facility to satisfy national defense
requirements through use of priorities authority or when the use of
priorities authority would cause a severe and prolonged disruption in
the supply of materials, services or facilities available to support
normal U.S. economic activity.
    Any allocation actions taken by BIS would also have to comply with
Section 701(e) of the DPA (50 U.S.C. app. 2151(e)), which provides that
``small business concerns shall be accorded, to the extent practicable,
a fair share of the such material [including services] in proportion to
the share received by such business concerns under normal conditions,
giving such special consideration as may be possible to emerging
business concerns.''

Conclusion

    Although BIS cannot determine precisely the number of small
entities that would be affected by this rule, BIS believes that the
overall impact on such entities would not be significant. With respect
to priorities authority, this rule is not likely to increase the number
of priority rated contracts compared to the number being issued
currently. Therefore the priorities authorities' provisions of this
rule are unlikely to

have any economic impact. BIS's lack of recent experience with
allocations makes gauging the impact of an allocation, should one
occur, difficult. However, because (1) all allocation actions require
planning that includes evaluation of the impact on the civilian market,
(2) allocations to control the general distribution of a material in
the civilian market may be imposed only after a determination by the
President, and (3) BIS has taken no allocation actions in decades, one
can expect allocations will be a rare occurrence. BIS believes that the
expected unchanged level of contract prioritizations, planning and
review requirements and requirements of section 701 of the DPA, which
are directed at protecting the interests of small businesses provide
reasonable assurance that any impact on small business will not be
significant. For the reasons set forth above, the Chief Counsel for
Regulations at the Department of Commerce certified that this action
would not have a significant impact on a substantial number of small
entities.

List of Subjects in 15 CFR Part 700

    Administrative practice and procedure, Business and industry,
Government contracts, National defense, Reporting and recordkeeping
requirements, Strategic and critical materials.

    For the reasons stated in the preamble, 15 CFR part 700 is proposed
to be amended as follows:

PART 700--[AMENDED]

0
1. The authority citations paragraph for part 700 is revised to read as
follows:

    Authority:  50 U.S.C. App. 2061, et seq.; 42 U.S.C. 5195, et
seq.; 50 U.S.C. App 468; 10 U.S.C. 2538; 50 U.S.C. 82; E.O. 12656,
53 FR 226, 3 CFR, 1988, Comp. 585; E.O. 12742, 56 FR 1079, 3 CFR,
1991 Comp. 309; E.O. 13603, 77 FR 16651, 3 CFR, 2012 Comp., p. 225.

0
2. Section 700.1 is revised to read as follows:

Sec.  700.1  Purpose of this part.

    This part implements the Defense Priorities and Allocations System
(DPAS) that is administered by the Department of Commerce, Bureau of
Industry and Security. The DPAS implements the priorities and
allocations authority of the Defense Production Act, including use of
that authority to support emergency preparedness activities pursuant to
Title VI of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5195 et seq.), and the priorities authority
of the Selective Service Act and related statutes, all with respect to
industrial resources. The DPAS establishes procedures for the
placement, acceptance, and performance of priority rated contracts and
orders and for the allocation of materials, services, and facilities.
The guidance and procedures in this part are generally consistent with
the guidance and procedures provided in other regulations issued under
Executive Order 13603 authority.
0
3. Section 700.2 is revised to read as follows:

Sec.  700.2  Introduction.

    (a) Certain national defense and energy programs (including
military, emergency preparedness, homeland security, and critical
infrastructure protection and restoration activities) are approved for
priorities and allocations support. A complete list of currently
approved programs is provided at Schedule I to this part.
    (b) The Department of Commerce administers the DPAS and may
exercise priorities and allocations authority to ensure the timely
delivery of industrial items to meet approved program requirements.
    (c) The Department of Commerce has delegated authority to place
priority ratings on contracts or orders necessary or appropriate to
promote the national defense to certain government agencies that issue
such contracts or orders. Such delegations include authority to
authorize recipients of rated orders to place ratings on contracts or
orders to contractors, subcontractors, and suppliers. Schedule I to
this part includes a list of agencies to which the Department of
Commerce has delegated authority.
0
4. In Sec.  700.3, paragraphs (a), (b), and (e) are revised to read as
follows:

Sec.  700.3  Priority ratings and rated orders.

    (a) Rated orders are identified by a priority rating and a program
identification symbol. Rated orders take precedence over all unrated
orders as necessary to meet required delivery dates. Among rated
orders, DX rated orders take precedence over DO rated orders. Program
identification symbols indicate which approved program is attributed to
the rated order.
    (b) Persons receiving rated orders must give them preferential
treatment as required by this part.
* * * * *
    (e) Persons may place a priority rating on orders only when they
are in receipt of a rated order, have been explicitly authorized to do
so by the Department of Commerce or a Delegate Agency, or are otherwise
permitted to do so by this part.

Sec.  700.4  [Removed and Reserved]

0
5. Section 700.4 is removed and reserved.

Sec.  700.5  [Removed and Reserved]

0
6. Section 700.5 is removed and reserved.

Sec.  700.6  [Removed and Reserved]

0
7. Section 700.6 is removed and reserved.

Sec.  700.7  [Removed and Reserved]

0
8. Section 700.7 is removed and reserved.
0
9. Section 700.8 is revised to read as follows:

Sec.  700.8  Definitions.

    The definitions in this section apply throughout this part:
    Allocation. The control of the distribution of materials, services
or facilities for a purpose deemed necessary or appropriate to promote
the national defense.
    Allocation order. An official action to control the distribution of
materials, services, or facilities for a purpose deemed necessary or
appropriate to promote the national defense.
    Allotment. An official action that specifies the maximum quantity
of a material, service, or facility authorized for a specific use to
promote the national defense.
    Approved program. A program determined as necessary or appropriate
for priorities and allocations support to promote the national defense
by the Secretary of Defense, the Secretary of Energy, or the Secretary
of Homeland Security, under the authority of the Defense Production Act
and Executive Order 13603, or the Selective Service Act and Executive
Order 12742.
    Construction. The erection, addition, extension, or alteration of
any building, structure, or project, using materials or products which
are to be an integral and permanent part of the building, structure, or
project. Construction does not include maintenance and repair.
    Critical infrastructure. Any systems and assets, whether physical
or cyber-based, so vital to the United States that the degradation or
destruction of such systems and assets would have a debilitating impact
on national security, including, but not limited to, national economic
security and national public health or safety.
    Defense Production Act. The Defense Production Act of 1950, as
amended (50 U.S.C. App. 2061, et seq.)
    Delegate Agency. A government agency authorized by delegation from

the Department of Commerce to place priority ratings on contracts or
orders needed to support approved programs.
    Directive. An official action which requires a person to take or
refrain from taking certain actions in accordance with its provisions.
    Emergency preparedness. All activities and measures designed or
undertaken to prepare for or minimize the effects of a hazard upon the
civilian population, to deal with the immediate emergency conditions
which would be created by the hazard, and to effectuate emergency
repairs to, or the emergency restoration of, vital utilities and
facilities destroyed or damaged by the hazard. Emergency preparedness
includes the following:
    (1) Measures to be undertaken in preparation for anticipated
hazards (including the establishment of appropriate organizations,
operational plans, and supporting agreements, the recruitment and
training of personnel, the conduct of research, the procurement and
stockpiling of necessary materials and supplies, the provision of
suitable warning systems, the construction or preparation of shelters,
shelter areas, and control centers, and, when appropriate, the
nonmilitary evacuation of the civilian population);
    (2) Measures to be undertaken during a hazard (including the
enforcement of passive defense regulations prescribed by duly
established military or civil authorities, the evacuation of personnel
to shelter areas, the control of traffic and panic, and the control and
use of lighting and civil communications); and
    (3) Measures to be undertaken following a hazard (including
activities for firefighting, rescue, emergency medical, health and
sanitation services, monitoring for specific dangers of special
weapons, unexploded bomb reconnaissance, essential debris clearance,
emergency welfare measures, and immediately essential emergency repair
or restoration of damaged vital facilities).
    Hazard. An emergency or disaster resulting from:
    (1) A natural disaster, or
    (2) An accidental or man-caused event.
    Homeland security. Includes efforts:
    (1) To prevent terrorist attacks within the United States;
    (2) To reduce the vulnerability of the United States to terrorism;
    (3) To minimize damage from a terrorist attack in the United
States; and
    (4) To recover from a terrorist attack in the United States.
    Industrial resources. All materials, services, and facilities,
including construction materials, the authority for which has not been
delegated to other agencies under Executive Order 13603. This term also
includes the term ``item'' as defined and used in this part.
    Item. Any raw, in process, or manufactured material, article,
commodity, supply, equipment, component, accessory, part, assembly, or
product of any kind, technical information, process, or service.
    Maintenance and repair and/or operating supplies (MRO):
    (1) Maintenance is the upkeep necessary to continue any plant,
facility, or equipment in working condition.
    (2) Repair is the restoration of any plant, facility, or equipment
to working condition when it has been rendered unsafe or unfit for
service by wear and tear, damage, or failure of parts.
    (3) Operating supplies are any items carried as operating supplies
according to a person's established accounting practice. Operating
supplies may include hand tools and expendable tools, jigs, dies,
fixtures used on production equipment, lubricants, cleaners, chemicals
and other expendable items.
    (4) MRO does not include items produced or obtained for sale to
other persons or for installation upon or attachment to the property of
another person, or items required for the production of such items;
items needed for the replacement of any plant, facility, or equipment;
or items for the improvement of any plant, facility, or equipment by
replacing items which are still in working condition with items of a
new or different kind, quality, or design.
    National defense. Programs for military and energy production or
construction, military or critical infrastructure assistance to any
foreign nation, homeland security, stockpiling, space, and any directly
related activity. Such term includes emergency preparedness activities
conducted pursuant to Title VI of The Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C. 5195 et seq.) and
critical infrastructure protection and restoration.
    Official action. An action taken by the Department of Commerce
under the authority of the Defense Production Act, the Selective
Service Act and related statutes, and this part. Such actions include
the issuance of rating authorizations, directives, letters of
understanding, demands for information, inspection authorizations,
administrative subpoenas and allocation orders.
    Person. Any individual, corporation, partnership, association, or
any other organized group of persons, or legal successor or
representative thereof; or any authorized State or local government or
agency thereof; and for purposes of administration of this part,
includes the United States Government and any authorized foreign
government or international organization or agency thereof, delegated
authority as provided in this part.
    Priorities authority. The authority of the Department of Commerce,
pursuant to Section 101 of the Defense Production Act, to require
priority performance of contracts and orders for industrial resource
items for use in approved programs.
    Priority rating. An identifying code assigned by a Delegate Agency
or authorized person placed on all rated orders and consisting of the
rating symbol and the program identification symbol.
    Production equipment. Any item of capital equipment used in
producing materials or furnishing services that has a unit acquisition
cost of $2,500 or more, an anticipated service life in excess of one
year, and the potential for maintaining its integrity as a capital
item.
    Program identification symbols. Abbreviations used to indicate
which approved program is supported by a rated order.
    Rated order. A prime contract, a subcontract, or a purchase order
in support of an approved program issued in accordance with the
provisions of this part.
    Selective Service Act. Section 18 of the Selective Service Act of
1948 (50 U.S.C. app. 468).
    Set-aside. An official action that requires a person to reserve
materials, services, or facilities capacity in anticipation of the
receipt of rated orders.
    Stafford Act. Title VI (Emergency Preparedness) of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act, as amended (42
U.S.C. 5195, et seq.).
    Working day. Any day that the recipient of an order is open for
business.
0
10. Section 700.10 is revised to read as follows:

Sec.  700.10  Authority.

    (a) Delegations to the Department of Commerce. The priorities and
allocations authorities of the President under Title I of the Defense
Production Act with respect to industrial resources have been delegated
to the Secretary of Commerce under Executive Order 13603 of March 16,
2012 (77 FR 16651, 3 CFR, 2012 Comp., p. 225). The priorities

authorities of the President under the Selective Service Act and
related statutes with respect to industrial resources have also been
delegated to the Secretary of Commerce under Executive Order 12742 of
January 8, 1991 (56 FR 1079, 3 CFR, 1991 Comp. 309).
    (b) Delegations by the Department of Commerce. The Department of
Commerce has authorized the Delegate Agencies to assign priority
ratings to orders for industrial resources needed for use in approved
programs.
    (c) Jurisdiction limitations. (1) The priorities and allocations
authority for certain items have been delegated under Executive Order
13603, other executive orders, or Interagency Memoranda of
Understanding between other agencies. Unless otherwise agreed to by the
concerned agencies, the provisions of this part are not applicable to
those other items which include:
    (i) Food resources, food resource facilities, livestock resources,
veterinary resources, plant health resources, and the domestic
distribution of farm equipment and commercial fertilizer (delegated to
the Department of Agriculture);
    (ii) All forms of energy (delegated to the Department of Energy);
    (iii) Health resources (delegated to the Department of Health and
Human Services);
    (iv) All forms of civil transportation (delegated to the Department
of Transportation); and
    (v) Water resources (delegated to the Department of Defense/U.S.
Army Corps of Engineers).
    (2) The priorities and allocations authority set forth in this part
may not be applied to communications services subject to Executive
Order 13618 of July 6, 2012--Assignment of National Security and
Emergency Preparedness Communications Functions (77 FR 40779, 3 CFR,
2012 Comp., p. 273).
0
11. Section 700.11 is amended by revising the second sentence of
paragraph (b) to read as follows:

Sec.  700.11  Priority ratings.

* * * * *
    (b) Program identification symbols. * * * The list of approved
programs and their identification symbols is found in Schedule I to
this part. * * *
* * * * *
0
12. Section 700.12 is revised to read as follows:

Sec.  700.12  Elements of a rated order.

    (a) Elements required for all rated orders. (1) The appropriate
priority rating and program identification symbol (e.g., DO-A1, DX-A4,
DO-N1).
    (2) A required delivery date or dates. The words ``immediately'' or
``as soon as possible'' do not constitute a delivery date. When a
``requirements contract,'' ``basic ordering agreement,'' ``prime vendor
contract,'' or similar procurement document bearing a priority rating
contains no specific delivery date or dates, but provides for the
furnishing of items from time-to-time or within a stated period against
specific purchase orders, such as ``calls,'' ``requisitions,'' and
``delivery orders,'' the purchase orders supporting such contracts or
agreements must specify a required delivery date or dates and are to be
considered as rated as of the date of their receipt by the supplier and
not as of the date of the original procurement document.
    (3) The written signature on a manually placed order, or the
digital signature or name on an electronically placed order, of an
individual authorized to sign rated orders for the person placing the
order. The signature, manual or digital, certifies that the rated order
is authorized under this part and that the requirements of this part
are being followed.
    (4) A statement that reads in substance: This is a rated order
certified for national defense use and you are required to follow all
the provisions of the Defense Priorities and Allocations System
regulations (15 CFR part 700).
    (b) Additional element required for certain emergency preparedness
rated orders. If a rated order is placed for the purpose of emergency
preparedness requirements and expedited action is necessary or
appropriate to meet these requirements, the following statement must be
included in the order. ``This rated order is placed for the purpose of
emergency preparedness. It must be accepted or rejected within [Insert
a time limit no less than the minimum applicable time limit specified
in Sec.  700.13(d)(2)t.].''
0
13. Section 700.13 is amended by revising paragraph (d) to read as
follows:

Sec.  700.13  Acceptance and rejection of rated orders.

* * * * *
    (d) Customer notification requirements. (1) Except as provided in
paragraph (d)(2) of this section, a person must accept or reject a
rated order in writing (hard copy), or in electronic format, within
fifteen (15) working days after receipt of a DO rated order and within
ten (10) working days after receipt of a DX rated order. If the order
is rejected, the person must give reasons in writing or electronically
for the rejection.
    (2) If a rated order is placed for the purpose of emergency
preparedness requirements and expedited action is necessary or
appropriate to meet these requirements and the order includes the
statement set forth in Sec.  700.12(b), a person must accept or reject
the rated order and transmit the acceptance or rejection in writing or
in an electronic format within the time specified in the rated order.
The minimum times for acceptance or rejection that such orders may
specify are six (6) hours after receipt of the order if the order is
issued by an authorized person in response to a hazard that has
occurred, or twelve (12) hours after receipt if the order is issued by
an authorized person to prepare for an imminent hazard.
    (3) If a person has accepted a rated order and subsequently finds
that shipment or performance will be delayed, the person must notify
the customer immediately, give the reasons for the delay, and advise of
a new shipment or performance date. If notification is given verbally,
written (hard copy) or electronic confirmation must be provided within
one working day of the verbal notice.
* * * * *
0
14. Section 700.14 is amended by adding a sentence at the end of the
examples paragraph in paragraph (b) and by revising paragraph (c)(2) to
read as follows:

Sec.  700.14  Preferential scheduling.

* * * * *
    (b) * * *

    Examples:  * * * However, if business operations cannot be
altered to meet both the June 3 and July 15 delivery dates, then the
DX rated order must be given priority over the DO rated order.

    (c) * * *
    (2) If a person is unable to resolve rated order delivery or
performance conflicts under this section, the person should promptly
seek special priorities assistance as provided in Subpart H of this
part. If the person's customer objects to the rescheduling of delivery
or performance of a rated order, the customer should promptly seek
special priorities assistance as provided in Subpart H of this part.
For any rated order against which delivery or performance will be
delayed, the person must notify the customer as provided in Sec.
700.13(d)(3).
* * * * *
0
15. Section 700.15 is amended by revising the second sentence of
paragraph (a), the undesignated paragraph following paragraph (a),
revising the second sentence of

paragraph (b), and by adding paragraph (c) to read as follows:

Sec.  700.15  Extension of priority ratings.

    (a) * * * The person must use the priority rating indicated on the
customer's rated order, except as otherwise provided in this part or as
directed by the Department of Commerce. * * *

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

    (b) * * * Therefore, the inclusion of the rating will continue from
contractor to subcontractor to supplier throughout the entire supply
chain.
    (c) A person must use rated orders with suppliers to obtain items
needed to fill an emergency preparedness rated order. That person must
require acceptance or rejection, and transmission of that acceptance or
rejection by the supplier within the time limit stated in the rated
order that is being filled.
0
16. Section 700.16 is amended by revising paragraphs (d), (e) and (f)
to read as follows:

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

* * * * *
    (d) The following amendments do not constitute a new rated order: a
change in shipping destination; a reduction in the total amount of the
order; an increase in the total amount of the order which has
negligible impact upon deliveries; a minor variation in size or design
(prior to the start of production); or a change which is agreed upon
between the supplier and the customer. (e) A person must cancel any
rated orders that the person (or a predecessor in interest) has placed
with suppliers or cancel the priority ratings on those orders if the
person no longer needs the items in those orders to fill a rated order.
    (f) A person adding a rating to an unrated order, or changing or
cancelling a priority rating must promptly notify all suppliers to whom
the order was sent of the addition, change or cancellation.
0
17. Section 700.17 is amended by revising paragraphs (d)(1)(ii) and (f)
to read as follows:

Sec.  700.17  Use of rated orders.

* * * * *
    (d) * * *
    (1) * * *
    (ii) The elements of a rated order, as required by Sec.  700.12,
are included on the order with the statement required in Sec.
700.12(a)(4) modified to read in substance: ``This purchase order
contains rated order quantities certified for national defense use, and
you are required to follow all the provisions of the Defense Priorities
and Allocations System regulations (15 CFR part 700) as it pertains to
the rated quantities.''
* * * * *
    (f) A person is not required to place a priority rating on an order
for less than $75,000, or one half of the Simplified Acquisition
Threshold (as established in the Federal Acquisition Regulation (FAR)
(see FAR section 2.101), whichever amount is greater, provided that
delivery can be obtained in a timely fashion without the use of the
priority rating.
0
18. Section 700.18 is revised to read as follows:

Sec.  700.18  Limitations on placing rated orders.

    (a) General limitations. (1) A person may not place a rated order
pursuant to this part unless the person is in receipt of a rated order,
has been explicitly authorized to do so by the Department of Commerce
or a Delegate Agency or is otherwise permitted to do so by this part.
    (2) Rated orders may not be used to obtain:
    (i) Delivery on a date earlier than needed;
    (ii) A greater quantity of the item than needed, except to obtain a
minimum procurable quantity;
    (iii) Items in advance of the receipt of a rated order, except as
specifically authorized by the Department of Commerce (see Sec.
700.41(c) for information on obtaining authorization for a priority
rating in advance of a rated order); or
    (iv) Any of the following items unless specific priority rating
authority has been obtained from a Delegate Agency or the Department of
Commerce:
    (A) Items for plant improvement, expansion or construction, unless
they will be physically incorporated into a construction project
covered by a rated order; or
    (B) Production or construction equipment or items to be used for
the manufacture of production equipment (for information on requesting
priority rating authority, see Sec.  700.41).
    (v) Any items related to the development of chemical or biological
warfare capabilities or the production of chemical or biological
weapons, unless such development or production has been authorized by
the President or the Secretary of Defense.
    (3) Separate rated orders may not be placed solely for obtaining
minimum procurable quantities on each order if the minimum procurable
quantity would be sufficient to cover more than one rated order.
    (b) Specific item limitations. Notwithstanding any authorization or
requirement to place a rated order stated elsewhere in this part, no
person may place a rated order to obtain the following items unless
such order is authorized by an official action of the Department of
Commerce.
    (1) Copper raw materials.
    (2) Crushed stone.
    (3) Gravel.
    (4) Sand.
    (5) Scrap.
    (6) Slag.
    (7) Steam heat, central.
    (8) Waste paper.
0
19. Section 700.21 is revised to read as follows:

Sec.  700.21  Application for priority rating authority.

    (a) For projects believed to maximize domestic energy supplies, a
person may request priority rating authority for scarce, critical, and
essential supplies of materials, equipment, and services (related to
the production of materials or equipment, or the installation, repair,
or maintenance of equipment) by submitting a request to the Department
of Energy. Further information may be obtained from the Department of
Energy, Office of Electricity Delivery and Energy Reliability, 1000
Independence Avenue SW., Washington, DC 20585.
    (b) If the Department of Energy notifies the Department of Commerce
that the project maximizes domestic energy supplies and that the
materials, equipment, or services are critical and essential, the
Department of Commerce will determine whether the items in question are
scarce, and, if they are scarce, whether there is a need to use the
priorities authority.
    (1) Scarcity implies an unusual difficulty in obtaining the
materials, equipment, or services in a time frame consistent with the
timely completion of the energy project. In determining scarcity, the
Department of Commerce may consider factors such as the following:
    (i) Value and volume of material or equipment shipments;
    (ii) Consumption of material and equipment;
    (iii) Volume and market trends of imports and exports;
    (iv) Domestic and foreign sources of supply;
    (v) Normal levels of inventories;

    (vi) Rates of capacity utilization;
    (vii) Volume of new orders; and
    (viii) Lead times for new orders.
    (2) In finding whether there is a need to use the priorities
authority, the Department of Commerce may consider alternative supply
solutions and other measures.
    (c) After the Department of Commerce has conducted its analysis, it
will advise the Department of Energy whether the two findings have been
satisfied. If the findings are satisfied, the Department of Commerce
will authorize the Department of Energy to grant the use of a priority
rating to the applicant.
    (d) Schedule I to this part includes a list of approved programs to
support the maximization of domestic energy supplies. A Department of
Energy regulation setting forth the procedures and criteria used by the
Department of Energy in making its determination and findings is
published in 10 CFR part 216.

Subpart F--Allocation Actions

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20. The heading of Subpart F is revised to read as set forth above.
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21. Section 700.30 is revised to read as follows:

Sec.  700.30  Policy.

    (a) Allocation orders will:
    (1) Be used only when there is insufficient supply of a material,
service, or facility to satisfy national defense requirements through
the use of the priorities authority or when the use of the priorities
authority would cause a severe and prolonged disruption in the supply
of materials, services, or facilities available to support normal U.S.
economic activities; and
    (2) Not be used to ration materials or services at the retail
level.
    (b) Allocation orders, when used, will be distributed equitably
among the suppliers of the materials, services, or facilities being
allocated and not require any person to relinquish a disproportionate
share of the civilian market.
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22. Section 700.31 is revised to read as follows:

Sec.  700.31  General procedures.

    Before the Department of Commerce uses its allocations authority to
address a supply problem within its resource jurisdiction, it will
develop a plan that includes:
    (a) A copy of the written determination made in accordance with
section 202 of Executive Order 13603, that the program or programs that
would be supported by the allocation action are necessary or
appropriate to promote the national defense;
    (b) A detailed description of the situation to include any unusual
events or circumstances that have created the requirement for an
allocation action;
    (c) A statement of the specific objective(s) of the allocation
action;
    (d) A list of the materials, services, or facilities to be
allocated;
    (e) A list or description of the sources of the materials,
services, or facilities that will be subject to the allocation action;
    (f) A detailed description of the provisions that will be included
in the allocations orders, including the type(s) of allocations orders,
the percentages or quantity of capacity or output to be allocated for
each purpose, the relationship with previously or subsequently received
priority rated and unrated contracts and orders, and the duration of
the allocation action (e.g., anticipated start and end dates);
    (g) An evaluation of the impact of the proposed allocation action
on the civilian market; and
    (h) Proposed actions, if any, to mitigate disruptions to civilian
market operations.
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23. In Subpart F, add Sec.  700.32 to read as follows:

Sec.  700.32  Controlling the general distribution of a material in the
civilian market.

    No allocation action by the Department of Commerce may be used to
control the general distribution of a material in the civilian market
unless the conditions of paragraphs (a), (b) and (c) of this section
are met.
    (a) The Secretary has made a written finding that:
    (1) Such material is a scarce and critical material essential to
the national defense, and
    (2) The requirements of the national defense for such material
cannot otherwise be met without creating a significant dislocation of
the normal distribution of such material in the civilian market to such
a degree as to create appreciable hardship.
    (b) The Secretary has submitted the finding for the President's
approval through the Assistant to the President and National Security
Advisor and the Assistant to the President for Homeland Security and
Counterterrorism.
    (c) The President has approved the finding.
    (d) In this section, the term, ``Secretary'' means the Secretary of
Commerce or his or her designee.
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24. In Subpart F, add Sec.  700.33 to read as follows:

Sec.  700.33  Types of allocations orders.

    There are three types of allocations orders available for
communicating allocation actions.
    (a) Set-aside. A set-aside is an official action that requires a
person to reserve materials, services, or facilities capacity in
anticipation of the receipt of rated orders.
    (b) Directive. A directive is an official action that requires a
person to take or refrain from taking certain actions in accordance
with its provisions. For example, a directive can require a person to:
Stop or reduce production of an item; prohibit the use of selected
materials, services, or facilities; or divert the use of materials,
services, or facilities from one purpose to another.
    (c) Allotment. An allotment is an official action that specifies
the maximum quantity of a material, service, or facility authorized for
a specific use to promote the national defense.
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25. In Subpart F, add Sec.  700.34 to read as follows:

Sec.  700.34  Elements of an allocation order.

    Allocation orders may be issued directly to the affected persons or
by constructive notice to the parties through publication in the
Federal Register. This section describes the elements that each order
must include.
    (a) Elements to be included in all allocation orders.
    (1) A detailed description of the required allocation action(s),
including its relationship to previously or subsequently received DX
rated orders, DO rated orders and unrated orders.
    (2) Specific start and end calendar dates for each required
allocation action.
    (b) Elements to be included in orders issued directly to affected
persons.
    (1) A statement that reads in substance: ``This is an allocation
order certified for national defense use. [Insert the name of the
person receiving the order] is required to comply with this order, in
accordance with the provisions of the Defense Priorities and
Allocations System regulations (15 CFR part 700).''
    (2) The written signature on a manually placed order, or the
digital signature or name on an electronically placed order, of an
authorized official or employee of the Department of Commerce.
    (c) Elements to be included in an allocation order that gives
constructive notice through publication in the Federal Register.
    (1) A statement that reads in substance: ``This is an allocation
order certified for national defense use. [Insert the name(s) of the
person(s) to whom

the order applies or a description of the class of persons to whom the
order applies] is (are) required to comply with this order, in
accordance with the provisions of the Defense Priorities and
Allocations System regulations (15 CFR part 700).''
    (2) The order must be signed by an authorized official or employee
of the Department of Commerce.
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26. In Subpart F, add Sec.  700.35 to read as follows:

Sec.  700.35  Mandatory acceptance of an allocation order.

    (a) Except as otherwise specified in this section, a person shall
accept and comply with every allocation order received.
    (b) A person shall not discriminate against an allocation order in
any manner such as by charging higher prices for materials, services,
or facilities covered by the order or by imposing terms and conditions
for contracts and orders involving allocated materials, services, or
facilities that differ from the person's terms and conditions for
contracts and orders for the materials, services, or facilities prior
to receiving the allocation order.
    (c) If a person is unable to comply fully with the required
action(s) specified in an allocation order, the person must notify the
Office of Strategic Industries and Economic Security immediately,
explain the extent to which compliance is possible, and give the
reasons why full compliance is not possible. If notification is given
verbally, written or electronic confirmation must be provided within
one working day. Such notification does not release the person from
complying with the order to the fullest extent possible, until the
person is notified by the Department of Commerce that the order has
been changed or cancelled.
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27. In Subpart F, add Sec.  700.36 to read as follows:

Sec.  700.36  Changes or cancellations of allocation orders.

    An allocation order may be changed or cancelled by an official
action from the Department of Commerce. Notice of such changes or
cancellations may be provided directly to persons to whom the order
being cancelled or modified applies or constructive notice may be
provided by publication in the Federal Register.
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28. Section 700.50 is amended by revising the first sentence of
paragraph (a) and revising paragraph (b) to read as follows:

Sec.  700.50  General provisions.

    (a) Once a priority rating has been authorized pursuant to this
part, further action by the Department of Commerce generally is not
needed. * * *
    (b) Special priorities assistance can be provided for any reason
consistent with this part, such as assisting in obtaining timely
deliveries of items needed to satisfy rated orders or authorizing the
use of priority ratings on orders to obtain items not otherwise ratable
under this part. If the Department of Commerce is unable to resolve the
problem or to authorize the use of a priority rating and believes
additional assistance is warranted, the Department of Commerce may
forward the request to another agency, identified in Sec.  700.10(c),
as appropriate, for action.
* * * * *

Sec.  700.51  [Amended]

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29. Section 700.51 is amended by:
0
a. Removing the word ``regulation'' and adding in its place the word
``part'' in paragraph (a), introductory text;
0
b. Adding the phrase ``the Department of'' immediately preceding the
word ``Commerce'' in the first sentence of paragraph (c)(1);
0
c. Adding the word ``and'' at the end of paragraph (c)(3)(iv);
0
d. Removing paragraph (c)(3)(v); and
0
e. Redesignating paragraph (c)(3)(vi) as (c)(3)(v).

Sec.  700.53  [Amended]

0
30. Section 700.53 is amneded by adding the words ``the Department of''
between the word ``or'' and the word ``Commerce'' in the introductory
text.

Sec.  700.54  [Amended]

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31. Section 700.54 is amended by adding the words ``the Department of''
between the word ``or'' and the word ``Commerce'' in the introductory
text.
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32. Section 700.55 is revised to read as follows:

Sec.  700.55  Homeland security, emergency preparedness, and critical
infrastructure protection and restoration assistance programs within
the United States.

    Any person requesting priority rating authority or requiring
assistance in obtaining rated items supporting homeland security,
emergency preparedness, and critical infrastructure protection and
restoration related activities should submit a request for such
assistance or priority rating authority to the Office of Policy and
Program Analysis, Federal Emergency Management Agency, Department of
Homeland Security, 500 C Street SW., Washington, DC, 20472; telephone:
(202) 646-3520; Fax:<PHONE_NUMBER>; Email<EMAIL_ADDRESS>Web
site: http://www.fema.gov/defense-production-act-program-division.
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33. In Subpart H, Sec.  700.56 is added to read as follows:

Sec.  700.56  Military assistance programs with Canada.

    (a) To promote military assistance to Canada, this section provides
for authorizing priority ratings to persons in Canada to obtain items
in the United States in support of approved programs. Although priority
ratings have no legal authority outside of the United States, this
section also provides information on how persons in the United States
may obtain informal assistance in Canada in support of approved
programs.
    (b) The joint United States-Canadian military arrangements for the
defense of North America and the integrated nature of the United States
and Canadian defense industries require close coordination and the
establishment of a means to provide mutual assistance to the defense
industries located in both countries.
    (c) The Department of Commerce coordinates with the Canadian Public
Works and Government Services Canada on all matters of mutual concern
relating to the administration of this part.
    (d) Any person in the United States ordering defense items in
Canada in support of an approved program should inform the Canadian
supplier that the items being ordered are to be used to fill a rated
order. The Canadian supplier should be informed that if production
materials are needed from the United States by the supplier or the
supplier's vendor to fill the order, the supplier or vendor should
contact the Canadian Public Works and Government Services Canada for
authority to place rated orders in the United States: Public Works and
Government Services Canada, Acquisitions Branch, Business Management
Directorate, Phase 3, Place du Portage, Level 0A1, 11 Laurier Street,
Gatineau, Quebec, K1A 0S5, Canada; Telephone:<PHONE_NUMBER>; Fax:
(819) 956-7827, or electronically at
<EMAIL_ADDRESS>    (e) Any person in Canada producing defense items for the Canadian
government may also obtain priority rating authority for items to be
purchased in the United States by applying to the Canadian Public Works
and Government Services Canada, Acquisitions Branch, Business
Management Directorate, in accordance with its procedures. (f) Persons
in Canada needing special priorities

assistance in obtaining defense items in the United States may apply to
the Canadian Public Works and Government Services Canada, Acquisitions
Branch, Business Management Directorate, for such assistance. Public
Works and Government Services Canada will forward appropriate requests
to the Department of Commerce.
    (g) Any person in the United States requiring assistance in
obtaining items in Canada must submit a request through the Delegate
Agency to the Office of Strategic Industries and Economic Security,
U.S. Department of Commerce on Form BIS-999. The Department of Commerce
will forward appropriate requests to the Canadian Public Works and
Government Services Canada.
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34. In Subpart H, Sec.  700.57 is added to read as follows:

Sec.  700.57   Military assistance programs with other nations and
international organizations.

    (a) Scope. To promote military assistance to foreign nations and
international organizations (for example the North Atlantic Treaty
Organization or the United Nations), this section provides for
authorizing priority ratings to persons in foreign nations or
international organizations to obtain items in the United States in
support of approved programs. Although priority ratings have no legal
authority outside of the United States, this section also provides
information on how persons in the United States may obtain informal
assistance in Australia, Finland, Italy, The Netherlands, Sweden, and
the United Kingdom in support of approved programs. (b) Foreign nations
and international organizations. (1) Any person in a foreign nation
other than Canada, or any person in an international organization,
requiring assistance in obtaining items in the United States or
priority rating authority for items to be purchased in the United
States, should submit a request for such assistance or priority rating
authority to: The Department of Defense DPAS Lead in the Office of the
Deputy Assistant Secretary of Defense for Manufacturing and Industrial
Base Policy, 3330 Defense Pentagon, Washington, DC 20301; Telephone:
(703) 697-0051; Fax:<PHONE_NUMBER>; Email<EMAIL_ADDRESS>Web site:
http://www.acq.osd.mil/mibp.
    (i) If the end product is being acquired by a U.S. Government
agency, the request should be submitted to the Department of Defense
DPAS Lead through the U.S. contract administration representative.
    (ii) If the end product is being acquired by a foreign nation or
international organization, the request must be sponsored prior to its
submission to the Department of Defense DPAS Lead by the government of
the foreign nation or the international organization that will use the
end product.
    (2) If the Department of Defense endorses the request, it will be
forwarded to the Department of Commerce for appropriate action.
    (c) Requesting assistance in Australia, Finland, Italy, The
Netherlands, Sweden, and the United Kingdom.
    (1) The Department of Defense has entered into bilateral security
of supply arrangements with Australia, Finland, Italy, The Netherlands,
Sweden, and the United Kingdom that allow the Department of Defense to
request the priority delivery for Department of Defense contracts,
subcontracts, and orders from companies in these countries.
    (2) Any person in the United States requiring assistance in
obtaining the priority delivery of a contract, subcontract, or order in
Australia, Finland, Italy, The Netherlands, Sweden, or the United
Kingdom to support an approved program should contact the Department of
Defense DPAS Lead in the Office of the Deputy Assistant Secretary of
Defense for Manufacturing and Industrial Base Policy for assistance.
Persons in Australia, Finland, Italy, The Netherlands, Sweden, and the
United Kingdom should request assistance in accordance with paragraph
(b)(1) of this section.
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35. In Subpart H, Sec.  700.58 is added to read as follows:

Sec.  700.58  Critical infrastructure assistance programs to foreign
nations and international organizations.

    (a) Scope. To promote critical infrastructure assistance to foreign
nations, this section provides for authorizing priority ratings to
persons in foreign nations or international organizations (for example
the North Atlantic Treaty Organization or the United Nations) to obtain
items in the United States in support of approved programs.
    (b) Foreign nations or international organizations. Any person in a
foreign nation or representing an international organization requiring
assistance in obtaining items to be purchased in the United States for
support of critical infrastructure protection and restoration should
submit a request for such assistance or priority rating authority to
the Office of Policy and Program Analysis, Federal Emergency Management
Agency, Department of Homeland Security, 500 C Street SW., Washington,
DC 20472; telephone:<PHONE_NUMBER>; Fax:<PHONE_NUMBER>; Email<EMAIL_ADDRESS>Web site: http://www.fema.gov/defense-production-act-program-division.
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36. Section 700.60 is revised to read as follows:

Sec.  700.60  General provisions.

    (a) The Department of Commerce may, from time-to-time, take
specific official actions to implement or enforce the provisions of
this part.
    (b) Some of these official actions (rating authorizations and
letters of understanding) are discussed in this subpart. Official
actions that pertain to compliance (administrative subpoenas, demands
for information, and inspection authorizations) are discussed in Sec.
700.71(c). Directives are discussed in Sec.  700.62.
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37. Section 700.61 is amended by revising the heading and paragraph (a)
introductory text to read as follows:

Sec.  700.61  Rating authorizations.

    (a) A rating authorization is an official action granting specific
priority rating authority that:
* * * * *

Sec.  700.62  [Amended]

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38. Section 700.62 is amended by removing ``Directive'' wherever it
appears and by adding in its place ``directive''.

Sec.  700.63  [Amended]

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39. Section 700.63 is amended by:
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a. Removing ``Letter of Understanding'' wherever it appears and adding
in its place ``letter of understanding''; and
0
b. Adding the words ``the Department of'' immediately preceding the
word ``Commerce''.

Sec.  700.70  [Amended]

0
40. Section 700.70 is amended by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraph (c) as paragraph (b); and
0
c. Removing the word ``regulation'' wherever it appears and adding in
its place the word ``part''.
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41. Section 700.71 is revised to read as follows:

Sec.  700.71  Audits and investigations.

    (a) Audits and investigations are official actions involving the
examination of books, records, documents, other writings and
information to ensure that the provisions of the Defense Production
Act, the Selective Service Act and

related statutes, and this part have been properly followed. An audit
or investigation may also include interviews and a systems evaluation
to detect problems or failures in the implementation of this part.
    (b) When undertaking an audit, investigation, or other inquiry, the
Department of Commerce shall:
    (1) Define the scope and purpose in the official action given to
the person under investigation, and
    (2) Have ascertained that the information sought or other adequate
and authoritative data are not available from any Federal or other
responsible agency.
    (c) In administering this part, the Department of Commerce may
issue the following documents, which constitute official actions:
    (1) Administrative subpoenas. An administrative subpoena requires a
person to appear as a witness before an official designated by the
Department of Commerce to testify under oath on matters of which that
person has knowledge relating to the enforcement or the administration
of the Defense Production Act, the Selective Service Act and related
statutes, or this part. An administrative subpoena may also require the
production of books, papers, records, documents and physical objects or
property.