[Federal Register Volume 76, Number 247 (Friday, December 23, 2011)]
[Proposed Rules]
[Pages 80282-80291]
[FR Doc No: 2011-32867]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 742 and 774

[Docket No. 111020643-1642-01]
RIN 0694-AF42

Revisions to the Export Administration Regulations (EAR): Control
of Vessels of War and Related Articles the President Determines No
Longer Warrant Control Under the United States Munitions List (USML)

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

ACTION: Proposed rule.

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SUMMARY: The Bureau of Industry and Security publishes a proposed rule
that describes how surface vessels of war and related articles that the
President determines no longer warrant control under Category VI
(surface vessels of war and special naval equipment) of the United
States Munitions List (USML) would be controlled under the Commerce
Control List (CCL) in new Export Control Classification Numbers (ECCNs)
8A609, 8B609, 8C609, 8D609, and 8E609.
    This rule is one of a planned series of proposed rules that are
part of the Administration's Export Control Reform Initiative under
which various types of articles presently controlled on the USML under
the International Traffic in Arms Regulations (ITAR) would, instead, be
controlled on the CCL in accordance with the requirements of the Export
Administration Regulations (EAR), if and after the President determines
that such articles no longer warrant control on the USML.
    BIS is publishing this proposed rule, on December 23, 2011, in
conjunction with another proposed rule that describes how submersible
vessels, oceanographic and associated equipment the President
determines no longer warrant control under USML Category VI or Category
XX would be controlled under the CCL in new Export Control
Classification Numbers (ECCNs) 8A620, 8B620, 8D620, and 8E620. This
proposed rule also is being published in conjunction with two proposed
rules of the Department of State, Directorate of Defense Trade
Controls, that would amend the list of articles controlled by USML
Categories VI and XX, respectively.

DATES: Comments must be received by February 6, 2012.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
The identification number for this rulemaking is BIS-2011-0044.
     By email directly to<EMAIL_ADDRESS>Include
RIN 0694-AF42 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-AF42.

FOR FURTHER INFORMATION CONTACT: Alexander Lopes, Director, Office of
Nonproliferation and Treaty Compliance, Bureau of Industry and
Security, U.S. Department of Commerce, Telephone:<PHONE_NUMBER>,
Email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    On July 15, 2011, as part of the Administration's ongoing Export
Control Reform Initiative, the Bureau of Industry and Security (BIS)
published a proposed rule (76 FR 41958) (``the July 15 proposed rule'')
that set forth a framework for how articles the President determines,
in accordance with section 38(f) of the Arms Export Control Act (AECA)
(22 U.S.C. 2778(f)), would no longer warrant control on the United
States Munitions List (USML) and, instead, would be controlled on the
Commerce Control List (CCL). The July 15 proposed rule also contained a
proposal by BIS describing how military vehicles and related articles
in USML Category VII that no longer warrant control under the USML
would be controlled on the CCL--the military vehicles proposal was the
first in a series of such proposed rules to be published by BIS.
    On November 7, 2011 (76 FR 68675), and December 6, 2011 (76 FR
76072), BIS published proposed rules describing, respectively, how
aircraft and related items, and gas turbine engines and related items,
determined by the President to no longer warrant control under the USML
would be controlled on the CCL. In the November 7 proposed rule, BIS
also made several changes and additions to the framework proposed in
the July 15 proposed rule.
    BIS plans to publish additional proposed rules describing how
certain articles that the President determines no longer warrant
control on the USML (e.g., submersibles, submarines, and related
articles now controlled by USML Category VI or XX) would be controlled
on the CCL.
    BIS also plans to publish a proposed rule describing how the new
controls described in this and similar notices would be implemented,
such as through the use of ``grandfather'' clauses and additional
exceptions. The goal of such amendments would be to give exporters
sufficient time to implement the final versions of such changes and to
avoid, to the extent possible, situations where transactions would
require licenses from both the State Department and the Commerce
Department.
    Following the structure of the July 15 and November 7 proposed
rules, which describe the ``export control reform initiative
framework'' for controlling on the CCL articles that the President
determines no longer warrant control on the USML, this proposed rule
describes BIS's proposal for how another group of items--various
surface vessels of war and related articles that are controlled by USML
Category VI--would be controlled on the CCL. The changes described in
this proposed rule and the State Department's proposed amendment to
Category VI of the USML are based on a review of Category VI by the
Defense Department, which worked with the Departments of State and
Commerce in preparing the proposed amendments. The review was focused
on identifying the types of articles that are now controlled by USML
Category VI that are either: (i) Inherently military and otherwise
warrant control on the USML, or (ii) if they are a type common to civil
applications, possess parameters or characteristics that provide a
critical military or intelligence advantage to the United States, and
are almost exclusively available from the United States. If an article
satisfies either or both of those criteria, the article would remain on
the USML. If an article did not satisfy either criterion, but is
nonetheless a type of article that is, as a result of differences in
form and fit, ``specially designed'' for military applications, then it
is identified in one of the new ECCNs in this proposed rule. Finally,
if an article does not satisfy either of the two criteria and is not
found to be ``specially designed'' for military applications, the
article is not affected by this rule because such items already are not
on the USML.
    The licensing policies and other EAR-specific controls for such
items that are also described in this proposed rule

would enhance our national security by: (i) Allowing for greater
interoperability with our NATO and other allies while maintaining and
expanding robust controls that, in some instances, would include
prohibitions on exports or reexports destined for other countries or
intended for proscribed end-users and end-uses; (ii) enhancing our
defense industrial base by, for example, reducing the current
incentives for foreign companies to design out or avoid U.S.-origin
ITAR-controlled content, particularly with respect to generic,
unspecified parts and components; and (iii) permitting the U.S.
Government to focus its resources on controlling, monitoring,
investigating, analyzing, and, if need be, prohibiting exports and
reexports of more significant items to destinations, end users, and end
uses of greater concern than our NATO allies and other multi-regime
partners.
    Pursuant to section 38(f) of the AECA, the President shall review
the USML ``to determine what items, if any, no longer warrant export
controls under'' the AECA. The President must report the results of the
review to Congress and wait 30 days before removing any such items from
the USML. The report must ``describe the nature of any controls to be
imposed on that item under any other provision of law.'' 22 U.S.C.
2778(f)(1). This proposed rule describes how certain surface vessels of
war and related articles in USML Category VI would be controlled by the
EAR and identified on the CCL, if the President determines that the
articles no longer warrant control on the USML. The Department of
Commerce is publishing, in conjunction with this proposed rule on
December 23, 2011, a proposed rule that will describe how submersible
vessels, oceanographic and associated equipment that the President
determines no longer warrant control on the USML Category VI or XX
would be controlled on the CCL under new ECCNs 8A620, 8B620, 8D620, and
8E620.
    In the July 15 proposed rule, BIS proposed creating a series of new
ECCNs to control items that: (i) Would be moved from the USML to the
CCL or (ii) are listed on the Wassenaar Arrangement on Export Controls
for Conventional Arms and Dual-Use Goods and Technologies Munitions
List (Wassenaar Arrangement Munitions List or WAML) and are already
controlled elsewhere on the CCL. The proposed rule referred to this
series as the ``600 series'' because the third character in each of the
new ECCNs would be a ``6.'' The first two characters of the 600 series
ECCNs serve the same function as described for any other ECCN in Sec.
738.2 of the EAR. The first character is a digit in the range 0 through
9 that identifies the Category on the CCL in which the ECCN is located.
The second character is a letter in the range A through E that
identifies the product group within a CCL Category. In the 600 series,
the third character is the number 6. With few exceptions, the final two
characters identify the WAML category that covers items that are the
same or similar to items in a particular 600 series ECCN.
    BIS will publish additional Federal Register notices containing
proposed amendments to the CCL that will describe proposed controls for
additional categories of articles the President determines no longer
warrant control under the USML. The State Department will publish,
concurrently, proposed amendments to the USML that correspond to the
BIS notices. BIS will also publish proposed rules to further align the
CCL with the WAML and the Missile Technology Control Regime Equipment,
Software and Technology Annex.

Modifications to Provisions in the July 15 Proposed Rule

    In addition to the proposals mentioned above, this proposed rule
would make the following modifications to the July 15 proposed rule:
     Addition of the new Category 8 (600 series) ECCNs to Sec.
742.6(a)(1).
    These modifications are described in the section ``Scope of this
Proposed Rule.''
    The comment period for the July 15 Proposed Rule closed on
September 13, 2011. BIS will consider comments on the July 15 proposals
only for the specific paragraph, note, and ECCNs referenced above, and
only within the context of this proposed rule's modifications to them.

Scope of This Proposed Rule

    This proposed rule would create five new 600 series ECCNs in CCL
Category 8--8A609, 8B609, 8C609, 8D609, and 8E609--that would control
articles the President determines no longer warrant control under USML
Category VI. The proposed changes are discussed in more detail, below.

New Category 8 (600 Series) ECCNs

    Certain surface vessels of war and related articles that the
President determines no longer warrant control in USML Category VI
would be controlled under proposed new ECCNs 8A609, 8B609, 8C609,
8D609, and 8E609. These new ECCNs follow the 600 series construct
identified in the July 15 proposed rule.
    Paragraph .a of ECCN 8A609 would control surface vessels of war
that are ``specially designed'' for military use, but not enumerated in
the USML or elsewhere on the CCL. Paragraphs .b through .w would be
reserved for possible future use. Paragraph .x would consist of parts,
components, accessories and attachments (including certain unfinished
products that have reached a stage in manufacturing where they are
clearly identifiable as commodities controlled by paragraph .x) that
are ``specially designed'' for a commodity in paragraph .a or a defense
article in USML Category VI. Paragraph .y would consist of specific
types of commodities that, if specially designed for a commodity
subject to control in ECCN 8A609 or a defense article in USML Category
VI, warrant less strict controls because they have little or no
military significance. Commodities listed in paragraph .y would be
subject to antiterrorism (AT Column 1) controls, which currently impose
a license requirement for five countries. A license also would be
required, in accordance with the July 15 proposed rule, if commodities
listed in paragraph .y were destined to the People's Republic of China
for a military end use as described in Sec.  744.21 of the EAR.
    This proposed rule does not add gas turbine engines for military
vessels of war to the proposed new ECCN 8A609. Instead, the
Administration issued a separate proposed rule, on December 6,
describing the U.S. Government's controls on gas turbine engines and
related items for military aircraft, ships, and vehicles that no longer
warrant control under the USML or an existing 018 ECCN on the CCL.
Similarly, this proposed rule does not address military submersible
vessels of war, submarines, and related articles that no longer warrant
control under the USML--BIS will address controls on these items in a
separate proposed rule.
    ECCN 8B609.a would control test, inspection, and production
``equipment'' ``specially designed'' for the ``development'' or
``production'' of surface vessels of war and related commodities
enumerated in ECCN 8A609 (except for items in 8A609.y) or in USML
Category VI. Paragraphs .b through .x and paragraphs .y.1 through .y.98
would be reserved for possible future use.
    ECCN 8C609.a would control materials ``specially designed'' for the
``development'' or ``production'' of surface vessels of war and related
commodities enumerated in ECCN 8A609 that are not specified elsewhere
on the CCL, such as in Category 1, or on the USML. Paragraphs .b
through .x of

ECCN 8C609 would be reserved for possible future use. USML subcategory
XIII(f) would continue to control structural materials ``specifically
designed, developed, configured, modified, or adapted for defense
articles,'' such as warships and vessels of war controlled by USML
subcategory VI(a). The State Department plans to publish a proposed
rule that would make USML Category XIII(f) a more positive list of
controlled structural materials. Commerce will publish a corresponding
proposed rule under which ECCN 8C609 would control any materials
``specially designed'' for USML Category VI or ECCN 8A609 that would no
longer be controlled by the revised XIII(f).
    ECCN 8D609.a would control ``software'' ``required'' for the
``development,'' ``production,'' operation, or maintenance of
commodities enumerated in 8A609, 8B609, or 8C609. Paragraphs .b through
.x of ECCN 8D609 would be reserved for possible future use. ECCN
8D609.y would control specific ``software'' ``specially designed'' for
the ``development,'' ``production,'' operation, or maintenance of
commodities enumerated in ECCN 8A609.y, 8B609.y, or 8C609.y.
    ECCN 8E609.a would control ``technology'' ``required'' for the
``development,'' ``production,'' operation, installation, maintenance,
repair, or overhaul of items enumerated in ECCN 8A609, 8B609, 8C609, or
8D609, except for items enumerated in 8A609.y, 8B609.y, 8C609.y, or
8D609.y. Paragraphs .b through .x of ECCN 8E609 would be reserved for
possible future use. ECCN 8E609.y would control specific ``technology''
``required'' for the ``development,'' ``production,'' operation,
installation, maintenance, repair, or overhaul of items enumerated in
ECCN 8A609.y, 8B609.y, 8C609.y, or 8D609.y.
    In addition, ECCNs 8A609, 8B609, 8C609, 8D609, and 8E609 would each
contain a special paragraph designated ``.y.99.'' Paragraph .y.99 would
control any item that meets all of following criteria: (i) The item is
not listed on the CCL; (ii) the item was previously determined to be
subject to the EAR in an applicable commodity jurisdiction
determination issued by the U.S. Department of State; and (iii) the
item would otherwise be controlled under one of these Category 8, 600
series, ECCNs because, for example, the item was ``specially designed''
for a military use. Items in these .y.99 paragraphs would be subject to
antiterrorism controls.

Corresponding Amendments

    As discussed in further detail below, the July 15 proposed rule
stated that one reason for control for items classified in the 600
series is Regional Stability (specifically, RS Column 1). Items
classified under proposed ECCN 8A609, ECCN 8B609, or ECCN 8C609, other
than ECCN 8A609.y, 8B609.y, or 8C609.y items, as well as related
technology and software classified under ECCNs 8D609 and 8E609, would
be controlled for this reason, among others. Correspondingly, this
proposed rule would revise Sec.  742.6 of the EAR to apply the RS
Column 1 licensing policy to commodities classified under ECCN 8A609,
8B609, 8C609 (except paragraphs .y of those ECCNs), and to related
software and technology classified under ECCNs 8D609 and 8E609. Note
that the proposed rule on military aircraft and related items that BIS
published on November 7 would amend the RS Column 1 licensing policy to
impose a general policy of denial for ``600 series'' items if the
destination is subject to a United States arms embargo.

Relationship to the July 15 Proposed Rule

    As referenced above, the purpose of the July 15 proposed rule is to
establish within the EAR the framework for controlling on the CCL
articles that the President determines no longer warrant control on the
USML. To facilitate that goal, the July 15 proposed rule contains
definitions and concepts that are meant to be applied across
Categories. However, as BIS undertakes rulemakings to move specific
types of articles from the USML to the CCL, if and after the President
determines that such articles no longer warrant control under the USML,
there may be unforeseen issues or complications that require BIS to
reexamine those definitions and concepts. The comment period for the
July 15 proposed rule closed on September 13, 2011. In the November 7
proposed rule, BIS proposed several changes to those definitions and
concepts. The comment period for the November 7 proposed rule closed on
December 22, 2011.
    To the extent that this rule's proposals affect any provision in
the July 15 proposed rule or the July 15 proposed rule's provisions
affect this proposed rule, BIS will consider comments on those
provisions so long as they are within the context of the changes
proposed in this rule. For example, BIS will consider comments on how
the movement of Category VI items from the USML to the CCL affects a
definition, restriction, or provision that was contained in the July 15
proposed rule. BIS will also consider comments on the impact of a
definition of a term in the July 15 proposed rule when that term is
used in this proposed rule. BIS will not consider comments of a general
nature regarding the July 15 proposed rule that are submitted in
response to this rulemaking.
    BIS believes that the following provisions of the July 15 proposed
rule and the November 7 proposed rule on aircraft and related items are
among those that could affect the items covered by this proposed rule:
     De minimis provisions in Sec.  734.4;
     Restrictions on use of license exceptions in Sec. Sec.
740.2, 740.10, 740.11, and 740.20;
     Change to national security licensing policy in Sec.
742.4;
     Requirement to request authorization to use License
Exception STA (strategic trade authorization) for end items in 600
series ECCNs and procedures for submitting such requests in Sec. Sec.
740.2, 740.20, 748.8 and Supp. No. 2 to part 748;
     Addition of 600 series items to Supplement No. 2 to Part
744--List of Items Subject to the Military End-Use Requirement of Sec.
744.21; and
     Definitions of terms in Sec.  772.1.
    BIS believes that the following provisions of this proposed rule
are among those that could affect the provisions of the July 15 and
November 7 proposed rules:
     Additional 600 series items identified in the RS Column
licensing policy described in Sec.  742.6.

Effects of This Proposed Rule

    BIS believes that the principal effect of this rule will be to
provide greater flexibility for exports and reexports to NATO member
countries and other multiple-regime-member countries of items the
President determines no longer warrant control on the United States
Munitions List. This greater flexibility will be in the form of:
application of the EAR's de minimis threshold principle for items
constituting less than a de minimis amount of controlled U.S.-origin
content in foreign made items; availability of license exceptions,
particularly License Exceptions RPL (servicing and replacement of parts
and equipment) and STA (strategic trade authorization); elimination of
the requirements for manufacturing license agreements and technical
assistance agreements in connection with exports of technology; and a
reduction in, or elimination of, exporter and manufacturer registration
requirements and associated registration

fees. Some of these specific effects are discussed in more detail
below.

De minimis

    Section 734.3 of the EAR provides, inter alia, that under certain
conditions items made outside the United States that incorporate items
subject to the EAR are not subject to the EAR if they do not exceed a
``de minimis'' percentage of controlled U.S. origin content. Depending
on the destination, the de minimis percentage can be either 10 percent
or 25 percent. If the July 15 proposed rule's amendments at Sec.  734.4
of the EAR are adopted, the new ECCNs 8A609, 8B609, 8C609, 8D609 and
8E609 proposed in this rule would be subject to the de minimis
provisions set forth in the July 15 proposed rule, because they would
be ``600 series'' ECCNs. Foreign-made items incorporating items
controlled under the new ECCNs would become eligible for de minimis
treatment at the 10 percent level (i.e., a foreign-made item is not
subject to the EAR if the value of its U.S.-origin controlled content
does not exceed 10 percent of foreign-made item's value). The AECA does
not permit the ITAR to have a de minimis treatment for these USML-
listed items, regardless of the significance or insignificance of the
item, meaning that items subject to the ITAR remain subject to the ITAR
when they are incorporated abroad into a foreign-made item, regardless
of the percentage of U.S. origin content in the foreign-made item. In
addition, foreign-made items that incorporate any items that are
currently classified under an 018 ECCN and that are moved to a new 600
series ECCN would be subject to the EAR if those foreign-made items
contained more than 10 percent U.S.-origin controlled content,
regardless of the destination and regardless of the proportion of the
U.S.-origin controlled content accounted for by the former 018 ECCN
items.
    Based on the July 15 rule's proposals, foreign-made items that
contain controlled U.S.-origin content classified under non-600 series
ECCNs, as well as 600 series ECCNs, would potentially have to be
evaluated in two stages to determine whether they would qualify for de
minimis treatment. First, the value of the 600 series ECCN content
would have to be calculated. If the value of the 600 series ECCN
content exceeds 10 percent of the value of the foreign-made item, the
item would not qualify for de minimis treatment and would be subject to
the EAR. However, if the value of the 600 series ECCN content does not
exceed 10 percent of the value of the foreign-made item, then the value
of all of the controlled U.S. origin content (including both non-600
series and 600 series ECCN content) would have to be calculated to
determine whether the foreign made item's total U.S. origin controlled
content exceeds the de minimis percentage (either 10 percent or 25
percent) applicable to the country of destination. BIS is reviewing
comments that the public submitted with respect to this proposal and
plans to publish another proposed rule that addresses these comments
and other related issues.

Use of License Exceptions

    The July 15 proposed rule would impose certain restrictions on the
use of license exceptions for items that would be controlled under the
new 600 series ECCNs on the CCL. For example, proposed Sec.
740.2(a)(12) would make 600 series items that are destined for a
country subject to a United States arms embargo ineligible for shipment
under a license exception, except where authorized by License Exception
GOV under Sec.  740.11(b)(2)(ii) of the EAR. In addition, the use of
License Exception GOV for 600 series commodities would be limited to
situations in which the United States Government is the consignee and
end user or to situations in which the consignee or end user is the
government of a country listed in Sec.  740.20(c)(1). With respect to
License Exception STA, the July 15 proposed rule would (i) limit
eligibility for ``end items'' in 600 series ECCNs to those end items
for which a specific request for License Exception STA eligibility
(filed in conjunction with a license application) has been approved and
(ii) require that the end item be for ultimate end use by a foreign
government agency of a type specified in the July 15 proposed rule. The
July 15 proposed rule also would limit exports of 600 series parts,
components, accessories, and attachments under License Exception STA
for ultimate end use by the same set of end users and limit the
shipment of 600 series items under License Exception STA to
destinations listed in Sec.  740.20(c)(1).
    BIS believes that, even with the July 15 and November 7 proposed
restrictions on the use of license exceptions for 600 series items, the
restrictions on those items currently on the USML would be reduced,
particularly with respect to exports to NATO members and multiple-
regime member countries, if those items are moved from the USML to
proposed ECCN 8A609.

Making U.S. Export Controls More Consistent with the Wassenaar
Arrangement Munitions List Controls

    The Administration has stated, since the beginning of the Export
Control Reform Initiative, that the reforms will be consistent with the
obligations of the United States to the multilateral export control
regimes. Accordingly, the Administration will, in this and subsequent
proposed rules, exercise its national discretion to implement, clarify,
and, to the extent feasible, align its controls with those of the
regimes. For example, the proposed ECCN 8A609 tracks, to the extent
possible, the numbering structure and text of WAML category 9
pertaining to surface vessels of war not subject to the ITAR. It also
implements in 8A609.x the controls in WAML category 16 for forgings,
castings, and other unfinished products; in 8B609.a the controls in
WAML category 18 for production equipment; in 8D609 the applicable
controls in WAML category 21 for software; and in 8E609 the applicable
controls in WAML category 22 for technology.

Other Effects

    Pursuant to the framework identified in the July 15 proposed rule,
commodities classified under ECCN 8A609 (other than ECCN 8A609.y),
along with related test inspection and production equipment, materials,
software, and technology classified under ECCN 8B609, 8C609, 8D609 or
8E609 (except items classified under the .y paragraphs of these ECCNs)
would be subject to the licensing policies that apply to items
controlled for national security reasons, as described in Sec.
742.4(b)(1)--specifically, NS Column 1 controls. All commodities in
ECCN 8A609 (other than those identified in 8A609.y, which are
controlled for AT Column 1 anti-terrorism reasons only and may also be
subject to the prohibitions described in Part 744), along with related
test, inspection and production equipment, materials, software and
technology classified under ECCN 8B609, 8C609, 8D609 or 8E609 (except
items classified under the .y paragraphs of these ECCNs), would be
subject to the regional stability licensing policies set forth in Sec.
742.6(a)(1)--specifically, RS Column 1.
    The July 15 proposed rule would change Sec.  742.4 to apply a
general policy of denial to 600 series items for destinations that are
subject to a United States arms embargo. That policy would apply to all
items controlled for national security (NS) reasons under this proposed
rule. The November 7 proposed rule would expand that

general policy of denial to include 600 series items subject to the
licensing policies that apply to items controlled for regional
stability reasons, as described in Sec.  742.6(b)(1)--specifically, RS
Column 1. While this change might seem redundant for the items affected
by this proposed rule, it ensures that a general denial policy would
apply to any 600 series items that are controlled for missile
technology (MT) and regional stability (RS) reasons, but not for
national security (NS) reasons (as would be the case for certain items
affected by the aircraft rule).

Jurisdictional and Classification Status of Items Subject to Previous
Commodity Jurisdiction Determinations

    The Administration recognizes that some items that would fall
within the scope of the proposed new ECCNs will have been subject to
commodity jurisdiction (CJ) determinations issued by the United States
Department of State. The State Department will have either determined
that the item was subject to the jurisdiction of the ITAR or that it
was not. (See 22 CFR Sec. Sec.  120.3 and 120.4). Under this proposed
rule, items that the State Department determined to be not subject to
the ITAR and that are not described on the CCL would be subject to the
AT-only controls of the ``.y.99'' paragraph of a 600 series ECCN if
they would otherwise be within the scope of the ECCN. Thus, for
example, ECCN 8A609.x would control any part, component, accessory, or
attachment not specifically identified in the USML or elsewhere in the
ECCN if it was ``specially designed'' for a surface vessel of war.
However, any part, component, accessory or attachment, which is
determined by CJ not to be subject to the ITAR and is (as defined)
``specially designed'' for a surface vessel of war, would be controlled
under 8A609.y.99 if it is not identified elsewhere on the CCL. If the
item is controlled, either as a matter of law or as the result of a
subsequent commodity classification (``CCATS'') determination by
Commerce, under an ECCN that is currently on the CCL (e.g., ECCN
8A992.f), that ECCN would continue to apply to the item. This general
approach will, pending public comment, be repeated in subsequent
proposed rules pertaining to other categories of items.
    If, however, the State Department had made a CJ determination that
a particular item was subject to the jurisdiction of ITAR but that item
is not described on the final, implemented version of a revised USML
category, a new CJ determination would not be required unless there is
doubt about the application of the new USML category to the item. (See
22 CFR 120.4). Thus, unless there are doubts about the jurisdictional
status of a particular item, exporters and reexporters would be
entitled to rely on the revised USML categories when making
jurisdictional determinations, notwithstanding past CJ determinations
that, under the previous version of the USML, the item was ITAR
controlled.
    Finally, if the State Department had made a CJ determination that a
particular item was subject to the jurisdiction of the ITAR and that
item remains in the revised USML, the item would remain subject to the
jurisdiction of the ITAR.

Section-by-Section Description of the Proposed Changes

     Section 742.6--ECCNs 8A609, 8B609, 8C609, 8D609 and 8E609
are added to Sec.  742.6(a)(1) to impose an RS Column 1 license
requirement and licensing policy, including a general policy of denial
in Section 742.6(b)(1) for applications to export or reexport ``600
series'' items to destinations that are subject to a United States arms
embargo.
     Supplement No. 1 to part 774--Adds ECCNs 8A609, 8B609,
8C609, 8D609 and 8E609.

Request for Comments

    BIS seeks comments on this proposed rule. BIS will consider all
comments received on or before February 6, 2012. All comments
(including any personally identifying information or information for
which a claim of confidentially is asserted either in those comments or
their transmittal emails) 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.
    Although the Export Administration Act expired on August 20, 2001,
the President, through Executive Order 13222 of August 17, 2001, 3 CFR,
2001 Comp., p. 783 (2002), as extended by the Notice of August 12,
2011, 76 FR 50661 (August 16, 2011), has continued the Export
Administration Regulations in effect under the International Emergency
Economic Powers Act. BIS continues to carry out the provisions of the
Act, as appropriate and to the extent permitted by law, pursuant to
Executive Order 13222.

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 proposed rule would affect two approved
collections: Simplified Network Application Processing + System
(control number 0694-0088), which includes, among other things, license
applications, and License Exceptions and Exclusions (0694-0137).
    As stated in the proposed rules published at 76 FR 41958 (July 15,
2011), 76 FR 68675 (November 7, 2011), 76 FR 76072 (December 6, 2011),
and 76 FR 76085 (December 6, 2011) and in the proposed rule on
submersible vessels, oceanographic and associated equipment that is
being published in conjunction with this proposed rule on December 23,
2011, BIS believes that the combined effect of all rules to be
published adding items to EAR that would be removed from the ITAR as
part of the administration's Export Control Reform Initiative would
increase the number of license applications to be submitted by
approximately 16,000 annually, resulting in an increase in burden hours
of 5,067 (16,000 transactions at 17 minutes each) under control number
0694-0088.
    Some items formerly on the USML would become eligible for License
Exception STA under this rule. Other such items may become eligible for
License Exception STA upon approval of a request submitted in
conjunction with a license application. As stated in the July 15 and
November 7 proposed

rules published by BIS, in the two proposed rules that BIS published on
December 6, and in the proposed rule on submersible vessels,
oceanographic and associated equipment that BIS is publishing in
conjunction with this proposed rule on December 23, 2011, BIS believes
that the increased use of License Exception STA resulting from the
combined effect of all rules to be published adding items to EAR that
would be removed from the ITAR as part of the administration's Export
Control Reform Initiative would increase the burden associated with
control number 0694-0137 by about 23,858 hours (20,450 transactions @ 1
hour and 10 minutes each).
    BIS expects that this increase in burden would be more than offset
by a reduction in burden hours associated with approved collections
related to the ITAR. This proposed rule addresses controls on surface
vessels of war and related parts, components, production equipment,
materials, software, and technology. The largest impact of the proposed
rule would be with respect to exporters of parts and components
because, under the proposed rule, most U.S. and foreign military
vessels of war currently in service would continue to be subject to the
ITAR. Because, with few exceptions, the ITAR allows exemptions from
license requirements only for exports to Canada, most exports to
integrators for U.S government equipment and most exports of routine
maintenance parts and components for our NATO and other close allies
require State Department authorization. In addition, the exports
necessary to produce parts and components for defense articles in the
inventories of the United States and its NATO and other close allies
require State Department authorizations. Under the EAR, as proposed, a
small number of low level parts would not require a license to most
destinations. Most other parts, components, accessories, and
attachments would become eligible for export to NATO and other close
allies under License Exception STA. Use of License Exception STA
imposes a paperwork and compliance burden because, for example,
exporters must furnish information about the item being exported to the
consignee and obtain from the consignee an acknowledgement and
commitment to comply with the EAR. It is, however, the Administration's
understanding that complying with the requirements of STA is likely to
be less burdensome than applying for licenses. For example, under
License Exception STA, a single consignee statement can apply to an
unlimited number of products, need not have an expiration date and need
not be submitted to the government in advance for approval. Suppliers
with regular customers can tailor a single statement and assurance to
match their business relationship rather than applying repeatedly for
licenses with every purchase order to supply allied and, in some cases,
U.S forces with routine replacement parts and components.
    Even in situations in which a license would be required under the
EAR, the burden likely will be reduced compared to the license
requirement of the ITAR. In particular, license applications for
exports of technology controlled by ECCN 8E609 are likely to be less
complex and burdensome than the authorizations required to export ITAR-
controlled technology, i.e., Manufacturing License Agreements and
Technical Assistance Agreements.
    3. This rule does not contain policies with Federalism implications
as that term is defined under E.O. 13132.
    4. The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C.
601 et seq., generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to the notice and comment
rulemaking requirements under the Administrative Procedure Act (5
U.S.C. 553) or any other statute, unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Under section 605(b) of the RFA, however, if
the head of an agency certifies that a rule will not have a significant
impact on a substantial number of small entities, the statute does not
require the agency to prepare a regulatory flexibility analysis.
Pursuant to section 605(b), the Chief Counsel for Regulation,
Department of Commerce, certifiedto 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. A summary of the factual
basis for the certification is provided below.

Number of Small Entities

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

Economic Impact

    This proposed rule is part of the Administration's Export Control
Reform Initiative. Under that initiative, the United States Munitions
List (22 CFR part 121) (USML) would be revised to be a ``positive''
list, i.e., a list that does not use generic, catch-all controls on any
part, component, accessory, attachment, or end item that was in any way
specifically modified for a defense article, regardless of the
article's military or intelligence significance or non-military
applications. At the same time, articles that are determined to no
longer warrant control on the USML would become controlled on the
Commerce Control List (CCL). Such items, along with certain military
items that currently are on the CCL, will be identified in specific
Export Control Classification Numbers (ECCNs) known as the ``600
series'' ECCNs. In addition, some items currently on the Commerce
Control List would move from existing ECCNs to the new 600 series
ECCNs. In practice, the greatest impact of this rule on small entities
would likely be reduced administrative costs and reduced delay for
exports of items that are now on the USML but would become subject to
the EAR. This rule focuses on Category VI articles, which are surface
vessels of war and related parts, components, production equipment,
software, and technology. Most operational military vessels of war
currently in active inventory would remain on the USML. However, parts
and components, which are more likely to be produced by small
businesses than are complete military vessels of war, would in many
cases become subject to the EAR. In addition, officials of the
Department of State have informed BIS that license applications for
such parts and components are a high percentage of the license
applications for USML articles review by that department. Changing the
jurisdictional status of Category VI items would reduce the burden on
small entities (and other entities as well) through: (i) Elimination of
some license requirements, (ii) greater availability of license
exceptions, (iii) simpler license application procedures, and (iv)
reduced, or eliminated, registration fees.
    In addition, parts and components controlled under the ITAR remain
under ITAR control when incorporated into foreign-made items,
regardless of the significance or insignificance of the item. This
discourages foreign buyers from incorporating such U.S. content. The
availability of de minimis treatment under the EAR may reduce the
incentive for foreign manufacturers to refrain from

purchasing U.S.-origin parts and components.
    Parts and components identified in ECCN 8A609.y would be designated
immediately as parts and components that, even if specially designed
for a military use, have little or no military significance. These
parts and components, which under the ITAR require a license to nearly
all destinations, would, under the EAR, require a license to only five
destinations and, if destined for a military end use, to the People's
Republic of China.
    Many exports and reexports of the Category VI articles that would
be placed on the CCL by this rule, particularly parts and components,
would become eligible for license exceptions that apply to shipments to
United States Government agencies, shipments valued at less than
$1,500, parts and components being exported for use as replacement
parts, temporary exports, and License Exception Strategic Trade
Authorization (STA), reducing the number of licenses that exporters of
these items would need. License Exceptions under the EAR would allow
suppliers to send routine replacement parts and low level parts to NATO
and other close allies and export control regime partners for use by
those governments and for use by contractors building equipment for
those governments or for the United States government without having to
obtain export licenses. Under License Exception STA, the exporter would
need to furnish information about the item being exported to the
consignee and obtain a statement from the consignee that, among other
things, would commit the consignee to comply with the EAR and other
applicable U.S. laws. Because such statements and obligations can apply
to an unlimited number of transactions and have no expiration date,
they would impose a net reduction in burden on transactions that the
government routinely approves through the license application process
that the License Exception STA statements would replace.
    Even for exports and reexports for which a license would be
required, the process would be simpler and less costly under the EAR.
When a USML Category VI article is moved to the CCL, the number of
destinations for which a license is required would remain unchanged.
However, the burden on the license applicant would decrease because the
licensing procedure for CCL items is simpler and more flexible than the
license procedure for UMSL articles.
    Under the USML licensing procedure, an applicant must include a
purchase order or contract with its application. There is no such
requirement under the CCL licensing procedure. This difference gives
the CCL applicant at least two advantages. First, the applicant has a
way of determining whether the U.S. government will authorize the
transaction before it enters into potentially lengthy, complex and
expensive sales presentations or contract negotiations. Under the USML
procedure, the applicant must caveat all sales presentations with a
reference to the need for government approval and is more likely to
engage in substantial effort and expense only to find that the
government will reject the application. Second, a CCL license applicant
need not limit its application to the quantity or value of one purchase
order or contract. It may apply for a license to cover all of its
expected exports or reexports to a specified consignee over the life of
a license (normally two years, but may be longer if circumstances
warrant a longer period), thus reducing the total number of licenses
for which the applicant must apply.
    In addition, many applicants exporting or reexporting items that
this rule would transfer from the USML to the CCL would realize cost
savings through the elimination of some or all registration fees
currently assessed under the USML's licensing procedure. Currently,
USML applicants must pay to use the USML licensing procedure even if
they never actually are authorized to export. Registration fees for
manufacturers and exporters of articles on the USML start at $2,500 per
year, increase to $2,750 for organizations applying for one to ten
licenses per year and further increases to $2,750 plus $250 per license
application (subject to a maximum of three percent of total application
value) for those who need to apply for more than ten licenses per year.
There are no registration or application processing fees for
applications to export items listed on the CCL. Once the Category VI
items that are the subject to this rulemaking are moved from the USML
to the CCL, entities currently applying for licenses from the
Department of State would find their registration fees reduced if the
number of USML licenses those entities need declines. If an entity's
entire product line is moved to the CCL, its ITAR registration and
registration fee requirement would be eliminated entirely.
    De minimis treatment under the EAR would become available for all
items that this rule would transfer from the USML to the CCL. Items
subject to the ITAR remain subject to the ITAR when they are
incorporated abroad into a foreign-made product regardless of the
percentage of U.S content in that foreign made product. Foreign-made
products incorporating items that this rule would move to the CCL would
be subject to the EAR only if their total controlled U.S.-origin
content exceeds 10 percent. Because including small amounts of U.S.-
origin content would not subject foreign-made products to the EAR,
foreign manufacturers would have less incentive to refrain from
purchasing such U.S.-origin parts and components, a development that
potentially would mean greater sales for U.S. suppliers, including
small entities.
    For items currently on the CCL that would be moved from existing
ECCNs to the new 600 series, license exception availability would be
narrowed somewhat and the applicable de minimis threshold for foreign-
made products containing those items would in some cases be reduced
from 25 percent to 10 percent. However, BIS believes that increased
burden imposed by those actions will be offset substantially by the
reduction in burden attributable to the moving of items from the USML
to CCL and the compliance benefits associated with the consolidation of
all WAML items subject to the EAR in one series of ECCNs.

Conclusion

    BIS is unable to determine the precise number of small entities
that would be affected by this rule. Based on the facts and conclusions
set forth above, BIS believes that any burdens imposed by this rule
would be offset by a reduction in the number of items that would
require a license, increased opportunities for use of license
exceptions for exports to certain countries, simpler export license
applications, reduced or eliminated registration fees and application
of a de minimis threshold for foreign-made items incorporating U.S.-
origin parts and components, which would reduce the incentive for
foreign buyers to design out or avoid U.S.-origin content. For these
reasons, the Chief Counsel for Regulation of the Department of Commerce
certified to the Chief Counsel for Advocacy of the Small Business
Administration that this rule, if adopted in final form, would not have
a significant economic impact on a substantial number of small
entities.

List of Subjects

15 CFR Part 742

    Exports, Terrorism.

15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, parts 742 and 774 of the
Export Administration Regulations (15 CFR parts 730-774) are proposed
to be amended as follows:

 PART 742--[AMENDED]

    1. The authority citation for 15 CFR part 742 continues to read as
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 22 U.S.C. 7201 et seq.; 22
U.S.C. 7210; Sec. 1503, Pub. L. 108-11, 117 Stat. 559; E.O. 12058,
43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3
CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp.,
p. 950; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O.
13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Presidential
Determination 2003-23 of May 7, 2003, 68 FR 26459, May 16, 2003;
Notice of August 12, 2011, 76 FR 50661 (August 16, 2011); Notice of
November 9, 2011, 76 FR 70319 (November 10, 2011).
    2. Section 742.6 is amended by revising paragraph (a)(1) to read as
follows:

Sec.  742.6  Regional stability.

    (a) * * *
    (1) RS Column 1 License Requirements in General. As indicated in
the CCL and in RS column 1 of the Commerce Country Chart (see
Supplement No. 1 to part 738 of the EAR), a license is required to all
destinations, except Canada, for items described on the CCL under ECCNs
0A521; 0A606 (except 0A606.b and .y); 0B521; 0B606 (except 0B606.y);
0C521; 0C606 (except 0C606.y); 0D521; 0D606 (except 0D606.y); 0E521;
0E606 (except 0E606.y); 6A002.a.1, a.2, a.3, .c, or .e; 6A003.b.3, and
b.4.a; 6A008.j.1; 6A998.b; 6D001 (only ``software'' for the
``development'' or ``production'' of items in 6A002.a.1, a.2, a.3, .c;
6A003.b.3 and .b.4; or 6A008.j.1); 6D002 (only ``software'' for the
``use'' of items in 6A002.a.1, a.2, a.3, .c; 6A003.b.3 and .b.4; or
6A008.j.1); 6D003.c; 6D991 (only ``software'' for the ``development,''
``production,'' or ``use'' of equipment classified under 6A002.e or
6A998.b); 6E001 (only ``technology'' for ``development'' of items in
6A002.a.1, a.2, a.3 (except 6A002.a.3.d.2.a and 6A002.a.3.e for lead
selenide focal plane arrays), and .c or .e, 6A003.b.3 and b.4, or
6A008.j.1); 6E002 (only ``technology'' for ``production'' of items in
6A002.a.1, a.2, a.3, .c, or .e, 6A003.b.3 or b.4, or 6A008.j.1); 6E991
(only ``technology'' for the ``development,'' ``production,'' or
``use'' of equipment classified under 6A998.b); 6D994; 7A994 (only
QRS11-00100-100/101 and QRS11-0050-443/569 Micromachined Angular Rate
Sensors); 7D001 (only ``software'' for ``development'' or
``production'' of items in 7A001, 7A002, or 7A003); 7E001 (only
``technology'' for the ``development'' of inertial navigation systems,
inertial equipment, and specially designed components therefor for
civil aircraft); 7E002 (only ``technology'' for the ``production'' of
inertial navigation systems, inertial equipment, and specially designed
components therefor for civil aircraft); 7E101 (only ``technology'' for
the ``use'' of inertial navigation systems, inertial equipment, and
specially designed components for civil aircraft); 8A609 (except
8A609.y); 8B609 (except 8B609.y); 8C609 (except 8C609.y); 8D609 (except
software for the ``development,'' ``production,'' operation, or
maintenance of commodities controlled by 8A609.y, 8B609.y, or 8C609.y);
8E609 (except ``technology'' for the ``development,'' ``production,''
operation, installation, maintenance, repair, or overhaul of
commodities controlled by 8A609.y, 8B609.y, or 8C609.y); 9A610 (except
9A610.y); 9A619 (except 9A619.y); 9B610 (except 9B610.y); 9B619 (except
9B619.y); 9C610 (except 9C610.y); 9C619 (except 9C619.y); 9D610 (except
software for the ``development,'' ``production,'' operation,
installation, maintenance, repair, or overhaul of commodities
controlled by 9A610.y, 9B610.y, or 9C610.y); 9D619 (except software for
the ``development,'' ``production,'' operation, or maintenance of
commodities controlled by 9A619.y, 9B619.y, or 9C619.y); 9E610 (except
``technology'' for the ``development,'' ``production,'' operation,
installation, maintenance, repair, or overhaul of commodities
controlled by ECCN 9A610.y, 9B610.y, or 9C610.y); and 9E619 (except
``technology'' for the ``development,'' ``production'' operation,
installation, maintenance, repair, or overhaul of commodities
controlled by ECCN 9A619.y, 9B619.y, or 9C619.y).
* * * * *

PART 774--[AMENDED]

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

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et
seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42
U.S.C. 6212; 43 U.S.C. 1354; 15 U.S.C. 1824a; 50 U.S.C. app. 5; 22
U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 13026, 61 FR 58767, 3 CFR,
1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p.
783; Notice of August 12, 2011, 76 FR 50661 (August 16, 2011).
    4. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 8--Marine, add a new ECCN 8A609 between ECCNs 8A018 and 8A992
to read as follows:

Supplement No. 1 to Part 774--The Commerce Control List

* * * * *
8A609 Surface vessels of war and related commodities.

License Requirements

    Reason for Control: NS, RS, AT.

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 8A609.y.  NS Column 1.
RS applies to entire entry except 8A609.y.  RS Column 1.
AT applies to entire entry................  AT Column 1.
------------------------------------------------------------------------

License Exceptions

    LVS: $1,500.
    GBS: N/A.
    CIV: N/A.
    STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2))
of the EAR may not be used for any item in 8A609. Paragraph (c)(1) of
License Exception STA (Sec.  740.20(c)(1)) may not be used for any
``end item'' in 8A609, unless determined by BIS to be eligible for
License Exception STA in accordance with Sec.  740.20(g) (License
Exception STA eligibility requests for ``600 series'' end items). See
Sec.  740.20(g) for the procedures to follow if you wish to request new
STA eligibility for ``end items'' under this ECCN 8A609 as part of an
export, reexport, or transfer (in-country) license application. ``End
items'' under this entry that have already been determined to be
eligible for License Exception STA are listed in Supplement No. 4 to
part 774 and on the BIS Web site at www.bis.doc.gov. Paragraph (c)(1)
of License Exception STA (Sec.  740.20(c)(1)) may be used for items in
8A609.x without the need for a determination described in Sec.
740.20(g).

List of Items Controlled

    Unit: Items in number; parts, components, accessories and
attachments in $ value.
    Related Controls: (1) Surface vessels of war and special naval
equipment, and technical data (including software), and services
directly related thereto, described in 22 CFR part 121, Category VI,
Surface Vessels of War and Special Naval Equipment are subject to the

jurisdiction of the International Traffic in Arms Regulations. (2) See
ECCN 0A919 for foreign-made ``military commodities'' that incorporate
more than 10% U.S.-origin ``600 series'' items. (3) For controls on
diesel engines and electric motors for surface vessels of war subject
to the EAR, see ECCN 8A992.g. (4) For controls on military gas turbine
engines and related items for vessels of war, see ECCN 9A619 (as
published on December 6, 2011, at 76 FR 76072, in a separate proposed
rule that addresses gas turbine engines for military vehicles, vessels
of war, and aircraft).
    Related Definitions: N/A.
    Items:
    a. Surface Vessels of war ``specially designed'' for a military use
and not enumerated in the USML.

    Note: 8A609.a includes: (i) underway replenishment ships, (ii)
surface vessel and submarine tender and repair ships, (iii) non-
submersible submarine rescue ships, (iv) other auxiliaries (e.g.,
AGDS, AGF, AGM, AGOR, AGOS, AH, AP, ARL, AVB, AVM, and AVT), (v)
amphibious warfare craft except those that are armed; or (vi)
unarmored, and unarmed coastal, patrol, roadstead, and Coast Guard
and other patrol craft with mounts or hard points for firearms of
.50 caliber or less.

    b. through w. [RESERVED]
    x. ``Parts,'' ``components,'' ``accessories and attachments'' that
are ``specially designed'' for a commodity enumerated in ECCN 8A609 or
a defense article enumerated in USML Category VI and not specified
elsewhere in the CCL or the USML.

    Note 1: Forgings, castings, and other unfinished products, such
as extrusions and machined bodies, that have reached a stage in
manufacturing where they are clearly identifiable by material
composition, geometry, or function as commodities controlled by ECCN
8A609.x are controlled by ECCN 8A609.x.

    Note 2:  ``Parts,'' ``components,'' ``accessories and
attachments'' specified in USML subcategory VI(g) are subject to the
controls of that paragraph. ``Parts,'' ``components,'' ``accessories
and attachments'' specified in ECCN 8A609.y are subject to the
controls of that paragraph.

    y. Specific ``parts,'' ``components,'' ``accessories and
attachments'' ``specially designed'' for a commodity subject to control
in this ECCN or for a defense article in USML Category VI and not
elsewhere specified in the USML or the CCL, as follows:
    y.1. Ship service hydraulic and pneumatic systems;
    y.2. Internal communications systems;
    y.3. Filters and filter assemblies for hydraulic, oil and fuel
systems;
    y.4. Galleys and related equipment;
    y.5. Hydraulic and fuel hoses, straight and unbent lines, fittings,
clips, couplings, and brackets;
    y.6. Lavatories and sanitary systems;
    y.7. Magnetic compass, magnetic azimuth detector;
    y.8. Medical facilities and related equipment;
    y.9. Potable water storage systems;
    y.10. Filtered and unfiltered panel knobs, indicators, switches,
buttons, and dials;
    y.11. Emergency lighting;
    y.12. Analog gauges and indicators;
    y.13. Audio selector panels.
    y.14. to y.98 [RESERVED]
    y.99. Commodities not identified on the CCL that (i) have been
determined, in an applicable commodity jurisdiction determination
issued by the U.S. Department of State, to be subject to the EAR and
(ii) would otherwise be controlled elsewhere in ECCN 8A609.
    5. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 8--Marine, add a new ECCN 8B609 immediately following ECCN
8B001 to read as follows:

8B609 Test, inspection, and production ``equipment'' and related
commodities ``specially designed'' for the ``development'' or
``production'' of commodities enumerated in ECCN 8A609 or USML Category
VI, as follows.

License Requirements

    Reason for Control: NS, RS, AT.

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 8B609.y.  NS Column 1.
RS applies to entire entry except 8B609.y.  RS Column 1.
AT applies to entire entry................  AT Column 1.
------------------------------------------------------------------------

License Exceptions

    LVS: $1,500.
    GBS: N/A.
    CIV: N/A.
    STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2))
of the EAR may not be used for any item in 8B609.

List of Items Controlled

    Unit: N/A.
    Related Controls: N/A.
    Related Definitions: N/A.
    Items:
    a. Test, inspection, and production ``equipment'' ``specially
designed'' for the ``production'' or ``development'' of commodities
enumerated in ECCN 8A609 (except for 8A609.y) or in USML Category VI,
and ``parts,'' ``components,'' ``accessories and attachments''
``specially designed'' therefor.
    b. through x. [RESERVED]
    y. Specific test, inspection, and production ``equipment''
``specially designed'' for the ``production'' or ``development'' of
commodities enumerated in ECCN 8A609 (except for 8A609.y) or USML
Category VI and ``parts,'' ``components,'' ``accessories and
attachments'' ``specially designed'' therefor, as follows:
    y.1. through y.98 [RESERVED]
    y.99. Commodities not identified on the CCL that (i) have been
determined, in an applicable commodity jurisdiction determination
issued by the U.S. Department of State, to be subject to the EAR and
(ii) would otherwise be controlled elsewhere in ECCN 8B609.
    6. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 8--Marine, add a new ECCN 8C609 immediately following ECCN
8C001 to read as follows:

8C609 Materials ``specially designed'' for the ``development'' or
``production'' of commodities controlled by 8A609 not elsewhere
specified in the CCL or in the USML.

License Requirements

    Reason for Control: NS, RS, AT.

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 8C609.y.  NS Column 1.
RS applies to entire entry except 8C609.y.  RS Column 1.
AT applies to entire entry................  AT Column 1.
------------------------------------------------------------------------

License Exceptions

    LVS: $1,500.
    GBS: N/A.
    CIV: N/A.
    STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2))
of the EAR may not be used for any item in 8C609.

List of Items Controlled

    Unit: N/A.
    Related Controls: (1) See USML Categories VI and XIII(f) for
controls on materials specially designed for vessels of war enumerated
in USML Category VI. (2) See ECCN 0A919 for foreign made ``military
commodities'' that incorporate more than 10% U.S.-origin ``600 series''
items.
    Related Definitions: N/A.
    Items:

    a. Materials ``specially designed'' for commodities enumerated in
ECCN 8A609 (except for 8A609.y) not elsewhere specified in the USML or
the CCL.

    Note 1: Materials enumerated elsewhere in the CCL, such as in a
CCL Category 1 ECCN, are controlled pursuant to the controls of the
applicable ECCN.

    b. to .x. [RESERVED]
    y. Specific materials ``specially designed'' for the
``development'' or ``production'' of commodities enumerated in ECCN
8A609 (except for 8A609.y), and ``parts,'' ``components,''
``accessories and attachments'' ``specially designed'' therefor, as
follows:
    y.1. through y.98 [RESERVED]
    y.99. Materials not identified on the CCL that (i) have been
determined, in an applicable commodity jurisdiction determination
issued by the U.S. Department of State, to be subject to the EAR and
(ii) would otherwise be controlled elsewhere in ECCN 8C609.
    7. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 8--Marine, add a new ECCN 8D609 between ECCN 8D002 and 8D992
to read as follows:

8D609 Software ``specially designed'' for the ``development,''
``production,'' operation or maintenance of surface vessels of war and
related commodities controlled by 8A609, equipment controlled by 8B609,
or materials controlled by 8C609.

License Requirements

    Reason for Control: NS, RS, AT.

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 8D609.y.  NS Column 1.
RS applies to entire entry except 8D609.y.  RS Column 1.
AT applies to entire entry................  AT Column 1.
------------------------------------------------------------------------

License Exceptions

    CIV: N/A.
    TSR: N/A.
    STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2))
of the EAR may not be used for any software in 8D609.

List of Items Controlled

    Unit: $ value.
    Related Controls: (1) Software directly related to articles
enumerated in USML Category VI is controlled under USML Category VI(g).
(2) See ECCN 0A919 for foreign made ``military commodities'' that
incorporate more than 10% U.S.-origin ``600 series'' items.
    Related Definitions: N/A.
    Items:
    a. ``Software'' ``specially designed'' for the ``development,''
``production,'' operation, or maintenance of commodities controlled by
ECCN 8A609, ECCN 8B609, or ECCN 8C609 (except for ECCN 8A609.y,
8B609.y, or 8C609.y).
    b. to x. [RESERVED]
    y. Specific ``software'' ``specially designed'' for the
``development,'' ``production,'' operation, or maintenance of
commodities enumerated in ECCN 8A609.y, 8B609.y, or 8C609.y, as
follows:
    y.1. through y.98 [RESERVED]
    y.99. Software not identified on the CCL that (i) has been
determined, in an applicable commodity jurisdiction determination
issued by the U.S. Department of State, to be subject to the EAR and
(ii) would otherwise be controlled elsewhere in ECCN 8D609.
    8. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 8--Marine, add a new ECCN 8E609 between ECCN 8E002 and 8E992
to read as follows:

8E609 ``Technology'' ``required'' for the ``development,''
``production,'' operation, installation, maintenance, repair, or
overhaul of surface vessels of war and related commodities controlled
by 8A609, equipment controlled by 8B609, materials controlled by 8C609,
or software controlled by 8D609.

License Requirements

    Reason for Control: NS, RS, AT.

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 8E609.y.  NS Column 1.
RS applies to entire entry except 8E609.y.  RS Column 1.
AT applies to entire entry................  AT Column 1.
------------------------------------------------------------------------

License Exceptions

    CIV: N/A.
    TSR: N/A.
    STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2))
of the EAR may not be used for any technology in 8E609.

List of Items Controlled

    Unit: N/A.
    Related Controls: (1) Technical data directly related to articles
enumerated in USML Category VI are controlled under USML Category
VI(g). (2) See ECCN 0A919 for foreign made ``military commodities''
that incorporate more than 10% U.S.-origin ``600 series'' items.
    Related Definitions: N/A.
    Items:
    a. ``Technology'' ``required'' for the ``development,''
``production,'' operation, installation, maintenance, repair, or
overhaul of commodities controlled by ECCN 8A609, 8B609, or 8C609, or
``software'' controlled by ECCN 8D609, except for ECCN 8A609.y,
8B609.y, 8C609.y, or 8D609.y.
    b. through x. [RESERVED]
    y. Specific ``technology'' ``required'' for the ``development,''
``production,'' operation, installation, maintenance, repair, or
overhaul of commodities controlled by ECCN 8A609.y, 8B609.y or 8C609.y,
or ``software'' controlled by ECCN 8D609.y, as follows:
    y.1. through y.98 [RESERVED]
    y.99. ``Technology'' not identified on the CCL that (i) has been
determined, in an applicable commodity jurisdiction determination
issued by the U.S. Department of State, to be subject to the EAR and
(ii) would otherwise be controlled elsewhere in ECCN 8E609.

    Dated: December 16, 2011.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2011-32867 Filed 12-22-11; 8:45 am]
BILLING CODE 3510-33-P