Rule2024-16566
Iran Foreign Direct Product Rule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 26, 2024
Effective
July 23, 2024
Issuing agencies
Commerce DepartmentIndustry and Security Bureau
Abstract
On April 24, 2024, President Biden signed "Making emergency supplemental appropriations for the fiscal year ending September 30, 2024, and for other purposes," into law. The law requires the United States to regulate the export of certain foreign-produced items destined for Iran. This rule implements the law's requirements by expanding the scope of the Export Administration Regulations' (EAR) Foreign Direct Product rule for Iran and applicable license requirements, thereby increasing restrictions under the EAR.
Full Text
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<title>Federal Register, Volume 89 Issue 144 (Friday, July 26, 2024)</title>
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[Federal Register Volume 89, Number 144 (Friday, July 26, 2024)]
[Rules and Regulations]
[Pages 60563-60565]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16566]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 734 and 746
[Docket No. 240723-0203]
RIN 0694-AJ75
Iran Foreign Direct Product Rule
AGENCY: Bureau of Industry and Security, Department of Commerce.
ACTION: Final rule.
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SUMMARY: On April 24, 2024, President Biden signed ``Making emergency
supplemental appropriations for the fiscal year ending September 30,
2024, and for other purposes,'' into law. The law requires the United
States to regulate the export of certain foreign-produced items
destined for Iran. This rule implements the law's requirements by
expanding the scope of the Export Administration Regulations' (EAR)
Foreign Direct Product rule for Iran and applicable license
requirements, thereby increasing restrictions under the EAR.
DATES: This rule is effective July 23, 2024.
FOR FURTHER INFORMATION CONTACT: For general questions, contact Sharron
Cook, Office of Exporter Services, Bureau of Industry and Security,
U.S. Department of Commerce at 202-482-2440 or by email:
<a href="/cdn-cgi/l/email-protection#34675c5546465b5a1a775b5b5f74565d471a505b571a535b42"><span class="__cf_email__" data-cfemail="8fdce7eefdfde0e1a1cce0e0e4cfede6fca1ebe0eca1e8e0f9">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
Division N of Public Law 118-50, the No Technology for Terror Act
(the Act), which is available at <a href="https://www.congress.gov/bill/118th-congress/house-bill/815/text#">https://www.congress.gov/bill/118th-congress/house-bill/815/text#</a>, establishes that certain foreign-
produced items are subject to the Export Administration Regulations (15
CFR 730-774) (EAR) under the Export Control Reform Act (ECRA), 50
U.S.C. 4801-4852, if they are to be exported, reexported, or in-country
transferred to Iran. Sponsors of H.R. 815 cited the need to restrict
transfers of U.S. technology to Iran when that technology may be used
for weapons systems, including drones, that threaten U.S. troops
overseas or key allies. The Act is effective on July 23, 2024.
Accordingly, this rule revises the Foreign-Direct Product (FDP) rule
for Iran in Sec. 734.9(j) of the EAR (Iran FDP rule).
Under the Iran FDP rule, prior to July 23, 2024, foreign-produced
items were subject to the EAR when they were: (1) the direct product of
U.S.-origin ``software'' or ``technology'' and specified in an EAR
supplement (Supp. No. 7 to part 746) or classified under an Export
Control Classification Number (ECCN) in Categories 3 through 5 and 7 of
the Commerce Control List, Supp. No. 1 to part 774 (CCL), or (2) were
produced by a plant or major component of a plant that is itself the
direct product of such CCL-controlled ``software'' or ``technology''.
Such items may have required a license from the Department of
Commerce's Bureau of Industry and Security (BIS) for export, reexport,
or transfer (in-country) to Iran. See Sec. Sec. 734.9(j) and
746.7(a)(iii) of the EAR.
Effective July 23, 2024, the Act expanded the scope of the EAR's
existing Iran FDP rule to require a license for additional foreign-
produced items, while also providing certain exclusions from license
requirements that would otherwise apply. This rule revises Sec. Sec.
734.9 and 746.7 of the EAR to implement the Act's requirements in four
respects.
First, BIS revises the introduction to paragraph (j) to identify
the two circumstances in which foreign-produced items that meet the
product scope of paragraph (j)(1) are subject to the EAR: if they fall
within either the destination and end-use scope paragraphs of paragraph
(j)(2) or the end-user scope set forth in new paragraph (j)(3).
Second, this rule expands the range of items in the product scope
of the Iran FDP rule. Specifically, this rule revises the product scope
in Sec. 734.9(j)(1) by expanding the CCL category range of items in
paragraphs (j)(1)(i) and (j)(1)(ii) from ``any ECCN in product group D
or E in Categories 3 through 5 or 7'' of the CCL to include Categories
3 through 9 of the CCL. The expanded product scope now includes
``technology'' and ``software'' for Category 6--Lasers and Sensors,
Category 8--Marine, and Category 9--Aerospace and Propulsion.
Third, BIS has revised paragraph (j)(2) and has made structural
changes, including by breaking the revised paragraph into separate
paragraphs (j)(2)(i) and (j)(2)(ii) to assist the reader in applying
the scope of this paragraph correctly. As revised, the scope of
paragraph (j)(2) is satisfied if there is ``knowledge'' that the
foreign-produced item meets the destination scope in paragraph
(j)(2)(i) or meets the combined end-use and destination scope in
paragraph (j)(2)(ii). The paragraph title is accordingly expanded by
adding ``and end-use'' so that it will refer to both destination and
end-use scope.
Finally, BIS has added a new end-user scope in new paragraph
(j)(3). This new
[[Page 60564]]
end-user scope applies if there is ``knowledge'' that the Government of
Iran is a party to any transaction involving the foreign-produced item,
e.g., as a ``purchaser,'' ``intermediate consignee,'' ``ultimate
consignee,'' or ``end-user.'' This ``knowledge'' standard and reference
to transaction parties is consistent with language used in the Entity
List FDP rule set forth in Sec. 734.9(e) of the EAR.
Section 746.7 (Iran)
In addition to expanding the EAR's Iran FDP rule set forth in Sec.
734.9(j), the Act made changes to the license requirements for Iran set
forth in Sec. 746.7(a)(1)(iii) of the EAR. Accordingly, this rule
expands the license requirement in paragraph (a)(1)(iii), which applies
to items subject to the EAR pursuant to the Iran FDP rule, to apply to
in-country transfers of such items within Iran.
This rule also makes a correction to paragraph (a)(1)(iv)(A) by
removing an inadvertent duplicative reference to the phrase ``from the
countries described in supplement no. 3''.
This rule also redesignates paragraph (a)(1)(iv) as paragraph
(a)(1)(iv)(A) and adds a new paragraph (a)(1)(iv)(B) to list exclusions
from the license requirements of paragraph (a)(1)(iii). Section 2(d)(2)
of the Act added certain exclusions to the Iran restrictions specified
in paragraph (a)(1)(iii) for food, ``medicine,'' or ``medical devices''
designated as EAR99, and certain items necessary and ordinarily
incident to communications that are specified in ECCN 5A992.c or
5D992.c and classified in accordance with Sec. 740.17 of the EAR or
designated as EAR99.
Savings Clause
Shipments of items removed from license exception eligibility or
eligibility for export, reexport or transfer (in-country) without a
license as a result of this regulatory action that were on dock for
loading, on lighter, laden aboard an exporting carrier, or en route
aboard a carrier to a port of export, on July 26, 2024, pursuant to
actual orders for exports, reexports and transfers (in-country) to a
foreign destination, may proceed to that destination under the previous
license exception eligibility or without a license so long as they have
been exported, reexported or transferred (in-country) before August 26,
2024. Any such items not actually exported, reexported or transferred
(in-country) before midnight, on August 26, 2024, require a license in
accordance with this final rule.
Export Control Reform Act of 2018
On August 13, 2018, the President signed into law the John S.
McCain National Defense Authorization Act for Fiscal Year 2019, which
included the Export Control Reform Act (ECRA), 50 U.S.C. 4801-4852.
ECRA, as amended, provides the legal basis for BIS's principal
authorities and serves as the authority under which BIS issues this
rule.
Rulemaking Requirements
1. Executive Orders 12866, 13563, and 14094 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 and distributive impacts and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits and of reducing costs, harmonizing rules, and
promoting flexibility.
This final rule has been designated a ``significant regulatory
action'' under section 3(f) of Executive Order 12866, as amended by
Executive Order 14094. This rule does not contain policies with
Federalism implications as that term is defined under Executive Order
13132.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be 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 Office of Management and Budget (OMB) Control Number. Although
this rule makes important changes to the EAR for items controlled for
national security reasons, BIS believes that the overall increases in
burdens and costs associated with the following information collections
due to this rule will be minimal.
<bullet> 0694-0088, ``Simplified Network Application Processing
System,'' which carries a burden- hour estimate of 29.6 minutes for a
manual or electronic submission;
<bullet> 0694-0137 ``License Exceptions and Exclusions,'' which
carries a burden-hour estimate average of 1.5 hours per submission
(Note: submissions for License Exceptions are rarely required);
<bullet> 0694-0096 ``Five Year Records Retention Period,'' which
carries a burden-hour estimate of less than 1 minute; and
<bullet> 0607-0152 ``Automated Export System (AES) Program,'' which
carries a burden-hour estimate of 3 minutes per electronic submission.
Additional information regarding these collections of information--
including all background materials--can be found at <a href="https://www.reginfo.gov/public/do/PRAMain">https://www.reginfo.gov/public/do/PRAMain</a> and using the search function to
enter either the title of the collection or the OMB Control Number.
3. Pursuant to Section 1762 of ECRA (50 U.S.C. 4821), this action
is exempt from the Administrative Procedure Act (APA) (5 U.S.C. 553)
requirements for notice of proposed rulemaking, opportunity for public
participation and delay in effective date.
List of Subjects
15 CFR Part 734
Administrative practice and procedure, Exports, Inventions and
patents, Research, Science and technology
15 CFR Part 746
Exports, Reporting and recordkeeping requirements.
Accordingly, parts 734 and 746 of the Export Administration
Regulations (15 CFR parts 730 to 774) are amended as follows:
PART 734--SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS
0
1. The authority citation for part 734 is revised to read as follows:
Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p.
950; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026,
61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3
CFR, 2001 Comp., p. 783; E.O. 13637, 78 FR 16129, 3 CFR, 2014 Comp.,
p. 223; Notice of November 1, 2023, 88 FR 75475 (November 3, 2023);
Pub. L. 118-50.
0
2. Section 734.9 is amended by revising paragraph (j) to read as
follows:
Sec. 734.9 Foreign-Direct Product (FDP) Rules.
* * * * *
(j) Iran FDP rule. A foreign-produced item is subject to the EAR if
it meets both the product scope in paragraph (j)(1) of this section and
the destination and end-use scope in paragraph (j)(2) of this section
or meets both the product scope in paragraph (j)(1) of this section and
the end-user scope in paragraph (j)(3) of this section. See Sec. 746.7
of the EAR for license requirements and license application review
policy applicable to foreign-produced items that are subject to the EAR
pursuant to this paragraph, as well as certain
[[Page 60565]]
exclusions from those license requirements.
(1) Product scope of the Iran FDP rule. The product scope applies
if a foreign-produced item meets the conditions of either paragraph
(j)(1)(i) or (ii) of this section.
(i) ``Direct product'' of ``technology'' or ``software.'' A
foreign-produced item meets the product scope of this paragraph
(j)(1)(i) if the foreign-produced item meets both of the following
conditions:
(A) The foreign-produced item is the ``direct product'' of U.S.-
origin ``technology'' or ``software'' subject to the EAR that is
specified in any ECCN in product groups D or E in Categories 3 through
9 of the CCL; and
(B) The foreign-produced item is identified in supplement no. 7 to
part 746 of the EAR or is specified in any ECCN on the CCL in
Categories 3 through 9 of the CCL; or
(ii) Product of a complete plant or `major component' of a plant
that is a ``direct product.'' A foreign-produced item meets the product
scope of this paragraph (j)(1)(ii) if it meets both of the following
conditions:
(A) The foreign-produced item is produced by any plant or `major
component' of a plant that is located outside the United States, when
the plant or 'major component' of a plant, whether made in the United
States or a foreign country, itself is a ``direct product'' of U.S.-
origin ``technology'' or ``software'' subject to the EAR that is
specified in any ECCN in product groups D or E in Categories 3 through
9 of the CCL; and
(B) The foreign-produced item is identified in supplement no. 7 to
part 746 of the EAR or is specified in any ECCN on the CCL in
Categories 3 through 9 of the CCL.
(2) Destination and end-use scope of the Iran FDP rule. A foreign-
produced item meets the scope of this paragraph (j)(2) if there is
``knowledge'' that the foreign-produced item:
(i) Is destined to Iran; or
(ii) Will be incorporated into or used in the ``production'' or
``development'' of any ``part,'' ``component,'' or ``equipment,''
including any modified or designed ``components,'' ``parts,''
``accessories,'' and ``attachments'' therefor, identified in supplement
no. 7 to part 746 of the EAR or specified in any ECCN in Categories 3
through 9 of the CCL, and located in or destined to Iran.
(3) End-user scope of the Iran FDP rule. A transaction meets the
end-user scope of this paragraph (j)(3) if the reexporter or transferor
has ``knowledge'' that the Government of Iran is a party to any
transaction involving the foreign-produced item, e.g., as a
``purchaser,'' ``intermediate consignee,'' ``ultimate consignee,'' or
``end-user.''
* * * * *
PART 746--EMBARGOES AND OTHER SPECIAL CONTROLS
0
3. The authority citation for part 746 is revised to read as follows:
Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50
U.S.C. 1701 et seq.; 22 U.S.C. 287c; Sec 1503, Pub. L. 108-11, 117
Stat. 559; 22 U.S.C. 2151 note; 22 U.S.C. 6004; 22 U.S.C. 7201 et
seq.; 22 U.S.C. 7210; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p.
614; E.O. 12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 899; E.O. 13222,
66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13338, 69 FR 26751, 3
CFR, 2004 Comp., p 168; Presidential Determination 2003-23, 68 FR
26459, 3 CFR, 2004 Comp., p. 320; Presidential Determination 2007-7,
72 FR 1899, 3 CFR, 2006 Comp., p. 325; Notice of May 8, 2024, 89 FR
40355 (May 9, 2024); Pub. L. 118-50.
0
4. Section 746.7 is amended by revising paragraphs (a)(1)(iii) and (iv)
to read as follows:
Sec. 746.7 Iran.
* * * * *
(a) * * *
(1) * * *
(iii) Foreign-produced items subject to the EAR under Sec.
734.9(j) of the EAR (Iran FDP rule). Except as described in paragraph
(a)(1)(iv) of this section, a license is required to reexport or export
from abroad to, or transfer (in-country) within Iran any foreign-
produced item subject to the EAR under the Iran FDP rule that is
located in or destined to Iran. A Department of Commerce license is not
required for transactions described in this paragraph (a)(1)(iii) that
would have otherwise met all of the terms and conditions of an OFAC
general license or other authorization if the transactions had been
subject to OFAC jurisdiction.
(iv) Exclusion from license requirements under paragraph
(a)(1)(iii) of this section. (A) Exports from abroad or reexports from
the countries described in supplement no. 3 to this part are not
subject to the license requirements described in paragraph (a)(1)(iii)
of this section, unless a limit to the exclusion is described in the
``Scope'' column in supplement no. 3 to this part.
(B) An item is excluded from license requirements under paragraph
(a)(1)(iii) of this section if the item is any of the following:
(1) Food, ``medicine,'' or ``medical devices'' designated as EAR99;
(2) Necessary and ordinarily incident to communications, designated
as EAR99 or specified in ECCN 5A992.c or 5D992.c, and classified in
accordance with Sec. 740.17 of the EAR; and would otherwise meet all
of the terms and conditions of an OFAC general license or other
authorization if the transaction were subject to OFAC jurisdiction.
* * * * *
Thea D. Rozman Kendler,
Assistant Secretary for Export Administration.
[FR Doc. 2024-16566 Filed 7-24-24; 11:15 am]
BILLING CODE 3510-33-P
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</html>Indexed from Federal Register on July 26, 2024.
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