Implementation of Additional Controls on Pakistan

<RULE> DEPARTMENT OF COMMERCE <SUBAGY>Bureau of Industry and Security</SUBAGY> <CFR>15 CFR Parts 738, 740, 742 and 774</CFR> <DEPDOC>[Docket No. 241113-0293]</DEPDOC> <RIN>RIN 0694-AJ63</RIN> <SUBJECT>Implementation of Additional Controls on Pakistan</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Bureau of Industry and Security, Department of Commerce. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) by imposing new licensing requirements on exports, reexports, and transfers (in-country) to and within Pakistan of certain items identified on the Commerce Control List (CCL) that are not currently subject to a license requirement when destined for Pakistan. This change is being made to ensure that such transactions receive U.S. government review to reduce the risk of diversion to an end use or end user of concern. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective November 25, 2024, except for amendatory instruction 6, which is effective November 25, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> For questions on this rule, contact Philip Johnson at <E T="03">RPD2@bis.doc.gov</E> or (202) 482-2440. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> BIS implements export controls on dual-use and certain munitions items (commodities, software, and technology) under the EAR (15 CFR parts 730-774) to advance U.S. national security and foreign policy interests. Among other controls, the EAR restricts the export, reexport, and transfer (in-country) of items based on their classification on the CCL (supp. no. 1 to 15 CFR part 774) and relevant reason(s) for control (see 15 CFR part 742) applicable to the country of destination, as generally determined by the Commerce Country Chart (supp. no. 1 to 15 CFR part 738). BIS also maintains end-use and end-user controls pursuant to part 744 of the EAR, including controls on transactions involving less-sensitive items designated as EAR99, and controls that apply to specific activities of U.S. persons. Additionally, BIS maintains embargoes and special controls pursuant to part 746 of the EAR. With respect to Pakistan, BIS maintains a combination of CCL-based, end-use, and end-user controls. The end-use controls include a license requirement for the export, reexport, or transfer (in-country) of items subject to the EAR to or within Pakistan when there is knowledge that the items will be used in certain nuclear end uses (see 15 CFR 744.2) or in certain rocket system or unmanned aerial vehicle ( <E T="03">e.g.,</E> missile) end uses (see 15 CFR 744.3). The end-user controls include Entity List and Unverified List restrictions on exports, reexports, and transfers (in-country) of certain items subject to the EAR that apply when specific entities in Pakistan are parties to the transaction pursuant to part 744 of the EAR (see supps. no. 4 and 6 to 15 CFR part 744). In 1998, Pakistan detonated a nuclear explosive device. In response, BIS imposed further licensing requirements on certain entities in Pakistan determined to have been involved in nuclear or missile activities by adding those entities to the Entity List (63 FR 64322, November 19, 1998). Since that time, BIS has added additional entities in Pakistan to the Entity List. There are currently over 100 entities on the Entity List under the destination of Pakistan. Pursuant to § 744.11(b) of the EAR, BIS has added such entities consistent with the interagency End-User Review Committee's determination that there was reasonable cause to believe, based on specific and articulable facts, that such entities are involved, have been involved, or pose a significant risk of being or becoming involved in, activities contrary to U.S. national security or foreign policy interests. For example, in 2021, BIS added 11 entities to the Entity List, under the destination of Pakistan for, <E T="03">inter alia,</E> contributions to Pakistan's unsafeguarded nuclear activities and ballistic missile program (86 FR 67317, November 26, 2021). In 2022, BIS added three entities to the Entity List, under the destination of Pakistan, because the entities pose an unacceptable risk of using or diverting items subject to the EAR to certain nuclear end-uses and certain rocket systems and unmanned aerial vehicles end-uses (87 FR 38920, June 28, 2022). This rule addresses BIS's concern that certain CCL items controlled only for antiterrorism (AT) reasons (and hence not currently subject to a CCL-based license requirement for export or reexport, or transfer (in-country) to or within Pakistan) have been sought by entities listed on the Entity List, as well as front companies acting on behalf of such entities. Specifically, entities on the Entity List have sought items classified under the following Export Control Classification Numbers (ECCNs): (1) 1B999 (“Specific Processing Equipment, n.e.s.”); (2) 2A992 (“Piping, fittings and valves made of, or lined with stainless, copper-nickel alloy or other alloy steel containing 10% or more nickel and/or chromium”); (3) 2B999 (“Specific Processing Equipment, n.e.s.”); (4) 3A992 (“General purpose electronic equipment not controlled by 3A002”); (5) 3A999 (“Specific Processing Equipment, n.e.s.”); and (6) 6A996 (“`Magnetometers' not controlled by ECCN 6A006, `Superconductive' electromagnetic sensors, and `specially designed' `components' therefor”). BIS previously controlled certain of these nuclear- or missile-related items to Pakistan unilaterally for nuclear nonproliferation (NP2) reasons (see 81 FR 85138, November 25, 2016), and for Anti-Terrorism (AT) reasons to sanctioned and embargoed destinations (see 65 FR 38148, June 19, 2000 and 72 FR 3722, January 26, 2007). Accordingly, BIS has determined that prior U.S. government review of proposed exports, reexports, and transfers (in-country) of items controlled under the six ECCNs specified above to or within Pakistan, and the potential denial or approval with limiting conditions of such exports, reexports, and transfers (in-country), would advance U.S. national security and foreign policy interests by reducing the risk of diversion to unauthorized end uses and/or end users. BIS reminds exporters, reexporters, and transferors of items subject to the EAR to Pakistan that as a best practice, they should review BIS's Pakistan Due Diligence Guidance located on the BIS website at: <E T="03">https://www.bis.doc.gov/index.php/policy-guidance/pakistan-due-diligence-guidance.</E> <HD SOURCE="HD1">Revisions to the EAR</HD> <HD SOURCE="HD2">Additional CCL-Based License Requirements</HD> In this final rule, BIS is imposing additional CCL controls on exports and reexports to, as well as transfers (in-country) within, Pakistan pursuant to part 742 of the EAR. Specifically, BIS is adding a new paragraph to § 742.6 of the EAR to impose a license requirement on the export, reexport, or transfer (in-country) of certain items to or within Pakistan, for regional stability (RS) reasons. Pursuant to new paragraph (a)(12) of § 742.6, there will be a license requirement for exports, reexports, and transfers (in-country) to or within Pakistan of all items classified under ECCNs 1B999, 2A992, 2B999 (other than 2B999.h.2), 3A992, 3A999, and 6A996. Pursuant to new § 740.2(a)(25), the only license exceptions that will be available for the export, reexport, or transfer (in-country) to or within Pakistan of items subject to the new license requirement in § 742.6(a)(12) are TMP (limited to 740.9(a)(1), (a)(4), (a)(5), (a)(10), (b)(2), and (b)(3)), RPL (740.10), and GOV (limited to 740.11(a), (b), and (d)). However, BIS notes that consistent with § 744.16(b), license exceptions are generally unavailable when a party on the Entity List is a party to the transaction. For example, the Chashma and Karachi Nuclear Power Plants are subject to International Atomic Energy Agency (IAEA) safeguards but are listed on the Entity List under the entry for the Pakistan Atomic Energy Commission, under the subordinate entity “Nuclear reactors (including power plants).” The Organization for the Prohibition of Chemical Weapons (OPCW)-designated laboratory in Pakistan, the Analytical Laboratory of the Defense Science and Technology Organization (DESTO) is also listed on the Entity List. Accordingly, GOV (§ 740.11(a)) (IAEA shipments for international safeguards use) and GOV (§ 740.11(d)) (OPCW-related shipments), would not be available for exports or reexports of the foregoing items to these entities in support of IAEA/OPCW activities. <HD SOURCE="HD2">Review Policy</HD> New paragraph (b)(13) of § 742.6 provides that license applications for exports, reexports, and transfers (in-country) to or within Pakistan of items controlled under ECCNs 1B999, 2A992, 2B999 (other than 2B999.h.2), 3A992, 3A999, and 6A996 will be reviewed on a case-by-case basis to determine whether the proposed export, reexport, or transfer (in-country) presents an unacceptable risk of use in, or diversion to, an end use or end user of concern, as set forth in part 744 of the EAR. If it is determined that the proposed export, reexport, or transfer (in-country) presents an unacceptable risk of use in, or diversion to, an end use or end user of concern, the application will be denied. Accordingly, as of the effective date of this rule, exporters, reexporters, and transferors must seek a license from BIS to export, reexport, or transfer (in-country) items controlled under ECCNs 1B999, 2A992, 2B999 (other than 2B999.h.2), 3A992, 3A999, and 6A996 to Pakistan, regardless of end use or end user, unless a license exception specified in § 740.2(a)(25) is available. <HD SOURCE="HD2">Additional Revision</HD> This rule also adds and reserves two new paragraphs § 74 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 38k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━