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28 February 2007

[Federal Register: February 26, 2007 (Volume 72, Number 37)]
[Proposed Rules]               
[Page 8315]
From the Federal Register Online via GPO Access []



Bureau of Industry and Security

15 CFR Part 740

[Docket No. 0612242560-7024-01]
RIN 0694-AD93

Country Group C: Destinations of Diversion Concern

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Advance notice of proposed rulemaking.


SUMMARY: The Department of Commerce's Bureau of Industry and Security 
(BIS) is considering amendments to the Export Administration 
Regulations (EAR) to further the national security interests of the 
United States by designating Country Group C for countries that are 
``Destinations of Diversion Concern.'' This amendment would establish 
license requirements for exports and reexports to countries that 
represent a concern for the diversion of items subject to the EAR. BIS 
by this notice requests comments on Country Group C.

DATES: Comments are due no later than close of business March 12, 2007.

ADDRESSES: Comments should be sent to, fax 
(202) 482-3355, or to Regulatory Policy Division, Bureau of Industry 
and Security, Room H2705, U.S. Department of Commerce, Washington, DC 
20230. Please refer to regulatory identification number (RIN) 0694-AD93 
in all comments, and in the subject line of e-mail comments. Comments 
on the collection of information should be sent to David Rostker, 
Office of Management and Budget (OMB), by e-mail to, or by fax to (202) 395-7285.

FOR FURTHER INFORMATION CONTACT: Sharron Cook, Office of Exporter 
Services, Bureau of Industry and Security, Telephone (202) 482-2440.



    The Department of Commerce seeks to address the threat to national 
security caused by the illicit transshipment, reexport, and diversion 
in international trade of items subject to the EAR. Through government-
to-government and government-to-industry outreach, the Department of 
Commerce encourages transshipment countries to strengthen their 
international export control practices.
    This effort includes both government-to-government cooperation and 
U.S. Government cooperation and information-sharing with the private 
sector. To strengthen government-to-government cooperation, the 
Department of Commerce has worked with its counterpart agencies to: (1) 
Develop or strengthen export control regimes, (2) promote information 
and data exchanges, and (3) strengthen cooperation and facilitate 
enforcement. Specific initiatives to develop export control 
capabilities have included technical assistance in the areas of legal 
framework and licensing procedures and practices, enforcement training, 
and industry outreach. To strengthen cooperation and facilitate 
enforcement, the Department of Commerce has posted export control 
attach[eacute]s to serve as liaisons in many of these areas, and has 
sought agreements and other government-to-government cooperation in 
certain destinations.
    The Department of Commerce has also concentrated on outreach to key 
companies involved in forwarding, processing, and transporting goods 
through transshipment points, i.e., freight forwarders, integrators, 
air cargo carriers, and shipping lines. The Department of Commerce has 
sought to enhance cooperation with these private sector entities via 
informal meetings, the establishment of communication channels to 
facilitate information sharing, the establishment and sharing of ``best 
practices,'' and by working with the foreign trade zone board to 
address transshipment issues.
    The diversion of items subject to the EAR could augment the 
capabilities of terrorists and state sponsors of terrorism, and 
significantly undermine international counterproliferation efforts. The 
illegal diversion of such items could also compromise the effectiveness 
of U.S. export control laws. In recent years, diversions have 
contributed to a number of major cases involving the violation of U.S. 
export control laws for dual-use goods.

Request for Comment

    Consideration of designating Country Group C to identify 
``Destinations of Diversion Concern'' is part of the Department of 
Commerce's effort to strengthen the trade compliance and export control 
systems of countries that are transshipment hubs. By working to 
strengthen those systems, the Department of Commerce seeks to enhance 
international security and confidence in international trade flows. 
Country Group C would identify those countries of diversion concern, 
based on certain criteria including, but not limited to:
     Transit and transshipment volume;
     Inadequate export/reexport controls;
     Demonstrated inability to control diversion activities in 
this destination;
     Government not directly involved in diversion activities; 
     Government unwilling or unable to cooperate with the U.S. 
in interdiction efforts.
    As a result of being placed into Country Group C, the licensing 
policy would likely change for items going to any country designated as 
a ``Destination of Diversion Concern.'' Such changes could include 
changes in License Exception eligibility (Part 740 of the EAR), License 
Requirements and Licensing Policy (Part 742 of the EAR), and End-User 
and End-Use Based Controls (Part 744 of the EAR). The result of these 
changes could mean that more license applications might be required; 
more stringent license review policies might be implemented, which 
could result in less approvals or more conditions on licenses; 
authorizations may be delayed because of increased end-user checks; or 
authorizations may decrease because of diversion risks for such 

Rulemaking Requirements

    This advance notice of proposed rulemaking rule has been determined 
to be significant for purposes of E.O. 12866.

Christopher A. Padilla,
Assistant Secretary for Export Administration.
[FR Doc. E7-3252 Filed 2-23-07; 8:45 am]