Note that all existing export license requirements that apply to CWC Scheduled chemicals and UDOCs subject to Department of Commerce jurisdiction continue in effect. Further, the new CWC reporting requirements, such as the End-Use Certificate and prior notification requirements, are in addition to existing export license and supporting documentation requirements for exports of chemicals subject to Department of Commerce or Department of State export licensing jurisdiction.

The Chemical Weapons Convention Regulations (CWCR)

This rule implements reporting and inspection requirements and import restrictions. The CWCR :

Reporting Requirements

Declaration Requirements.

Facilities required to submit "declarations" are those that produce, process or consume certain chemicals in quantities that exceed specified thresholds. Four types of declarations are due to BXA when required by parts 712 through 715 of the CWCR: initial declarations, annual declarations on past activities, annual declarations on anticipated activities, and a one-time declaration of facilities that produced Schedule 2 or 3 chemicals for chemical weapons purposes at any time since January 1, 1946. The United States will transmit data on declared facilities to the OPCW. Such data will also be compiled to establish the U.S. national aggregate on production, processing and consumption of relevant chemicals. Export and import data contained in declarations will also be compiled and added to export and import information obtained from other reports to establish the U.S. national aggregate declaration on imports and exports of certain chemicals.

Initial declarations. Initial declarations are one-time declarations that are due to BXA by March 30, 1999, except for the establishment of new Schedule 1 facilities, which requires submission of a technical description of the facility prior to producing above 100 grams aggregate. Any Schedule 2 or 3, or UDOC plant site that was not required to submit an initial declaration but that exceeded the applicable declaration or reporting thresholds for covered activities in a subsequent year, must submit only an annual declaration on past activities or an annual report on exports and imports. Facilities that produced more than 100 grams aggregate of Schedule 1 chemicals in calendar year 1997, 1998, or 1999 must submit an initial declaration (a technical description of the facilities). Note that the Schedule 1 Certification Form asks you to identify each year in which you produced in excess of 100 grams aggregate. Facilities that produced, processed or consumed more than specified quantities of a Schedule 2 chemical in any of the calendar years 1994, 1995, or 1996 must provide information on activities involving that Schedule 2 chemical that occurred in each of calendar years 1994, 1995, and 1996. Facilities that produced more than 30 metric tons of a Schedule 3 chemical in calendar year 1996 must provide information on activities involving this Schedule 3 chemical that occurred in 1996. Facilities that produced more than specified quantities of UDOCs in calendar year 1996 must provide ranges of production for 1996.

Annual declarations on past activities. Facilities that produced more than 100 grams aggregate of Schedule 1 chemicals, more than 30 metric tons of a Schedule 3 chemical, or more than specified quantities of UDOCs in the previous calendar year, must submit an annual declaration on past activities. Facilities that produced, processed or consumed more than specified quantities of a Schedule 2 chemical in any of the three previous calendar years must submit an annual declaration on past activities for activities during the previous year. Annual declarations on past activities for calendar years 1997, 1998, and 1999 will be due to BXA March 30, 1999.

Annual declarations on anticipated activities and declarations on additionally planned activities. Facilities that anticipate engaging in production of Schedule 1 or Schedule 3 chemicals or production, processing or consumption of Schedule 2 chemicals above specified thresholds during the next calendar year must submit an annual declaration on anticipated activities. Facilities that have certain types of changes or additions to their annual declaration on anticipated activities must submit a declaration on additionally planned activities.

One time declaration of past production for chemical weapons purposes. Facilities that have produced Schedule 2 or Schedule 3 chemicals anytime since January 1, 1946, for chemical weapons purposes must submit a declaration by March 30, 1999.

Amended declarations and reports. The CWCR also provide for submission of "amended declarations" and "amended reports" to change, replace, or add information to previously submitted declarations or reports.

Notification Requirements. Facilities that intend to export or import Schedule 1 chemicals to or from States Parties must submit prior notifications of these activities. These notifications will be forwarded to the OPCW.

Other Reporting Requirements. U.S. persons and facilities subject to the CWCR that have exported or imported a scheduled chemical, but have not produced, processed, or consumed declarable quantities of that chemical, may nevertheless have an export or import reporting requirement. The USNA will NOT forward facility-specific information contained in these reports to the OPCW. BXA will include the export and import data in the compilation of the U.S. national aggregate declaration on exports and imports of relevant chemicals.

Initial reports on exports and imports. Initial reports for exports and imports are required for exports and imports of Schedule 2 and Schedule 3 chemicals above certain threshold quantities during calendar year 1996.

Annual reports on exports and imports. Annual reports for exports and imports are required for all exports and imports of Schedule 1 chemicals during the previous calendar year, and for exports and imports of Schedule 2 and 3 chemicals above certain threshold quantities. Annual reports on exports and imports for calendar years 1997, 1998, and 1999 will be due to BXA March 30, 1999.

Timing of submission of initial and annual declarations and reports. The first declaration and report package due to the Department of Commerce will include the initial declaration plus the annual declarations and reports for activities in calendar years 1997, 1998, and 1999. The first Schedule 1 annual declaration on anticipated activities for calendar year 2001 will be due to BXA on August 3, 2000. The first Schedule 2 and Schedule 3 annual declarations on anticipated activities for calendar year 2001 will be due on September 3, 2000. Certain facilities may also need to submit the one-time declaration on past production of Schedule 2 or Schedule 3 chemicals for chemical weapons purposes. CWC Declaration and Report Handbooks containing necessary multipurpose forms for declarations and reports will be available by mail and through the Internet. If there are discrepancies between the CWCR and the Handbooks (including instructions and form requirements), the CWCR prevail.

On-site Inspection Requirements. This rule also sets forth the requirements and procedures for on-site inspections of U.S. facilities subject to the CWCR, consistent with sections 301 to 309 of the Act. On-site inspections will be conducted by inspectors from the OPCW's Technical Secretariat. The Department of Commerce will lead the Host Team accompanying and escorting the inspectors during inspections.

Types of inspections. There are two major kinds of inspections: (1) initial and subsequent ("routine," under the Act) inspections of declared facilities whose level of production, processing or consumption of specified chemicals makes them subject to such verification as a routine matter; and (2) "challenge" inspections of any facility or location in the United States based on a request made by another State Party to clarify and resolve any questions concerning possible non-compliance with the Convention.

Notification and consent procedures. Pursuant to section 304 of the Act, before an inspection may take place, the USNA must authorize each inspection of a facility or location in the United States and provide actual written notification of each inspection to the owner and operator or other person in charge of the facility. For routine inspections of declared facilities, the USNA will provide such written notification within 6 hours of receiving notification from the OPCW Technical Secretariat or as soon as possible thereafter. The Department of Commerce will provide Host Team notice to facilities to be inspected. The Department of Commerce intends to seek an administrative warrant, as provided for by section 305 of the Act and in E.O. 13128, if the owner or person in charge of the facility does not consent to the inspection.

II. PUBLIC COMMENTS ON PROPOSED RULE

On July 21, 1999, the Bureau of Export Administration published in the Federal Register (64 FR 39104) a proposed rule, with request for comment, to establish the Chemical Weapons Convention Regulations (CWCR) to implement provisions of the Convention and the Act affecting U.S. industry and other U.S. persons. BXA received comments from 18 respondents. Following is a summary of those comments, along with BXA's responses.

Scope of the CWCR:

One respondent questioned whether the definition of "Chemical Weapons Convention" includes any annexes that have not yet entered into force under the Convention, and stated that annexes approved after January 13, 1993, should not automatically be implemented by the CWCR. This rule implements those relevant articles and annexes of the Convention that entered into force on April 29, 1997, as reflected in parts 710 through 722 of the CWCR.

To clarify what U.S. government facilities are excluded from the CWCR, one respondent sought guidance on whether the term "U.S. facilities that are contractor-operated" includes facilities owned by the U.S. Government, but leased to private companies. The CWCR reporting, declaration, and inspection requirements do apply to facilities owned by a U.S. Government agency and leased to a private company or other entity, such that the private company or other entity may independently decide for what purposes to use the facilities. BXA has revised §710.2 of this rule to clarify the scope of the CWCR.

Chemicals subject to the CWCR:

One respondent requested that all Schedule 1, Schedule 2 and Schedule 3 chemicals subject to the CWCR be identified by the Chemical Abstract Service registry number (CAS number) to clarify declaration and reporting requirements. Supplement No. 1 to Part 712 (Schedule 1), Supplement No. 1 to Part 713 (Schedule 2), and Supplement No. 1 to Part 714 (Schedule 3) of the CWCR list certain chemicals by name or family that are subject to the CWCR. These Supplements also identify certain of these chemicals by CAS number. These Supplements mirror the Schedules of Chemicals found in the Convention. BXA agrees that it is desirable to provide CAS registry numbers for all chemicals subject to the CWCR. However, because there are, by conservative estimates, 25,000 or more chemicals subject to the CWCR, listing each chemical by name and CAS number is not practical. In addition, new chemicals are being developed and/or assigned CAS numbers daily. Therefore, any list published by BXA would be neither exhaustive nor current. BXA believes that Supplement No. 1 to Parts 712, 713 and 714 of the CWCR provide sufficient information for a qualified chemist to determine whether a chemical is subject to the CWCR. In addition, BXA will, upon request, provide a binding determination of whether or not a specific chemical is subject to the CWCR. (See §711.3 of the CWCR.)

Confidential business information:

Four respondents submitted comments on confidential business information (CBI) issues, which fall into four broad categories: the amount of information BXA should collect; location and consolidation of CBI provisions in the CWCR; protection of information made available to the OPCW; and protection of CBI within the United States in both Freedom of Information Act (FOIA) and non-FOIA contexts.

Amount of information BXA should collect:

Two respondents requested BXA to collect only the minimum amount of information necessary to comply with the Convention and the Act. Consistent with section 401 of the Act, the U.S. Government is requiring only the minimal information necessary to satisfy the requirements of the Convention and Act. This is reflected in the provisions of the CWCR.

One respondent suggested that BXA not make lists of companies subject to CWC verification, for fear that such lists could be exploited by persons seeking to stigmatize the lawful production of chemicals. The respondent suggested if BXA did establish such lists, that BXA implement procedures for removing facilities from those lists when such facilities are no longer subject to declaration requirements. From time to time, BXA will need to create such lists, for example, to comply with certain U.S. national declaration requirements. However, BXA will create the minimum number of lists necessary, and will update the lists as appropriate, to ensure effective U.S. implementation of the Convention.

One respondent was concerned that language in the proposed rule on the conduct of inspections would not allow the site representative to shroud or remove from the site items that the site representative determined were irrelevant to the inspection, unless "agreed by the U.S. Government Team." The respondent suggested deletion of the cited phrase. BXA has clarified this provision by changing it to read "as determined by the Host Team," since the right to take protective measures, such as shrouding equipment not related to the purpose of an inspection, is a right granted to the State Party under the Convention.

Consolidation and location of CBI provisions in the CWCR:

One respondent suggested consolidating the CBI provisions in Part 716 (routine inspections) and Part 717 (challenge inspections). Three respondents requested BXA to consolidate all provisions in the CWCR relating to CBI and place these consolidated provisions in part 710 to highlight their importance. BXA agrees that to avoid any ambiguity that may arise because of slight differences in wording, the CBI provisions should be consolidated. To highlight the importance of CBI, BXA is placing these provisions in a dedicated CBI part. Because part 710 serves as an introduction to the CWCR and does not have regulatory force, BXA is placing the CBI provisions in Part 718, entitled "Confidential Business Information." BXA is creating new part 722, entitled "Interpretations," to replace Part 718, originally reserved for interpretations.

Status of information made available to the OPCW:

Three respondents suggested that all CBI made available to the OPCW during inspections be designated "highly protected." The Convention provides that States Parties may designate information submitted to the Technical Secretariat as confidential, and requires the OPCW to limit access to, and prevent disclosure of, information so designated, except that the OPCW may disclose certain confidential information submitted in declarations to other States Parties if requested. The OPCW has developed a classification system whereby States Parties may designate their declarations as "restricted," "protected," or "highly protected." The U.S. Government is directing the OPCW to accord "protected" status to all information contained in declarations, reports and advance notifications of exports and imports of Schedule 1 chemicals. The "protected" level of confidentiality is consistent with the level of protection designated by many other States Parties for their industrial declarations.

It is also the policy of the U.S. Government to designate CBI that it discloses to OPCW Inspection Teams as "protected" or "highly protected," depending on the sensitivity of the information. However, the U.S. Government will not request "protected" status for information made available to OPCW Inspection Teams that is publicly available, such as company sales or marketing literature or information from the company's Internet web site. The "protected" or "highly protected" status will apply to CBI disclosed to Inspection Teams, irrespective of the form or medium in which it is made available to the OPCW, whether in oral, written or visual form.

Definition and identification of CBI:

Three respondents requested clarification about the "scope of coverage" of CBI in the CWCR. Section 103(g) of the Act defines U.S. confidential business information as any trade secrets or commercial or financial information that is privileged and confidential. BXA has determined that CBI contained in information submitted to, or obtained by, the U.S. Government for CWC purposes will fall into one of two categories:

information that falls under the types of information listed in Section 103(g)(1) of the Act, called "section 103(g)(1) information"; and

information that does not meet (1) but that meets all the criteria of section 103(g)(2) of the Act because it is a "trade secret" as described in 5 U.S.C. 552(b)(4) and is obtained from a U.S. person or through the U.S. Government or the conduct of an inspection in the United States, called "section 103(g)(2) information."

Information that satisfies the criteria of both sections 103(g)(1) and 103(g)(2) will be treated as section 103(g)(1) information.

BXA has determined that certain fields in the declaration and report forms meet the definition of section 103(g)(1) and has identified these fields in Supplement 1 to Part 718 of the CWCR. BXA will continue to determine whether additional types of information meet the requirements of section 103(g)(1) and will add to Part 718 any such types of information that can apply generally to entities subject to the CWCR. Section 103(g)(2) information will likely involve specific circumstances, require case-by-case determination, and not lend itself to general use. Therefore, BXA cannot at this time provide additional clarification about the scope of coverage of section 103(g)(2).

Except for the section 103(g)(1) information BXA has identified in the declaration and report forms, the U.S. Government will not be able to distinguish CBI from non-CBI, as defined in the Act, and will require the assistance of industry in identifying such CBI, most notably in connection with inspections.

Two respondents objected to the implicit limitation of the scope of CBI in Supplement No. 1 to Part 711 of the proposed rule. BXA intends this chart to serve as general guidance by indicating the fields of information on declaration and report forms that BXA has identified as section 103(g)(1) information. BXA is revising the supplement (to new part 718) to add a note indicating that information in other fields on the forms may also be considered CBI when such information has been specifically identified by submitters and a rationale has been provided for the CBI status of such information.

In a related matter, two respondents urged BXA to indicate that CBI need not be "marked," but one respondent recommended that items not specifically identified in 103(g)(1) be marked. This rule requires companies to identify information they consider to be CBI that BXA has not specifically identified in Supplement No. 1 to Part 718 as section 103(g)(1) information. In addition, entities hosting on-site inspections will need to specifically identify to the Host Team any CBI contained in information made available to the U.S. Government to ensure proper handling and treatment of such CBI.

One respondent requested BXA to provide a box on the declaration/reporting forms so a company could check the box to indicate the form contained CBI. Checking a box would not serve to specifically identify the information on the completed form that meets the definition of CBI. BXA must reject this suggestion and require the system of identification set out in this preamble and in this rule.

One respondent asked BXA to state that all information provided to the U.S. Government for whatever purpose is confidential when it meets the CBI definition of the Act. The Act defines CBI, not for all purposes, but for specific purposes. BXA is unable to comply with this request. Certain data defined as CBI in a CWC compliance context might not qualify as a "trade secret" or otherwise be deemed confidential when obtained by the U.S. Government in non-CWC compliance contexts (e.g., publicly available research, patent, or sales data).

One respondent urged BXA to acknowledge that CBI would arise in a variety of contexts BXA agrees that CBI will exist in tangible and intangible forms. BXA believes that Part 718 adequately covers CBI.

Protection of CBI by the U.S. Government in non-FOIA contexts: All four respondents expressed concern about U.S. Government protection of CBI in situations other than requests for information under the Freedom of Information Act (FOIA), such as Department of State and Commerce enforcement proceedings or litigation in which the U.S. Government is not a party. Three respondents requested BXA to draft CBI provisions in this regulation as a broad, blanket non-disclosure requirement, except where expressly permitted by section 404 of the Act (i.e., to the OPCW, U.S. law enforcement agencies, and appropriate congressional committees).

Section 404 of the Act provides exemptions from the disclosure requirements of FOIA. BXA cannot guarantee non-disclosure of information in all circumstances, such as in instances of judge-issued subpoenas. Information and documents related to CWC administrative enforcement cases will be handled and protected according to procedures set forth in part 719 of the CWCR.

In a related issue, three respondents requested BXA to specify that the Act is a "confidentiality statute" for purposes of regulations administered by the Office of the Secretary of Commerce in 15 CFR Part 15 (Legal Proceedings). Part 15 sets forth procedures governing the production of Department of Commerce records or testimony by Department of Commerce employees in legal proceedings in which the United States is not a party. Federal agencies may establish such procedures under section 301 of Title 5, United States Code, to provide for the custody, use and preservation of its records. BXA has determined that it is unnecessary to specify whether the provisions of the Act fall under the meaning of "confidentiality statute," as used in 15 CFR section 15.17 because this, in and of itself, does not provide any protection other than that already available under the Act and other statutes. The Departmental regulations do not enhance existing statutory protections, but merely provide a mechanism whereby the Department can determine whether any evidentiary privileges or statutory requirements of privacy or confidentiality apply, or if there is any other legal basis for withholding information.

One respondent stated that the U.S. Government should request the United States magistrate judge to seal all records of warrants proceedings in order to guard against public disclosure of any CBI contained in the warrant or in material submitted in support of the issuance of the warrant. BXA intends to request that warrant proceedings be sealed if the warrant or related material includes CBI.

Protection of CBI requested under the Freedom of Information Act: Section 404 of the Act does not provide a statutory exemption from FOIA disclosure requirements for all information that is reported to, or otherwise obtained by, the U.S. Government, but only for "certain Convention information" (i.e., that which is defined as "confidential business information" in section 103(g) of the Act). BXA will withhold from disclosure pursuant to a FOIA request only CBI, as defined in section 103(g), that has either been identified by BXA or by the person from whom the information is obtained.

National Interest Determination: Two respondents requested BXA to narrowly define the term "national interest," or to provide factors that the U.S. Government would consider in determining disclosure under the national interest disclosure provision. BXA cannot provide a definitive list of factors, since these would depend on specific circumstances, could change over time, and would need the concurrence of other agencies.

Two respondents suggested specific language for the consolidated CBI provisions, building upon language in the proposed rule. BXA is adopting some, but not all, the provisions in the suggested text. Under the suggested text, the notification and hearing procedures that apply to CBI disclosed in the "national interest" would also apply to disclosures to appropriate committees of Congress and law enforcement agencies. BXA rejects this suggestion. The Act does not require such notice and hearing procedures in the latter cases and provides no discretion regarding disclosure to such entities. Application of these procedures would only serve to delay authorized disclosures, without affecting the outcome. Moreover, delay in disclosure to other law enforcement agencies could hamper the actions of such law enforcement agencies, thereby thwarting the intention of the statute. BXA notes, however, that section 404 of the Act contains provisions limiting further disclosure by such Congressional committees and law enforcement agencies of CBI released to them.

Recordkeeping:

One respondent requested clarification on whether the declaration responsibilities for the production of Schedule 2 and 3 chemicals for chemical weapons purposes at any time since January 1, 1946 reside with the company that originally may have produced the chemicals. Four respondents addressed the proposed rule's requirement that the facility prepare declarations for activities dating back to 1994. The respondents state that the records and information necessary to prepare declarations may not be available because: 1) necessary information was not collected at the time of the activity, since no regulatory requirement to do so was in effect; 2) if collected at the time of the activity, the information has been discarded following normal business practices; or 3) due to changes in ownership or control of a facility, the current custodian of the information may no longer be affiliated with a facility subject to the CWCR. One respondent referenced a Supreme Court ruling which states that legislative rules, such as the CWCR, may not have a retroactive effect unless explicitly provided for by statute. The respondents request that BXA acknowledge that information necessary to prepare declarations or reports for previous years may not be available and that failure to prepare and submit declarations or reports for this reason should not constitute a violation under the CWCR.

BXA agrees that if records necessary to prepare a declaration and report are not available because one or more of the three factors cited in the preceding paragraph took place prior to the effective date of this rule, failure to prepare and submit the declaration or report should not constitute a violation under the CWCR. However, BXA has the authority under the Act to require the preparation and submission of a declaration or report for activities that occurred before the regulatory requirement becomes effective and, to the extent that information necessary to prepare the declarations and reports is available, the U.S. Government has the authority to impose an administrative sanction for willful failure or refusal to do so. Such a requirement is not "retroactive" under the Administrative Procedure Act, because it does not alter the past legal status of a past action (i.e., disposal of records or failure to create records). In addition, the Technical Secretariat of the OPCW recently has confirmed that declarations and reports for activities occurring as early as 1994 may be useful to it in carrying out its verification and monitoring responsibilities. This rule includes new language in §711.4 which addresses these issues.

One respondent requested that the 5-year record retention period be limited to 3 years. This rule maintains the 5-year requirement to correspond with the statute of limitations applicable to enforcement actions (28 U.S.C. 2462). Four respondents stated that part 721 was too vague and broad, and might be interpreted as requiring documents to be retained that are not necessary to enforcement or other administration of the CWCR. BXA has revised part 721 to clarify the types of documentation required to be retained, the location of documents, and the use of copies of documents to meet the record retention requirements. Finally, one respondent questioned the meaning of "formal or informal" requests for documents that would preclude their disposal or destruction. By "formal," the CWCR means a subpoena. By "informal," the CWCR means a verbal or written request by the investigating agency for a particular document or documents.

Declarations and Reports:

One respondent requested an explanation of how the term "report" is used in the CWCR and a clearer description of the types of information that will be submitted to the OPCW. The term "report" is used to describe several different types of activities under the CWCR and the Act. The Act refers to reports to describe all types of requirements under the Convention, including declarations on production, processing and consumption, as well as reports on exports and imports. For reports required by the Act, this rule uses the following terms: 1) declarations; 2) reports on export and import activities; 3) notifications; 4) end-use certificates; 5) reports on inspection-related costs; and 5) post-inspection reports. BXA submits individual declarations for each declared facility to the USNA for transmission to the OPCW. These declarations contain facility-specific information, including facility name and address, and information on production, processing, consumption, and, in certain instances, export and import of specific chemicals. In addition, BXA submits to the USNA a national aggregate declaration on exports and imports, which combines information from facility declarations as well as information from reports submitted by other facilities and trading companies. The national aggregate declaration does not include facility-specific information, but only aggregate information by chemical or by country.

This rule provides that Schedule 1 and Schedule 3 facilities may include their export and import information with their declarations on past activities, or may submit the information separately as reports. Whether submitted as part of a declaration or as a report, Schedule 1 and Schedule 3 export and import information is included only in the national aggregate declaration; BXA does not submit facility-specific Schedule 1 or Schedule 3 export and import information from declarations or reports to the USNA for transmittal to the OPCW. (It should be noted, however, that notifications of Schedule 1 exports and imports are submitted to the USNA for transmittal to the OPCW.) For certain declared Schedule 2 plant sites, BXA does submit facility-specific production, processing, consumption, export and import information to the USNA for transmittal to the OPCW as part of the annual declaration on past activities. The Schedule 2 national aggregate declaration only includes information on exports and imports by chemical and by country. These different requirements are due to differences among the declaration provisions of the Verification Annex of the Convention for Schedule 1, 2 and 3 chemicals.

Initial Declarations:

One respondent requested clarification of the initial declaration requirement for Schedule 1 facilities. For Schedule 1 facilities, unlike Schedule 2 and 3 facilities, the initial declaration does not include any production or other Schedule 1 chemical activity information; it only provides a technical description of the facility. Production and other activity information is provided in the annual declarations. For the annual declarations on past activities for calendar years 1997, 1998, and 1999, facilities are required to submit declarations only for those years during which they produced more than 100 grams aggregate of Schedule 1 chemicals.

One respondent requested clarification that for the Schedule 2 initial declaration, plant sites are not required to submit a declaration for all three years (1994, 1995, and 1996), but are only required to submit a declaration for the year(s) in which one or more plants on the plant site produced, processed, or consumed a Schedule 2 chemical above the applicable threshold. BXA recognizes that the Schedule 2 initial declaration requirement, as well as the annual declaration on past activities, is burdensome on facilities and may appear unnecessary. However, Part VII of the Convention's Verification Annex requires initial declarations to be submitted for all three years (1994, 1995, and 1996) by plant sites comprised of one or more plants that produced, processed or consumed a Schedule 2 chemical above the applicable threshold in any one of those three previous calendar years. This initial declaration requirement will establish a profile on the plant site that will be used by the OPCW to monitor activities. The profile may be updated based on the plant site's subsequent submission of annual declarations on past activities. In order to maintain an accurate profile, a plant site must comply with the initial declaration requirement as described in the note to §713.3(a)(1)(i). A plant site must declare each chemical that it produced processed or consumed over the applicable threshold quantity in any one of the calendar years 1994, 1995, or 1996, and must submit three Forms 2-3 - one for each of the calendar years 1994, 1995, and 1996 -- for each chemical. For each year or years that a plant site did not produce, process or consume the declared chemical over threshold, it must declare "0" quantity only for those activities that triggered the declaration requirement. It should leave blank on Form 2-3 those questions relating to activities that did not exceed the applicable threshold quantity in any one of the three previous years. Plant sites that submit an initial declaration are subject to on-site verification if their activities exceed the applicable inspection threshold quantities set forth in part 716.

Declaration and Approval Requirements for Schedule 1 Facilities:

One respondent requested clarification of whether a Schedule 1 facility would be subject to declaration requirements if all of its Schedule 1 production occurred prior to April 29, 1997, when the Convention entered into force. If a facility produced more than 100 grams aggregate of Schedule 1 chemicals in calendar year 1997, it must submit an initial declaration and an annual declaration on past activities for 1997.

A respondent requested that BXA clarify that Schedule 1 facilities must declare consumption and storage of Schedule 1 chemicals only if they produced more than 100 grams aggregate of Schedule 1 chemicals. This is correct, but BXA does not agree that the rule requires clarification.

One respondent also requested BXA to state the grounds for disapproval of a Schedule 1 facility. The Convention requires States Parties to approve all Schedule 1 facilities. However, the Act does not authorize the U.S. Government to require a facility to stop or limit its production of Schedule 1 chemicals. Therefore, BXA cannot disapprove a Schedule 1 facility.

Mixtures and other exemptions to declaration and reporting requirements:

Four respondents requested that BXA include a low-concentration threshold for mixtures containing Schedule 1 chemicals to reduce the burden on all companies of identifying, quantifying and accounting for trace amounts of Schedule 1 chemicals contained in complex product mixtures and waste streams at very low concentrations. One respondent expressed concerns about BXA not approving facilities that produce Schedule 1 chemicals as unwanted byproducts in the manufacture of another chemical, since the aggregate of such production could exceed the Convention's 10 kg limit for Schedule 1 chemicals. BXA believes that the production, export, and import of trace amounts of Schedule 1 chemicals as unavoidable by-products or impurities do not pose a threat to the object and purpose of the Convention, would capture industries totally unrelated to those involved in the intentional production of Schedule 1 chemicals, and would result in the inspection of facilities under a verification regime established for facilities that intentionally produce Schedule 1 chemicals. Therefore, this rule includes in part 712 a 0.5 percent "round to zero" rule for Schedule 1 chemicals produced as unavoidable by-products or impurities.

One respondent requested that BXA establish a uniform 30 percent low concentration exemption for Schedule 2 activities because the current two-tiered reporting system included in the proposed rule (10 percent for production, consumption, imports, exports; 30 percent for processing) would create legal and compliance problems for industry. Moreover, it puts U.S. companies at a competitive disadvantage with other major chemical producers and traders which have adopted a uniform 30 percent mixtures rule. BXA agrees that the two-tiered mixtures rule is unnecessarily complicated, creates an uneven playing field with our major industrial competitors, and will capture downstream consumers that pose no risk to the object and purpose of the Convention. BXA also believes that adopting a 30 percent low concentration exemption for declarations and reports on Schedule 2 transfers is consistent with the U.S. Government's non-proliferation objectives. Therefore, this rule establishes in part 713 of the CWCR a 30 percent mixtures exemption for production, processing, consumption, export and import of Schedule 2 chemicals. However, should conditions change, BXA will review the 30 percent low concentration exemption for Schedule 2 exports and imports to ensure that our non-proliferation interests are not being undermined.

One respondent requested BXA to clarify whether the mixtures rules contained in §§713.3(a)(2)(i) and (ii) are applicable to §713.1 of the CWCR. The respondent was concerned that a complete prohibition on the importation of all Schedule 2 chemicals could create a situation where importers unknowingly violate the CWCR and become subject to penalties for importing of Schedule 2 chemicals. BXA agrees with the respondent. This rule adopts a 10 percent low concentration exemption for imports of Schedule 2 chemicals from non-States Parties after April 28, 2000. This exemption mirrors the mixtures rule contained in the Export Administration Regulations for exports of Schedule 2 chemicals to non-States Parties after April 28, 2000.

Four respondents requested an exemption for UDOC mixtures similar to that already existing for Schedule 3 chemicals. They noted the inconsistency between having an 80% threshold for Schedule 3 chemicals while maintaining a 0% threshold for UDOCs, which pose a much less threat to the object and purpose of the Convention. The respondents also wanted to use the mixtures rule to clarify what the term "discrete" means. Furthermore, the respondents stated that identifying, quantifying, and accounting for low concentrations of UDOCs contained in complex mixtures is excessively burdensome and provides no benefits to the object and purpose of the Convention. BXA does not accept these comments and this rule does not contain a UDOC mixtures exemption. The Convention does not specifically permit a mixtures rule similar to that for Schedule 2 or 3. Further, §710.1 of the CWCR contains the Convention's definition of a discrete organic chemical. This rule does not provide specific exemptions for individual UDOCs. If companies have specific questions about whether their products are covered by the CWCR, they should request a chemical determination from BXA. However, BXA believes that a specific exemption for UDOCs produced by synthesis as normal ingredients, by-products, or impurities in the manufacture of foods designed for consumption by humans and/or animals is warranted since such plant sites pose no threat to the object and purpose of the Convention. This rule does not include an exemption for facilities that produce UDOCs solely as consumer goods packaged for retail sale and requests that the public comment on the impact of the CWCR on such producers.

One respondent requested four additional exemptions to the declaration requirements for Schedule 3 chemicals: materials that are not produced by synthesis; materials that are not isolated for use or sale as a specific end product; process intermediates that are transformed at the same plant site; and components of waste streams (or substances formed in waste streams). At this time, BXA believes it is unnecessary to add additional exemptions for Schedule 3 chemicals beyond the 80% threshold that currently exists. If the OPCW acts to set a universal Schedule 3 threshold which is lower than 80% and if Congress amends the Act, BXA will consider additional exemptions. For purposes of the CWCR, the term "production" should be understood to include a scheduled chemical (i.e., a Schedule 1, Schedule 2, or Schedule 3 chemical) produced by a biochemical or biologically mediated reaction. Further, Schedule 3 chemicals not isolated above 80% purity, whether used or sold as specific end products or as intermediates or disposed of as waste, are currently excluded by the Act and this rule. Finally, excluding Schedule 3 process intermediates, with concentrations greater than the applicable threshold (80% in the United States), would be inconsistent with the object and purpose of the Convention.

Another respondent suggested that in order to avoid double counting of UDOCs, a UDOC produced in salt form and pure form should only be counted once for declaration purposes, and that the substance to be declared would be the final "species" isolated for use or sale outside the facility. The CWCR require declaration of only the final UDOC produced in whatever form for use or sale. If a facility is producing UDOC(s) for use within the facility, that UDOC must be declared if produced in quantities greater than the threshold specified in part 715 of the CWCR.

Amended declarations and reports:

One respondent requested clarification on whether or not the submission of amended declarations and reports will, in itself, trigger an enforcement action. An amended declaration or report will be used by BXA to replace the information on a declaration, or the aggregate national declaration that was previously submitted to the OPCW. Submission of an amended declaration or report is considered a change, a replacement, or an addition to previously submitted information. Amended declarations and reports will not automatically trigger an enforcement action.

One respondent requested clarification on the types of changes to a previously submitted declaration on the production of UDOCs that would require submission of an amended declaration or report. This rule clarifies in §715.2 of the CWCR that for declarations involving UDOCs, only changes of production quantity into a higher range, the addition of a new PSF-chemical (phosphorus, sulfur, and fluorine) produced above 30 metric tons at a PSF plant not previously declared, changes to previously reported activities and end-use purposes, or the addition of new activities or end-use purposes require an amended declaration or report under part 715 of the CWCR.

One respondent requested clarification on the types of changes to declarations or reports that will not require submission of an amended declaration or report because they are considered minor or insignificant information. This rule makes such clarification in §§712.6, 713.7, and 714.6 of the CWCR. Changes to previously submitted information on chemicals, activities and end-use purposes, or the addition of new chemicals, activities and end-use purposes require submission of an amended declaration or report. For Schedule 1, 2, or 3 facilities subject to inspection, changes that may affect verification activities, such as changes of the owner or operator, company name, address, or inspection point of contact, require submission of an amended declaration. For Schedule 1, 2, or 3 facilities not subject to inspection and UDOC plant sites, changes that do not directly affect the purpose of the Convention, such as changes to a company name, address, points of contact, non-substantive typographical errors, etc., do not require submission of an amended declaration or report and may be corrected in subsequent declarations or reports that are submitted to BXA.

Timing of submission of declarations and reports:

One respondent suggested that the deadline for initial declarations and reports, and annual declarations and reports on past activities for calendar years 1997, 1998, and 1999, should be extended from 90 days to 150 days after the date of publication of the interim rule. The respondent notes that it will be difficult to coordinate preparation of declarations for its many facilities within the United States. Although BXA understands the respondent's concern that it will be difficult to coordinate declarations and reports from many different facilities in the United States, the U.S. Government has committed to the OPCW that it will meet its international obligations and submit data declarations as soon as possible. In the early phases of the regulatory planning process, BXA contemplated requiring industry to submit declarations within 30 days after publication of the interim rule. However, industry representatives advised BXA that industry would need 90 days to meet its obligations, and BXA therefore extended the deadline for submission of initial and annual declarations on past activities. This respondent also requested that the submission deadline for declarations and reports should be the "postmarked" date. This rule requires that declarations and reports due to BXA be postmarked by certain dates.

One respondent requested that additionally planned activities be declared to BXA 10 days in advance of the beginning of the additional or new production, processing or consumption of Schedule 2 chemicals or the additional or new production of Schedule 3 chemicals, rather than 21 days in advance as specified in the proposed rule. Because this rule requires that declarations and reports be postmarked by specified dates, BXA does not believe that 10 days is enough time for the U.S. Government to declare such activities to the OPCW. Therefore, this rule requires

Several respondents requested an extension of the due dates for submission of annual declarations on past activities from February 13 to February 28, or later. The respondents believe that industry has a more burdensome and time-consuming task in preparing declarations than the U.S. Government. They noted that the U.S. Government has an electronic means to process, compile and aggregate the data and does not need 45 days to accomplish this task. The respondents further stated that in early February, many companies may not have compiled all of the necessary data available to complete declarations because of ordinary business cycles, inventory control systems, or other reasons, and to comply with the February 13^th due date, many companies will have to institute new changes to corporate policies and procedures that may affect many aspects of their business. BXA agrees with the respondents' arguments regarding the distribution of time under the Convention's 90-day time frame. This rule reflects in Table 1 to parts 712 through 715 of the CWCR the new due date of February 28 for annual declarations and reports on past activities. Note that annual declarations and reports for past activities for calendar years 1997, 1998, and 1999 are due to BXA by March 30, 1999.

Two respondents stated that declarations and reporting requirements should be based on the effective date of publication of the CWCR in calendar year 2000. They further state that the initial and first annual declaration of past activities should be combined into a single declaration for Schedule 2, Schedule 3, and UDOCs to prevent undue burdens on industry. BXA supports the respondents' concerns about the burden declarations and reports are on U.S. industry, and has already taken steps to minimize the burden. For example, this rule includes a recordkeeping provision that requires U.S. industry to provide information for years up to the effective date of the rule for which they do have records and states that BXA will accept whatever degree of precision is found in existing records. The final section of the Cost Benefit Analysis of the costs and benefits of alternatives, as well as Section 2.5.2 of the final Regulatory Flexibility Analysis, provides examples of how BXA has interpreted the CWC requirements as narrowly as possible so that all companies will be declaring on the same basis for calculating Schedule 2 activities to minimize declaration requirements for Schedule 2 sites. Further, the instructions for Form 2-3 (for Schedule 2 declarations), instruct plants sites producing below threshold quantities in the reporting year to declare "0" because they have a declaration requirement based upon activities in previous years thus reducing burden and confidential business information disclosure. Finally, this rule includes an exemption for UDOCs produced by synthesis that are ingredients, by-products, or impurities in the manufacture of foods designed for consumption by humans or animals.

One respondent requested that for rounding of information included on declarations and reports, no more than two significant digits be required, and that no greater precision be required than can reasonably be provided using existing documentation, equipment, and measurement techniques. This rule includes additional guidance in a new §711.5 and in the reporting and declaration requirement sections of Parts 712 through 715 of the CWCR.

Additionally planned activities:

One respondent was concerned that the Schedule 2 and Schedule 3 requirement for a declaration on additionally planned activities due to BXA 21 days before additionally planned activities can begin implies that the facility may not commence its activities until BXA gives permission to do so. The respondent believes that the declaration on additionally planned activities is a "notice" to BXA, and the facility should be free to commence additional production after the requisite time has passed without receipt of any type of permission from BXA. The respondent further notes that the CWCR indicate that the timing for the declaration on additionally planned activities runs from when the notice is "delivered to" BXA, stating that a facility will not know when the declaration "is delivered" to BXA, but rather when it is "sent to" BXA. BXA agrees that the additionally planned activities declaration requirement is a "notice" to BXA declaring newly planned activities. Facilities are responsible for submitting declarations to BXA within the required time frame prior to the commencement of the new activities. Facilities are not required to wait for permission from BXA to commence such activities. If a facility begins these activities prior to the required notification time frame, the facility may be in violation of the declaration requirement and may be subject to civil penalties. BXA agrees with the respondent's recommendation to make the timing for submission of a declaration on additionally planned activities the "sent to" date (e.g., the postmarked date), as reflected in §§713.5(b) and 714.4 of the CWCR.

Two respondents asked about the requirements for declaring additionally planned Schedule 2 and Schedule 3 activities provided in §§713.5 and 714.4, respectively, of the proposed CWCR. This rule expands the requirements for additionally planned activities consistent with an OPCW decision dated May 16, 1997 (C-I/DEC.38). Declarations on additionally planned activities by plant sites declared under §713.3(a)(1)(iii) or §714.2(a)(1)(iii) are required for: (1) an additional plant not declared under §§713.3(a)(1)(iii) or 714.2(a)(1)(iii) that plans to produce, process, or consume a Schedule 2 chemical or produce a Schedule 3 chemical above the applicable declaration threshold; (2) an additional Schedule 2 chemical that will be produced, processed, or consumed above the applicable declaration threshold at a plant declared under §713.3(a)(1)(iii) or an additional Schedule 3 chemical which will be produced above the declaration threshold at a plant declared under §714.2(a)(1)(iii); (3) an additional planned activity (production, processing, or consumption) above the applicable threshold for a chemical declared under §713.3(a)(1)(iii); (4) a planned increase in the production, processing, or consumption of a Schedule 2 chemical by a plant declared under §713.3(a)(1)(iii) or a planned increased in the production of a Schedule 3 chemical by a plant declared under §714.2(a)(1)(iii) to an amount which exceeds the applicable inspection threshold (see §§716.1(b)(2) and 716.1(b)(3) for the respective Schedule 2 and 3 thresholds); (5) a planned increase in the production of a Schedule 3 chemical by declared plants at a plant site to an amount above the upper limit declared under §714.2(a)(1)(iii); (6) a change in the anticipated starting or ending date of production, processing, or consumption declared under §713.3(a)(1)(iii) by more than three months; and (7) a planned increase in the production, processing, or consumption of a Schedule 2 chemical by a declared plant by 20 percent or more above that declared under §713.3(a)(1)(iii).

While BXA recognizes that some of the new requirements in this rule increase the declaration burden on industry, they are required in order to meet U.S. Government obligations under C-I/DEC.38 and are consistent in scope with the original requirements contained in §§713.5 and 714.4 of the proposed CWCR. BXA anticipates an additional 20 declarations on additionally planned activities based upon the above new requirements, but requests that concerned parties submit comments regarding this estimate and the overall burden of requirements mandated under C-I/DEC.38. BXA will reevaluate these additionally planned activities requirements based upon this input.

Definitions:

One respondent remarked that the definition of "declaration form" states that all declared facilities will have facility-specific information transmitted to the OPCW, but pointed out that information included with UDOC declarations and Schedule 3 export and import information is only aggregated and facility-specific information is not submitted to the OPCW. The respondent suggested revisions to the definition of "declaration forms" to clarify this point. Facility-specific information contained in UDOC declarations is submitted to the OPCW by the USNA. However, to clarify what information is submitted to the OPCW, this rule revises the definitions of "declaration or report form" and "reports."

One respondent requested a revision to the definition of "consumption," noting that most chemical reactions are not 100% complete. Accounting for the majority of the material as consumed and the remainder as either waste or as recycled starting material is reasonable. Therefore, this rule defines "consumption" of a chemical as its conversion into another chemical via a chemical reaction. Un-reacted material must be accounted for as either waste or as recycled starting material.

One respondent requested clarification of "toxic chemical" as used in §716.2(b)(1)(ii)(E) of the CWCR. BXA agrees that clarification is warranted. Therefore, this rule adds a new definition of "toxic chemical" to §710.1 of the CWCR. The definition is based on the definition found in the Act.

One respondent commented that the definition of the term "trading company" appears to cover the requirements for submitting a report by an undeclared plant site, stating that the terms "entity" and "companies" in the definition are confusing. The respondent further states that the phrase "entities involved in the export or import of chemicals" could be interpreted to mean that an entity engaged in both exports and imports is not a trading company, and only scheduled chemicals are subject to reporting by trading companies. BXA agrees that the definition of "trading company" requires clarification. Therefore, this rule revises the definition of "trading company" by replacing the word "entity" with "person," which is also defined in §710.1, and by clarifying that trading companies that export or import scheduled chemicals in amounts greater than specified thresholds are subject to reporting requirements, but not routine inspections.

Several respondents requested that a definition of production be added to §710.1 of the CWCR to help clarify declaration requirements. This rule adds the Convention's definition of "production" as the formation of a chemical through a chemical reaction.

One respondent requested that the definition of "host team" be modified to include facility representatives to recognize that the employees of the inspected facility must contribute to the host team because of their expertise. Section 303(b)(2) of the Act states that "[t]he United States National Authority shall coordinate the designation of employees of the Federal Government to accompany members of an inspection team of the Technical Secretariat." The term "Host Team" in §710.1 of the CWCR is meant to assign a functional name to these designated federal government employees, who will be drawn from different agencies, by describing their role during inspections (i.e., to host inspectors at U.S. facilities). While BXA fully expects that facility representatives will act as "de facto" Host Team members during inspection activities, the Act imposes certain requirements on federal employees that legally cannot be performed by facility representatives (e.g., obtaining administrative warrants, negotiating facility agreements, and representing the United States' interests as a State Party). Therefore, the term "Host Team" in the CWCR refers to the U.S. Government team that accompanies inspectors from the OPCW at facilities subject to inspection, and does not include civilian site representatives.

Finally, one respondent requested clarification of the definition of "storage" as it applies to Schedule 2 and 3 chemicals and UDOCs. BXA does not agree that a clarification is necessary, because no quantitative reporting of storage for Schedule 2 or 3 chemicals or UDOCs is required by the CWCR.

Electronic submission of information:

One respondent requested that BXA permit industry to electronically request assistance in determining its obligations under the CWCR, including chemical determinations. The respondent further requests that BXA respond to an incomplete request for assistance if the omitted information is not required for responding to the request. BXA supports electronic submissions of information to the extent possible. Therefore, this rule includes more detailed information in §711.3 on how to contact BXA electronically. BXA will respond to requests for chemical determinations within 10 working days of receipt. BXA will respond to other inquiries about industry obligations under the CWCR in a timely manner.

Facility agreements:

One respondent, while supporting the U.S. Government's approach on managed access, requested that the concept of managed access be introduced for UDOC inspections to strengthen the ability of Host Teams to protect confidential business information. The Convention contains strict rules for inspection team access to UDOC facilities based on the area of the plant site to be inspected. The CWCR are not intended to provide this level of detail since the actual access provided to inspection teams will vary from facility to facility. Part IX of the Convention's Verification Annex provides that inspected States Parties have the right to manage inspection team access to declared plants on a plant site. However, access to other areas of the plant site will be agreed upon, which is more controlled than managed access. Therefore, this rule does not specify managed access for UDOC facilities because it could result in expanded access to inspection teams beyond the Convention, which BXA does not support. BXA will ensure that inspection team access does not exceed the terms of the Convention.

One respondent requested that BXA make a reasonable effort to complete facility agreement negotiations with the OPCW on the establishment of a new Schedule 1 facility within 200 days, stating that without this language, any new Schedule 1 production by a new facility could be delayed indefinitely. The Act does not give BXA the authority to implement the Convention's restrictions on Schedule 1 production at a new facility where a facility agreement has not been concluded. New Schedule 1 facilities must notify BXA 200 days prior to commencing production of Schedule 1 chemicals above 100 grams aggregate. BXA will work with the USNA to conclude a facility agreement for new Schedule 1 facilities with the OPCW prior to the commencement of production of Schedule 1 chemicals above 100 grams aggregate.

Two respondents requested that the facility be consulted and be authorized to approve any facility agreement prior to conclusion by the U.S. Government and the OPCW. The respondents further requested that the U.S. Government consult with the facility prior to final interpretations of the provisions of the facility agreement. BXA recognizes that facility input is critical to the successful negotiation of facility agreements. The proposed rule inadvertently omitted language from the Act that provides facilities with the right to participate in the preparation of facility agreements. This rule includes such language in §716.6(b) of the CWCR, and BXA will consult with facilities to the maximum extent possible during negotiations with the OPCW. The United States cannot withhold conclusion of a facility agreement with the OPCW because of facility concerns. The Convention does not provide for facility approval of the facility agreement. Industry should note that BXA will inform the affected facility of the status of negotiations at the OPCW, permit facility representatives to observe negotiations with the Technical Secretariat to the maximum extent practicable, and prior to conclusion of a facility agreement with the Executive Council, will provide facilities with an opportunity to comment. During final negotiations with the OPCW, BXA will give consideration to the facility's comments. Finally, BXA will consult with facility representatives prior to interpreting the facility agreement, once completed. If a disagreement over the provisions of a facility agreement occurs between the OPCW and BXA during an inspection that cannot be resolved on-site, the issue will be included in the preliminary factual finding report. After consulting with the U.S. interagency group established by the Act and E.O. 13128, the USNA and BXA will meet with the OPCW to resolve the issue. BXA will keep the facility informed of discussions with the OPCW.

BXA received several comments on the Schedule 2 Model Facility Agreement (MFA) found in Supplement No. 3 to part 716 of the CWCR. First, concerns were expressed about a provision found under Section 2 - Health and Safety, that states that if the inspected State Party so requests on the basis of confirmed contamination or hazardous waste requirements or regulations, any piece of equipment involved in the inspection activities will be left at the plant site at the end of the inspection. The respondent states that the facility may not be legally authorized to store or dispose of contaminated items. BXA will discuss issues related to disposal of contaminated items and hazardous waste with facilities as necessary, and facility agreements will be drafted accordingly.

Another concern raised by the respondents regarded sampling. Section 7.4, paragraph 2 of the Schedule 2 MFA states in part that "[s]ampling and analysis, for inspection purposes, may be carried out to check for the absence of undeclared scheduled chemicals. Each sample will be split into a minimum of four parts at the request of the inspection team in accordance with Part C of Attachment 10." The respondent states that the facility should retain the right to request a sample split and analyze it. BXA does not believe that the sampling language needs revision. The language does not preclude the inspected facility from requesting split samples. Facilities should further note that attachments to the MFA are intended to be site-specific and completed with facility input.

One respondent correctly notes that Section 7.4, paragraph 12 of the Schedule 2 MFA erroneously states that the inspection must stop at the direction of the plant site representative. BXA agrees that the plant site representative should not be authorized to stop analysis activities in the event that these activities are not in accordance with the facility agreement or agreed analysis procedures, or otherwise pose a threat to safety or environmental regulations or laws. Therefore, this rule revises the language in Section 7.4, paragraph 12 to state that the inspected State Party, in consultation with the plant site representative, may cease such activities.

BXA received several other comments regarding concerns that the Schedule 2 MFA does not allow for enough consultation with the facility representative. Other comments focused on suggestions to add clarifying language in the MFA that is site specific. Industry should note that the MFAs found in Supplements No. 2 and 3 to part 716 are models that include general language that could apply to all inspected facilities. Attachments to the MFAs will make the facility agreement site-specific.

Other comments made by the public regarding the Schedule 1 and 2 MFAs have been incorporated in Supplements No. 2 and 3 to part 716. Where applicable, corresponding changes were made to both MFAs.

BXA also received a request to develop and include in the CWCR a Schedule 3 MFA. BXA is assessing the needs and requirements of a Schedule 3 MFA. The OPCW's Technical Secretariat has developed a draft MFA but there has been no movement by States Parties to complete it. To date, no State Party that has undergone a Schedule 3 inspection has requested a facility agreement. Moreover, the OPCW has suggested that if a State Party requests a facility agreement for a Schedule 3 plant site, the length of an initial inspection will be extended by 2 days. Since the Convention limits the number of Schedule 3 and UDOC inspections to a total of 20 inspections per year, it is unlikely that a re-inspection will occur at a Schedule 3 facility within 5 to 10 years. Nevertheless, the Act gives Schedule 3 facilities the right to request a facility agreement and BXA will take the respondent's suggestion into consideration. BXA would prefer that States Parties reach consensus on a general framework for a model before drafting a national model, but will consider doing so if States Parties are unable or unwilling to complete a model before Schedule 3 inspections commence in the United States.

Finally, one respondent requested that language be added to the CWCR to require OPCW inspection teams to follow the requirements of relevant model facility agreements during an initial inspection. During initial inspections, verification activities are subject to the Convention's "General Rules of Verification" (Part II of the Verification Annex) and the applicable annex for the type of facility being inspected (Parts VI, VII, VIII, or IX). Although BXA does not believe it is appropriate to include the respondent's suggested language in the CWCR, BXA suggests that facilities subject to initial inspection develop a preliminary draft facility agreement based on the CWCR's model facility agreement. This preliminary draft will be provided to the inspection team upon arrival at the facility. Although the OPCW is not bound by this preliminary draft, BXA will urge that inspection teams use it as a guide during initial inspections. Regardless, inspection teams are always under the obligation to discharge their functions with the least possible inconvenience and disturbance to the facility, and to avoid hampering or delaying the operation of a facility or affecting its safety.

Initial and routine inspections:

Section 716.5 of the CWCR provides that the Department of Commerce provide written Host Team notification of an inspection. Such notice will usually be via fax or phone. If notification by fax or phone fails, a written notification of the inspection will immediately be posted at the plant site. A respondent questioned whether there will be an additional notification that includes the contents of the OPCW inspection mandate after it has been provided to the Host Team at the point of entry. This respondent also asked how much time the facility will have to respond to the notification, and whether the facility will be asked to respond to the notification regarding warrants. The Host Team notice from the Department of Commerce serves to notify the facility of an inspection, advise the facility of the availability of U.S. Government assistance, and to determine if an administrative warrant is required. BXA asks the facility to reply to the request for consent within 4 hours. If, after 4 hours, the request for consent is not granted, BXA will seek an administrative warrant. The notification also advises the facility of the availability of an Advance Team. The company may wish to respond as soon as possible to maximize the time available for preparation of an inspection. The Convention requires transport of the OPCW Inspection Team to the inspected site within 12 hours of presenting the mandate. Due to this time constraint, BXA may not be able to provide the mandate to the facility prior to the arrival of the Inspection Team at the facility. However, the Commerce-led Host Team currently plans to pass the mandate, if possible, to the Advance Team at the site as soon as possible.

One respondent requested BXA to share a copy of its preliminary (renamed "Host Team") notice with industry for comment. The respondent wanted to ensure that it contains certain "critical" information such as the inspection mandate and establishes a dialogue between the U.S. Government and facility on health and safety information that could impact a facility during verification activities. Once the CWCR are published and the interagency formally clears the Host Team notification, BXA will make the notice available to the public upon request. The Host Team notification is meant to alert the facility of an impending inspection, determine whether the facility consents to the inspection, and ascertain whether the facility requests Advance Team support. The Host Team notification will also contain a copy of the OPCW's notification to the USNA, which includes health and safety information regarding special needs of inspectors and inspection equipment. However, such information will change from inspection to inspection, and BXA cannot anticipate Inspection Team needs in advance. If there are special facility-specific issues (e.g., health and safety) that the Host Team or OPCW needs to be aware of prior to the commencement of an inspection, they should be communicated to the Advance Team during pre-inspection preparation activities. The Advance Team will then inform the Host Team Leader, who will brief the Inspection Team upon arrival at the U.S. point of entry (POE) (Washington Dulles International Airport). The inspection mandate is not part of the Host Team notification because the Host Team Leader will not receive the mandate until the Inspection Team arrives at the POE.

One respondent requested that inspections start in normal business hours, therefore reinforcing the Convention's commitment to not impact the regular operation of a facility. BXA does not agree that all inspections will be conducted during normal business working hours. Verification activities include, inter alia, physical plant inspections, records review, the preparation of preliminary factual findings and draft facility agreements, if applicable. Many of these activities can be done in an administrative work space outside of operations areas, but all must be completed prior to the conclusion of an inspection. Limiting inspection activities to normal working hours will increase the amount of time (i.e., number of days) Inspection Teams remain on-site. Inspectors are obligated to discharge their functions with the least possible inconvenience and disturbance to the facility, and to avoid hampering or delaying the operation of a facility or affecting its safety. BXA will take all of these factors into consideration when determining whether an inspection should commence, continue, or conclude during other hours. The respondent also requested that the facility be consulted for any extension in the duration of an inspection prior to agreement by the Host Team Leader and the Inspection Team. BXA supports this request. Therefore, this rule adds to §716.5(b)(2) and (b)(3) that the Host Team Leader will consult with the inspected facility on any extension of the inspection prior to making an agreement with the Inspection Team.

BXA has also determined that part 716 of the proposed CWCR was deficient regarding two inspection requirements of the Convention: pre-inspection briefing and debriefing on the preliminary factual findings. The Convention requires that prior to the commencement of an inspection, facility personnel brief the Inspection Team on the facility, the activities carried out there, safety measures, and administrative and logistic arrangements necessary for the inspection. The pre-inspection briefing is limited to three hours. New §716.4(c) of the CWCR contains the requirement for facilities to provide a pre-inspection briefing and lists topics to be addressed. The Convention also requires that the Inspection Team meet with the inspected State Party and facility upon completion of the inspection to review its preliminary factual findings report and to clarify any ambiguities. The debriefing must be completed no later than 24 hours after the completion of the inspection. New §716.4(i) contains the requirement for a debriefing. Facilities should note that the time required for a pre-inspection briefing and debriefing on the preliminary factual findings is in addition to the specified period of inspection for Schedule 2, Schedule 3, and UDOC plant sites. This rule also includes new §§716.4(b), (d) and (e) to provide a clearer description of the inspection process and to set forth the scope of consent to an inspection. BXA invites the public to comment on the changes to part 716, particularly the new sections.

Three respondents stated that additional information should be included in §716.3 to clarify, for facilities subject to routine inspection, that withholding consent to an inspection or withdrawing consent following the commencement of an inspection are not violations of the regulations. BXA notes that the Act provides that consent may be withheld for any reason or no reason. BXA also agrees that in most circumstances, withdrawal of consent would not be a violation under §719.2(a)(1) of the CWCR.

One respondent recommended that, in order to reduce the likelihood of a misunderstanding by the OPCW inspectors, and to avoid possible "international incidents," §716.3 should also specify the procedures to be followed if consent is withdrawn during an inspection. BXA does not accept this recommendation because procedures may differ from inspection to inspection, depending on the circumstances and the timing of a withdrawal of consent, and on whether the OPCW inspectors decide to wait for BXA to obtain an administrative warrant and then to continue the inspection or to terminate the inspection.

One respondent raised Constitutional concerns about the installation of on-site monitoring equipment at Schedule 1 facilities. Although paragraph 29 of Part VI of the Convention's Verification Annex, pertaining to verification of declared Schedule 1 facilities, gives the OPCW the right to install such instruments, the U.S. Government does not anticipate that the OPCW will request to do so for facilities subject to the CWCR. This rule moves the provision for on-site monitoring of Schedule 1 facilities from §716.2 to a new §716.8.

A respondent requested that BXA reduce the post-inspection reporting burden on industry by allowing reports on inspection-related costs to be voluntary, summarized, estimated by BXA or the facility, or reported in ranges, and that the time frame for submitting such reports be extended to 180 days after an inspection. BXA is sympathetic to the respondent's concerns, however, the Act specifically requires that the President report the total costs borne by United States business firms in the course of inspections to the Congress. This requires BXA to compel industry to submit reports on the total costs related to inspection. BXA gives facilities the discretion to determine the methodology for computing total costs. Because the annual report on inspections must be submitted annually to Congress, BXA must be able to provide as current figures as possible without excessively burdening industry. BXA believes that the 90 day time frame is reasonable and meets the requirements of the Act.

Clarification procedures; challenge inspection requests:

Two respondents questioned whether the Department of Commerce has the authority, under the Act, to require facilities subject to the CWCR to provide information in response to a clarification request from another State Party, and suggested deletion of §717.1(b) of the CWCR. Section 101(e) of the Act and Section 3 of Executive Order No. 13128 give the Department of Commerce adequate authority to require such information. In addition, as one respondent highlighted, the clarification procedures in Article IX of the Convention provide a means of clarifying and resolving ambiguities without the need for challenge inspections. Three respondents stated that the requirement for facilities to provide information to the Department of Commerce pursuant to a clarification request from another State Party or the OPCW should be clarified to establish substantive limits on the scope of the request and a time frame for response. Substantive limits are already provided in §717.1(b). The information must pertain to "reporting, declaration, notification, or inspection requirements set forth in parts 712 through 716." BXA agrees that a time frame for response should be provided. Therefore, this rule requires in §717.1(b) that information be provided to the Department of Commerce pursuant to a clarification request within five working days. This time frame will allow the U.S. Government to respond to another State Party or to the OPCW within 10 days, as required by Article IX of the Convention.

One respondent recommended that this part establish procedures for resolving differences, including meetings with the OPCW, to avoid the need for challenge inspections. BXA does not believe it is necessary or appropriate for the CWCR to set forth procedures that the U.S. Government will follow in communicating with other States Parties or the OPCW.

Finally, one respondent suggested that a request for information under the clarification procedure amounts to a criminal investigation, and another respondent suggested that a facility should be able to require BXA to obtain an administrative warrant before providing the requested information. A request for information does not rise to the level of a criminal investigation. An administrative warrant is not appropriate in this context, because no physical inspection of a facility is involved and the information requested falls within the scope of the CWCR. Willful failure or refusal to provide information in response to a BXA request under part 717 of the CWCR would constitute a violation under §719.2 of the CWCR.

Facilities that cease involvement with declarable activities:

Respondents were concerned about whether a facility will be absolved from further requirements under the CWCR when the facility eliminates its declarable activities. The respondents recommended that BXA provide a mechanism by which the facility can commit to elimination of declared activities, and therefore not be subject to initial declaration and reporting. BXA does not agree that a facility should be able to avoid submission of a declaration based on the facility's intent to terminate the declarable activity. This would be inconsistent with the requirements of the Convention.

Violations and penalties:

BXA received several comments on part 719 - Enforcement, many of which were adopted. The most significant changes that were made to part 719 concern its structure and the application of the administrative process. Part 719 of this rule is intended to more accurately reflect the three categories of Chemical Weapons Convention violations: "violations of the Act subject to administrative and criminal enforcement proceedings" (§719.2); "violations of IEEPA subject to judicial enforcement proceedings" (§719.3); and "violations and sanctions under the Act not subject to proceedings under the CWCR" (§719.4). Section 719.2 of the CWCR sets forth violations of the Act . The Department of Commerce and Department of State jointly apply the administrative process that applies to these violations. The administrative procedures are found in 15 CFR §§719.5-719.22 and in 22 CFR part 103, subpart C. Section 719.3 sets forth the violations of the International Emergency Economic Powers Act (IEEPA). Part 719 provides no administrative process for these IEEPA violations. They are referred to the Department of Justice for judicial enforcement. The violations contained in §719.4 have as their basis the Act, but they are not subject to the CWCR and are provided for informational purposes only.

In addition to the concerns expressed about structure and organization, there were also several comments expressing general displeasure with the precise wording of various violations and penalties. While BXA is sympathetic to some of these comments, the violations and penalties in the CWCR merely recite the violations and penalties as they appear in the relevant statutes. Thus, BXA made no substantive changes to the violation and penalty language.

Although no substantive changes were made to the language of the violations and penalties, BXA does believe it is necessary to clarify what the violation of "willfully impeding an inspection" might mean. One respondent expressed concern that this violation could be construed so that the exercise of the right to withhold consent (which makes it necessary for the government to obtain an administrative warrant), or that efforts to protect the safety of the inspectors, would constitute willfully delaying or impeding an inspection. Since ~305(a) of the Act provides that the owner or the operator, occupant, or agent in charge of the premises may withhold consent for any reason or no reason, BXA does not believe those concerns are well founded.

Finally with respect to the violations and penalties, some respondents were confused by use of the terms "knowingly" and "willfully." The basis for this confusion was the mistaken assumption that the Act was the statutory basis for the import violations, which caused confusion because the criminal penalty provision says "willfully" rather than "knowingly" as required by the Act. The reason for use of the word "willfully" rather than (or in addition to) "knowingly" is that the statutory basis for the import violations is the International Emergency Economic Powers Act. Therefore, the criminal penalty for import violations mirrors the IEEPA penalty provision. Several respondents also asked BXA to clarify the meaning of the word "knowingly" as used to describe the criminal penalties for refusal violations. However, the penalty language and standards are statutory (see ~ 501(b) of the Act), and are therefore more appropriately interpreted by the courts.

Administrative procedures:

One respondent objected to §719.6(c), which states that defenses that the respondent does not set forth in the Answer to a Notice of Violation and Assessment (NOVA) are waived, except for good cause shown. However, it is especially important that this standard administrative law provision be included in the CWCR because the statutory time limit for administrative proceedings is very short (30 days). Interested parties should keep in mind that the provision is not an absolute waiver of defenses - it does permit a respondent to present additional defenses if the Administrative Law Judge (ALJ) determines there is a good reason for doing so.

Several respondents expressed concern about §719.20. As proposed, it permitted documents filed with the ALJ to be made available immediately upon filing. In response to these comments, this rule revises §719.20(c)(2) to state that the record for decision, including the NOVA and other documents that are filed in an administrative proceeding, will be available to the public only after the final administrative resolution of a case. Prior to that final resolution, any party may request that the ALJ restrict access to any portion of the record, and the ALJ may so direct. Thus, the revised Part 719 ensures that parties have the opportunity to petition for restricted access to documents or portions of documents, and to have the ALJ rule on such petitions, before the record for decision becomes public.

In addition, respondents expressed concern, pursuant to §719.20(b) of the CWCR, that the ALJ may transfer previously restricted material to the unrestricted portion of the record once it becomes declassified or unrestricted due to the passage of time. The respondent suggested implementing a new process whereby the ALJ would provide notice and opportunity for objection before making such a move. BXA has not made such a change as the material is already protected. Since material may not be transferred until it becomes declassified or derestricted, the ALJ would have to make inquiries if there were any doubt about the status of the material.

Other respondents requested that §719.14, regarding hearings, be clarified. BXA changed this section to provide that hearings are closed to the public, except upon good cause shown, and clarified that evidence of settlement discussions is not admissible in any administrative proceeding, and that witnesses may be cross-examined. However, the ALJ continues to have discretion over what evidence is admissible; the federal rules of evidence do not apply.

One respondent asked why §719.18 sets forth factors to be considered in assessing penalties for reporting- and inspection-related violations but not for import violations. As the revised CWCR provides no administrative process for import violations, the question is moot. However, the answer was that the statutory basis for the two types of violations is different: the Act is the basis for reporting- and inspection-related violations and the IEEPA is the basis for import violations. Only the Act requires specific factors for consideration.

Various other comments requested clarification regarding for whom the Department of Commerce provides legal representation (§719.1(a)(2)), service via facsimile (§719.8(b)), issuance of subpoenas (719.11(b)), and payment for copies of the hearing transcript (§719.14(c)(1)). All these clarifications have been made. BXA also agreed to use the word "request" rather than the word "demand" in connection with requests for a hearing (§719.6). Other comments did not result in any changes. BXA did not extend the time permitted to request a hearing from 15 days to 30 days for refusal violations as the 15-day time period is statutory, and BXA did not delete the requirement for a notice of appearance.

Denial of export privileges:

Like part 719, part 720 of the CWCR was reorganized and clarified, though not significantly changed. This reorganization was accomplished in lieu of deleting part 720 and organizing denial cases as a third category of cases in part 719 as one respondent suggested. That suggestion was not adopted because a denial of export privileges can only occur after a conviction of crimes outside the scope of the CWCR. The Act requires that respondents have notice and an opportunity for hearing before a denial of export privileges is imposed, and this part sets forth that process. Several respondents noted discrepancies in part 720 of the CWCR regarding the standards for ALJ review and the standards for Under Secretary review. BXA has changed this part to make it clear that anyone may request a hearing before an ALJ, but that there are specific grounds for appeal from the ALJ decision to the Under Secretary. The grounds for appeal include: omission of a necessary finding of fact, a necessary legal conclusion is contrary to law, a prejudicial error occurred, or the decision was arbitrary, capricious, or an abuse of discretion.

Additional Public Comments:

There were several public comments that were not addressed in this Supplementary Information section, but those comments were reviewed and incorporated, as appropriate, in the CWCR itself. Additionally, typographical errors and minor clarifications were corrected in this rule.

III. PUBLIC COMMENTS ON DECLARATION AND REPORTING FORMS AND HANDBOOKS

This section outlines comments received from four respondents regarding the Department of Commerce's Federal Register notice (Volume 64, Number 141) of July 21, 1999, announcing an Office of Management and Budget review and request for comments on BXA's proposal for collection of information under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35) for the Chemical Weapons Convention Declaration Forms (OMB Approval Number 0694-0091). Two respondents requested that BXA establish an official record of the public comments received on the forms by including those comments in the supplementary information section of this rule. BXA agrees with this request and provides those comments herein. All typographical errors and minor clarifications noted by the respondents were corrected, and are not addressed here.

Declaration and Report Handbooks for Schedule 1, 2 and 3 Chemicals and Unscheduled Discrete Organic Chemicals:

Section 3 "Guide to Submission of Forms" of the Declaration and Report Handbooks for Schedules 1, 2 and 3 and Unscheduled Discrete Organic Chemicals. One respondent stated that the "Guide to Submission of Forms" complicates industry's ability to decipher its specific obligations. The respondent requested clarification and that BXA ensure the consistency of the final reporting requirements and establish an immediate routine for fulfilling these requirements. Additionally, two respondents stated that the Guides indicate Form A is "required, as appropriate" whereas they believe Form A is optional and should be referred to as "attached, as appropriate."

BXA clarified each of the Handbooks' "Guide to Submission of Forms" by including the routine date for submission of annual declarations on past activities and annual reports on export and import activities. However, because initial declarations and reports as well as declarations and reports on past activities from multiple years must be submitted to BXA within 90 days after publication of this rule, BXA is maintaining the specific declaration and report submission requirements as a note to the Guide. In the first revision to the Handbook, BXA will remove these notes from the Guide and the routine filing requirements will be clearly defined.

BXA also revised each of the Handbooks' "Guide to Submission of Forms" to reflect that Form A is an attachment and should be submitted as appropriate. Form A should be used to submit any attachment to a declaration or report including, but not limited to, a plant site diagram, a technical description of a Schedule 1 facility or a structural formula drawing of a chemical.

The following clarifies the specific types of declarations and/or reports that must be submitted to BXA within 90 days of the publication of the Chemical Weapons Convention Regulations (CWCR) as well as the calendar years for which this information must be provided:

Schedule 1

Schedule 2

Schedule 3