U.S. Industrial Base Surveys Pursuant to the Defense Production Act of 1950 - Federal Register 7/15/2015

Summary

This rule sets forth the policies and procedures of the Bureau of Industry and Security (BIS) for conducting surveys to obtain information in order to perform industry studies assessing the U.S. industrial base to support the national defense pursuant to the Defense Production Act of 1950, as amended. Specifically, this rule provides a description of BIS's authority to issue surveys; the purpose for the surveys and the manner in which such surveys are developed; the confidential treatment of submitted information; and the penalties for non-compliance with surveys. This rule is intended to facilitate compliance with surveys, thereby resulting in stronger and more complete assessments of the U.S. industrial base.

Dates

This rule is effective August 14, 2015.

Background

Pursuant to authorities under section 705 of the Defense Production Act of 1950 as amended (DPA) (50 U.S.C. app. 2155) and § 104 of Executive Order 13603 of March 16, 2012 (National Defense Resources Preparedness, 77 FR 16651, 3 CFR, 2012 Comp., p. 225), the Bureau of Industry and Security (BIS) conducts studies that assess the capabilities of the U.S. industrial base to support the national defense. To produce these studies, BIS may issue surveys to collect detailed information related to the health and competitiveness of the U.S. industrial base from government sources and private individuals or organizations. BIS published a proposed rule addressing its authority to conduct the studies, the authority to issue surveys to gather data in support of the studies, the purpose of the surveys and the manner in which such surveys are developed, the confidential treatment of submitted information, and the penalties for non-compliance with surveys (see 80 FR 11350, March 3, 2015). BIS received two comments on the proposed rule and is not making any changes to the final rule text in response to those comments. This final rule makes no substantive change to the proposed rule.

Update

Summary

This proposed rule would set forth the policies and procedures of the Bureau of Industry and Security (BIS) for conducting surveys to obtain information in order to perform industry studies assessing the U.S. industrial base to support the national defense pursuant to the Defense Production Act of 1950, as amended. Specifically, this proposed rule would provide a description of: BIS's authority to issue surveys; the purpose for the surveys and the manner in which such surveys are developed; the confidential treatment of submitted information; and the penalties for non-compliance with surveys. This rule is intended to facilitate compliance with surveys, thereby resulting in stronger and more complete assessments of the U.S. industrial base.

Background

Pursuant to authorities under § 705 of the Defense Production Act of 1950 as amended (DPA) (50 U.S.C. app. 2155) and § 104 of Executive Order 13603 of March 16, 2012 (National Defense Resources Preparedness, 77 FR 16651, 3 CFR, 2012 Comp., p. 225), the Bureau of Industry and Security (BIS) conducts studies that assess the capabilities of the U.S. industrial base to support the national defense. To produce these studies, BIS may issue surveys to collect detailed information related to the health and competitiveness of the U.S. industrial base from government sources and private individuals or organizations.

This proposed rule sets forth procedures intended to facilitate the accurate and timely completion of surveys issued by BIS to collect data for these studies. This rule sets forth in a single part of the Code of Federal Regulations the information about BIS's authority to conduct the studies, the authority to issue surveys to gather data in support of the studies, the purpose of the surveys and the manner in which such surveys are developed, the confidential treatment of submitted information, and the penalties for non-compliance with surveys.

Additionally, this rule explains BIS's procedures for verifying that the scope and purpose of the surveys are well defined, and assures that the surveys do not solicit data that duplicates adequate and authoritative data that is available to BIS from any federal or other responsible agency. A survey may require the submission of information similar or identical to information possessed by another federal agency but that is not available to BIS.

Based on requests it receives from U.S. Government agencies, BIS produces studies to develop findings and policy recommendations for the purpose of improving the competitiveness of specific domestic industries and technologies critical to meeting national defense and essential civilian requirements. These studies may require surveys to collect relevant data and assessments of that data and other information available to BIS.

BIS, in cooperation with the requesting agency, selects the persons to be surveyed based on the likelihood that they will have information relevant to a study. That likelihood is related to the person's association with the industry sector, material, product, service or technology that is the subject of the study. That association may be based on factors such as the person's role in directly or indirectly providing, producing, distributing, utilizing, procuring, researching, developing, consulting or advising on, the industry sector, material, product, service or technology that is the subject of the study.

Whether a person's association with the industry sector, material, product, service or technology being assessed is proximate or remote does not determine whether that person's association is sufficient for inclusion in the survey. For example, information about a supplier of raw materials or components that is several transactions removed from the production of the product that is the subject of a study may be relevant to assessing the capabilities of the U.S. industrial base to supply the product to support the national defense. In such a situation, the supplier would be included in the survey. The nature of the person from whom the information is sought also does not determine whether that person's association with the industry sector, material, product, service or technology at issue is sufficient for inclusion in the survey. Surveys may require information from businesses organized for profit, non-profit organizations, academic institutions and government agencies.

To be useful, a study must be comprehensive, accurate and focused on the relevant industry sector, material, product, service or technology. Therefore, surveys may require information about employment, research and development, sources of supply, manufacturing processes, customers, business strategy, finances and other factors affecting the industry's health and competitiveness. To properly focus the survey on the industry sector, material, product, service or technology being assessed, BIS may request information about a corporation as a whole or information about one or more specified units or individual activities of that corporation. The DPA provides both a civil remedy and criminal penalties that may be used when recipients of surveys do not supply the information sought.

BIS deems the information supplied in response to survey requests to be confidential and is prohibited by law from publishing or disclosing such information unless the Under Secretary for Industry and Security determines that withholding the information is contrary to the interest of the national defense. The authority to make this determination, which § 705(d) of the DPA gives to the President, has been delegated to relevant agencies, including the Secretary of Commerce, by § 802 of Executive Order 13603. The Secretary of Commerce re-delegated this authority to the Under Secretary for Industry and Security. The DPA provides criminal penalties for any person who willfully violates its prohibition on publication or disclosure.

Section by Section Description of the Proposed Rule

This proposed rule would create a new part in Title 15, Chapter VII, Start Printed Page 11351Subchapter A of the Code of Federal Regulations to be designated as 15 CFR part 702. This new part would be devoted exclusively to BIS's collection of information under § 705 of the DPA (50 U.S.C. app. 2155). Placing the new part in Subchapter A would promote an orderly and logical regulatory structure because all other regulations implementing BIS authorities related to the DPA are contained in that subchapter.

Section 702.1

Section 702.1 would set forth a general description of BIS' authority to collect information needed to complete the surveys. The survey responses assist BIS in determining the capabilities of the industrial base to support the national defense and to develop policy recommendations to improve both the international competitiveness of specific domestic industries and their ability to meet national defense needs.

Section 702.2

Section 702.2 would implement the requirement to publish regulations found in § 705 of the DPA (50 U.S.C. app. 2155(a)) by requiring BIS personnel of appropriate competence and authority to ensure that before a survey is sent to any person for completion; (1) the scope and purpose of a survey have been established, (2) the scope and purpose are consistent with BIS's authorities under the DPA, and (3) the data requested by the survey does not duplicate adequate and authoritative data available to BIS from a federal or other authoritative source. A survey may require information that is similar or identical to information possessed by other federal agencies but not available to BIS. The section does not limit the factors that may be considered in deciding whether to conduct a survey nor does it modify or replace the requirements of the Paperwork Reduction Act. In addition, all surveys are reviewed by BIS and by the Office of Management and Budget (OMB) pursuant to the Paperwork Reduction Act before they are distributed. The OMB review process provides additional assurance that surveys are designed to collect only information deemed necessary to meet the scope and purpose of a study.

Section 702.3

Section 702.3 would address the confidentiality requirements imposed by § 705(d) of the DPA (50 U.S.C. app. 2155(d)) and, in accordance with that section, would provide two procedures by which the restrictions on disclosure in § 705(d) would be invoked. First, consistent with its current practice, BIS would deem all information submitted in response to a survey to be confidential. Second, a person submitting a response to a survey may request confidential treatment of the information submitted.

Although the second procedure is likely to be redundant of the first, the statute prohibits disclosure if either the government deems the information to be confidential or if the person furnishing the information requests confidential treatment. BIS concludes that both procedures should be included in the regulations to be consistent with the statute. Additionally, § 702.3 would note that confidential information shall not be published or disclosed unless the Under Secretary for Industry and Security determines that withholding the information is contrary to the interest of the national defense. The statutory authority of the President to make this determination has been delegated to the Under Secretary for Industry and Security. This section also repeats the penalties that the statute authorizes for persons convicted of willfully violating the prohibition on disclosure.

Section 702.4

Section 702.4 would require timely, complete and adequate responses to surveys. Specifically, the section would require that survey responses be returned to BIS within the time frame stated on the initial distribution letter or other request for information. The section would treat a response as “inadequate” if it provides information that is not responsive to the questions asked or if it provides aggregated information when specific information was requested.

Section 702.4 would set forth the criteria by which BIS may grant either an exemption from complying with the survey requirement or an extension of time to comply. The grounds for granting an exemption or an extension are limited and generally result when BIS concludes that the survey recipient lacks information deemed relevant to the survey or when compliance with the requirement would be unduly burdensome.

Section 702.4 would make clear that the deadline for complying with a survey is not suspended by submitting a request for an exemption or extension of time to comply.

Finally, § 702.4 would provide that BIS may return responses that are incomplete or inadequate and specify a due date for a complete and adequate response.

Section 702.5

Section 702.5 would set forth the consequences of failure to comply with a survey or other request for information. These consequences are established by § 705(a) and (c) of the DPA (50 U.S.C. app. 2155(a) and (c)). If a person does not comply with a survey, BIS may serve a subpoena upon that person to compel compliance. If the person still does not comply, the government may apply to the U.S. district court in any district in which the person is found, resides or transacts business for an order requiring such person to comply. The district court has authority to punish any failure to comply with the order as contempt of court. Persons who are convicted of willfully failing to comply with a survey or other request for information may be fined not more than $10,000 or imprisoned for not more than one year, or both.

Section 702.6

Section 702.6 would define certain terms used in part 702.

The word “confidential” would be defined in terms of § 705(d) of the DPA, thereby distinguishing its use in this rule from its use in connection with the classification of information for national security purposes as set forth in Executive Order 13526 of December 29, 2009, Classified National Security Information (75 FR 707; 3 CFR, 2010 Comp., p. 298).

The definition of the term “person” would be based on the definition of “person” in § 702 of the DPA (50 U.S.C. app. 2152) with some additions. The DPA definition reads: “The term `person' includes an individual, corporation, partnership, association, or any other organized group of persons, or legal successor or representative thereof, or any State or local government or agency thereof.” Use of the word “includes” in the statutory definition implies that the list following that word is not exhaustive. BIS concludes that the use of “includes” indicates that Congress recognized that the agency implementing the DPA would need discretion to identify the types of entities that would likely possess information relevant to the subject of each industrial base assessment to ensure a comprehensive collection of information.

This proposed rule would add “The Government of the United States, of the District of Columbia, of any commonwealth, territory or possession of the United States, or any department, agency or commission thereof.” BIS has concluded that inclusion of the Start Printed Page 11352additional entities is within its authority under the DPA because the DPA definition prefaces the list of entities with the word “includes,” and because inclusion of the additional entities is necessary to achieve the purpose of the statute.

Based on prior studies, BIS has observed that the U.S. Government makes a significant contribution to the industrial base, whether in research, technology development, testing, manufacturing, repair and overhaul, or trade development. As a result, the U.S. Government is a significant source of information regarding the industrial base. Similarly, it is plausible that the District of Columbia, commonwealths of the United States and other territories and agencies can be survey respondents, and therefore have been included to ensure the completeness of a survey sample and corresponding assessment.

The regulatory definition also would make clear that the term “corporation, partnership, association, or any other organized group of persons” is not limited to commercial, for-profit enterprises or publicly traded corporations.

The definitions of the terms “initial distribution letter” and “survey” each describe a document used in the data collection process. The definitions describe those documents based on the way they are used in current BIS practice.

Supplement No. 1 to Part 702 Supplement No. 1 to part 702 would provide information that BIS believes would be helpful to persons who receive a survey. This information includes both a description of the survey and a glossary of terms.

Impact

This proposed rule would set forth, in a single part of the Code of Federal Regulations, the Department of Commerce's authority under § 705 of the DPA “to obtain information in order to perform industry studies assessing the capabilities of the United States industrial base to support the national defense.” Since the mid-1980s, BIS and its predecessor organizations within the Department of Commerce have conducted such studies and required survey responses based on the statute. Section 705 of the DPA authorizes the collection of the information. The statute also authorizes the issuance of subpoenas for the information and authorizes the United States district courts to issue orders compelling compliance with such subpoenas. It also provides criminal penalties for failure to comply with the government's requests for information. This proposed rule would not require any person to supply information that the person would not be required to provide pursuant to the statute.

This proposed rule would require that surveys issued by BIS pursuant to § 705 be responded to by the deadline set forth in the survey. The rule would publicly state BIS's existing internal policies and standards for the granting of both an extension of time to comply with the requirement and exemptions from compliance. To the extent that publication of these policies and standards in the Code of Federal Regulations could be construed as a change in the burden on small entities or any other entities, the publication would have to be deemed as a reduction in burden because it facilitates access to the standards by all parties.

This proposed rule also would set forth the statutory standards for treating information submitted in response to a survey as confidential. It would reiterate the statutory penalties for failure to comply with a survey and for unauthorized release of information that § 705 requires to be treated as confidential.

This proposed rule would adopt the statutory definition of “person” but also add “[t]he Government of the United States, of the District of Columbia, of any commonwealth, territory or possession of the United States, or any department, agency or commission thereof” to the definition. The term “person” is used in the statute and in this proposed rule to represent those to whom the requirements of the statute and this proposed rule apply. BIS has historically interpreted the statute to apply to units of the U.S. Government (including the District of Columbia Government and the governments of the territories and possessions) and does not view this as a substantive change. For purposes of this certification, the addition is immaterial because the government bodies that would be added to the statutory definition by this proposed rule are not small entities under the definition provided in the Small Business Regulatory Enforcement Fairness Act of 1996.