PAPERWORK REDUCTION ACT ANALYSIS

Supporting Statement for Chemical Weapons Convention

Provisions of the Export Administration Regulations

(Schedule 1 Advance Notifications and Reports
and
Schedule 3 End-Use Certificates)

0694-0117

Approved: June 6, 2003
Expiration Date: June 30, 2006

The Chemical Weapons Convention (CWC) is a multilateral arms control treaty that seeks to achieve an international ban on chemical weapons (CW). The CWC prohibits the use, development, production, acquisition, stockpiling, retention, and direct or indirect transfer of chemical weapons.

The Convention was signed by the United States in Paris on January 13, 1993, and submitted to the U. S. Senate on November 23, 1993, for its advice and consent to ratification. The U.S. Senate provided its advice and consent to ratification on April 24, 1997. The United States deposited its instrument of ratification with the United Nations on April 25, 1997. The Convention entered into force on April 29, 1997. To date, the CWC has been signed by 175 countries and ratified by more than 150.

On October 21, 1998, the United States enacted the Chemical Weapons Convention Implementation Act (Pub. L. 105- 277, Division I) (the "Act" or CWCIA), which, inter alia:

• authorizes the promulgation of regulations to require declarations by U.S. chemical and related industries;
• sets forth procedures for international inspection of U.S. commercial facilities;
• directs the establishment of a "National Authority" to serve as the liaison between the U.S. and the international organization, the OPCW; and
• prohibits all persons within the United States, as well as all U.S. nationals outside the United States, from engaging in activities prohibited under the Convention.

The United States is under obligation by the CWC to impose trade controls on certain toxic and precursor chemicals specified by category or "Schedule" in its Annex on Chemicals. States Parties may only export Schedule 1 chemicals to other States Parties, must provide advance notification of exports of any quantity of a Schedule 1 chemical, and must submit annual reports of exports of such chemicals during the previous calendar year (CY). The Convention also requires that prior to the export of a Schedule 3 chemical to a non-State Party, the exporter must obtain an end-use certificate issued by the government of the importing country. Certain of these documents must be submitted to the OPCW.

The implementation of the Convention's requirements necessitate a working relationship between the U.S. Government and private industry which is unprecedented in terms of the degree of industry-government cooperation. The Bureau of Industry and Security (BIS) of the Department of Commerce is the principal liaison between the U.S. Government and the chemical industry. BIS is responsible for receiving industry notifications, reports and declarations and submitting them to the United States National Authority (USNA), which coordinates and facilitates administrative and logistical matters related to CWC implementation. The USNA will forward declarations received from the Departments of Commerce and Defense, as well as from other U.S. agencies, to the OPCW, located in The Hague.

On May 18, 1999, BIS amended the Export Administration Regulations (EAR) to implement the export control provisions of the CWC. For additional background information on implementation of the export control provisions of the CWC, see the May 18, 1999, EAR amendment on our web site www.cwc.gov .

2. Schedule 1 notification and annual report: Part VI of the CWC Verification Annex, requires the United States to notify the OPCW at least 30 days before any transfer (export/import) of Schedule 1 chemicals to another State Party. The United States is also required to submit annual reports to the OPCW on all transfers of Schedule 1 chemicals.

Therefore, exporters are required to submit an advance notification at least 45 days prior to a proposed export of any amount of Schedule 1 chemicals and also to submit an annual report of actual transfers that occurred during the previous year to BIS. BIS analyzes the Schedule 1 notifications for completeness and accuracy, and transmits the notifications to the USNA for transmittal to the OPCW. BIS also analyzes the actual export data submitted by exporters under the "Annual Report of Schedule 1 Chemicals Imported or Exported to Other States Parties" and compiles an aggregate report reflecting all exports from United States that occurred during the previous year. BIS reconciles the annual reports submitted by exporters with Schedule 1 notifications received to determine if all proposed exports were made. The aggregate Annual Report is transmitted to the USNA for transmittal to the OPCW.

This notification and report process permits the OPCW to monitor worldwide trade in Schedule 1 chemicals and also provides oversight to ensure that no State-Party exceeds the treaty mandated one metric ton limit on possession of Schedule 1 chemicals.

End-use certificates: Part VIII of the CWC Verification Annex, requires the United States to obtain end-use certificates for the transfer of Schedule 3 chemicals to Non-States Parties to ensure the transferred chemicals are only used for purposes not prohibited under the Convention. The EAR requires exporters to submit an end-use certificate to BIS 7 days in advance of export to the issuing government: 1) certify that the chemicals being imported will not be used for purposes contrary to Article I of the Convention; 2) certify that the chemicals will not be re-transferred; 3) identify the types and quantities of chemicals to be imported; 4) identify the end-use(s) of the chemicals; and 5) identify the name(s) and address(es) of the end-user(s). BIS reviews end-use certificates to verify that each proposed export transaction is in compliance with our obligations under the Convention.

The Section 515 Information Quality Guidelines apply to this information collection and comply with all applicable information quality guidelines, i.e., OMB, Department of Commerce, and specific operating unit guidelines.

3. Schedule 1 notifications and annual reports often contain chemicals that are not listed in BIS's electronic tool, DESI (Data Entry Software for Industry), and therefore, in many cases DESI is not an option for exporters to use for completing these reporting requirements. Generally, Schedule 1 notifications are initiated by the exporter and importer on their letterhead. The end-use certificate is either an official government form or a letter on the importing government's letterhead and is not available for electronic submission. The ultimate consignee receives the end-use certificate from the importing government and transmits it to the exporter for submission to BIS. BIS accepts facsimile copies of the Schedule 1 notifications and end-use certificates.

The number of Schedule 1 notifications is minimal (approximately 2 annually) and does not merit development of software for this activity; however, if the number of notifications significantly increases over the next year, BIS will create an electronic means for exporters and importers to use in submitting their notifications. Industry can use DESI to submit Annual Reports if the Schedule 1 chemical involved in the transfer is listed in the software. As noted above, it is not possible to create an electronic format for end-use certificates since they are initiated by a foreign government.

4. The information required by this collection is specific to individual export transactions and is not duplicated or collected elsewhere.

5. This collection will not have a significant impact on small entities.

6. The CWC requires advance notifications of exports of Schedule 1 chemicals, annual reports for exports of Schedule 1 chemicals, and end-use certificates for exports of Schedule 3 chemicals to non-States Parties. If collection was less frequent or not conducted at all, the United States would not be able to meet its treaty obligations and would place the United States in the position of non-compliance with relevant treaty provisions.

7. There are no special circumstances that will result in the collection of information in a manner inconsistent with the guidelines of 5 CFR 1320.6.

The initial notice requesting public comment was published in the Federal Register on September 12, 2002, p. 57788. No comments were received.

9. There will be no payment or gift to respondents.

10. The "Confidentiality Annex" of the CWC protects confidential business information (CBI) by mandating that the OPCW requires only the minimum information and data necessary to carry out its CWC responsibilities, insuring its employees' integrity and specifying precisely the information to which it will give access to a State Party.

Additionally, the Director-General of the OPCW Technical Secretariat is charged with primary responsibility for protecting CBI. The OPCW's Technical Secretariat must evaluate data received for CBI. Furthermore, no information obtained by the OPCW is to be released without following safeguards, and CBI access must be strictly protected and regulated. Employees must obtain security clearances. States Parties may take measures they deem necessary to protect CBI during inspections. Finally, procedures have been established for measures to be taken in case of breaches of confidentiality.

The CWCIA also addresses confidentiality in which it exempts trade secrets and confidential commercial /financial information from the Freedom of Information Act (FOIA).

Further, pursuant to section 12(c) of the Export Administration Act (EAA), as amended, information obtained by this collection which is deemed confidential, or with reference to which a request for confidential treatment is made by the person furnishing such information, shall be exempt from disclosure under section 552 of title 5, United States Code, and such information shall not be published or disclosed unless the Secretary determines that the withholding thereof is contrary to the national interest. Although the Export Administration Act (EAA) expired on August 20, 1994, the President invoked the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) and continued in effect, to the extent permitted by law, the provisions of the EAA and the EAR in Executive Order 13222, 66 FR 44025, 3 CFR 2001 Comp., p. 738; continued by Notice of August 14, 2002, 67 FR 53721, August 16, 2002.

11. There are no questions of a sensitive nature.

12. There are 53.5 burden hours associated with this collection. This renewal package represents a reduction of 122 burden hours (175.5 - 53.5) because it is based on actual Schedule 1 notifications and annual reports received during CYs 2001 and 2002 and end-use certificates received during CY 2002.

Schedule 1 Notification and Reports: During CY 2001, BIS received 2 Schedule 1 notifications and 2 annual reports. BIS did not receive any notifications or annual reports during CY 2002. Therefore, BIS is using aggregate data from CYs 2001 and CY 2002. BIS estimates it takes approximately 30 minutes each to prepare and submit these documents. Accordingly, the estimated burden hours for completing these two documents is 2 hours (2 + 2 = 4 x .5 = 2). The estimated cost for completing these documents is $56 (2 hours x $28).

End-User Certificates: During CY 2002, BIS received 103 end-use certificates from 11 companies. The end-use certificate is issued by the importing government and obtained by the ultimate consignee who transmits it to the exporter for submission to BIS. This activity is estimated to take approximately 30 minutes. The estimated burden hours is 51.5 hours (103 x .5 = 51.5) and the cost is $1,442.00 (51.5 x $28 = $1,442.00).

Exports of technology to produce certain Schedule 2 and Schedule 3 chemicals. The EAR also imposes a license requirement for CW reasons for exports and reexports of certain technology under ECCN 1E355 when destined to non-States Parties, except for Israel and Taiwan. Applications for such exports and reexports will be considered on a case-by-case basis. Additionally, the EAR also imposes anti-terrorism controls on this technology controlled for AT reasons for exports and reexports to Iran, Sudan and Syria, consistent with the provisions of the EAA after consultation with the Secretary of State. For the exports of technology to produce certain Schedule 2 and Schedule 3 chemicals, there is no associated burden hours. This is because the net result is negligible, according to present assumptions and calculations.

13. BIS estimates that companies will not incur additional costs (excluding the costs outlined in item 12) above their standard operating costs to comply with Schedule 1 notifications and annual reports, and end-use certificates.

14. BIS estimates the annualized cost to process end-use certificates, Schedule 1 notifications and reports is $2,191.87. This is based upon a GS-12/1 employee ($27.82 per hour) performing these tasks and an overhead cost of 120%. The method used to calculate this cost estimate is as follows:

• .5 hours x 103 End-User Certificates = 51.5 hours x $27.82 = 1,432.73 x 120% = $1,791.27
• 2 hours x 2 Schedule 1 Notifications = 4 hours x $27.82 = $111.28 x 120% = $133.53
• 4 hours x 2 Annual Reports = 8 hours x $27.82 = $222.56 x 120% = $267.07

15. The adjustment reported in Item 12 from the previously approved collection is based upon a decrease in the number of companies expected to have a reporting obligation and in the number of notifications, reports and end-use certifications received.

16. There are no plans to publish this information for statistical purposes.

17. Not applicable.

18. Not applicable.

INFORMATION TECHNOLOGY QUESTIONS

1. Will the information be collected via the Internet or through Electronic Data Interchange (EDI)? If not, why not? Please briefly outline the prospects for future collection of this information electronically.

The information (End-Use Certificates, Schedule 1 Notifications and Annual Reports) cannot be collected via the Internet for the following reasons: 1) An End-Use Certificate is an official document issued by a CWC non-State Party Government to an importer who in turn transmits the Certificate to the U.S. exporter for submission to BIS. Most non-State Party Governments do not have automated procedures to electronically issue Certificates which could be transmitted over the Internet to BIS; and 2) Schedule 1 Notifications are initiated by a U.S. company on their letterhead. These documents contain sensitive information such as the importer/customer and the type of toxic chemical that will be exported. In many instances, DESI (Data Entry Software for Industry) does not contain the specific chemical involved in a transfer and, therefore, U.S. companies cannot use this electronic tool to submit their notifications. Additionally, BIS believes many companies dealing with Schedule 1 chemicals do not want their involvement with these chemicals to be broadcast over the Internet because of the potential for negative public relations. Further, a number of pharmaceutical firms are developing new powerful anti-cancer drugs based on these chemicals. If this type of information were prematurely leaked to the general public or to a competitor, it could cost a company millions of dollars in lost revenue and wasted research. Exporters can use DESI to submit annual reports if the chemical involved in the transfer is listed.

2. Will the information be made available to the public through the Internet? If not, why not? Please briefly outline the potential for future dissemination of this information.

The information collected from End-Use Certificates, Schedule 1 Notifications, and Annual Reports of Schedule 1 Exports cannot be released to the public because it contains proprietary and/or confidential business information. The information can only be released to the public in accordance with the Export Administration Act of 1979, as amended, which protects the confidentiality of U.S. companies. The Secretary of Commerce would also have to issue a national interest determination before any of the information collected could be released to the public. It is highly unlikely that the Secretary of Commerce would approve such a request. Additionally, the CWC Implementation Act exempts from release under the Freedom of Information Act any confidential business information.

LISTING OF ATTACHMENTS

The following documents are available on the joint web site of the Departments of Commerce and State as www.cwc.gov :

• Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction (CWC)
• Chemical Weapons Convention Implementation Act of 1998
• Executive Order on Chemical Weapons, June 1999
• Export Administration Regulations - CWC Export Control Provisions