Department of Energy Issues Final Rule on Assistance to Foreign Atomic Energy Activities

On February 23, 2015, the Department of Energy (DOE) published a Final Rule amending 10 C.F.R. Part 810, DOE’s regulations governing assistance to foreign atomic energy activities and the export of unclassified nuclear technologies.  The long-awaited amendments make significant changes to the structure and substance of Part 810.  They exempt certain activities from DOE licensing (including the transfer of information in the public domain), make clear that Part 810 applies to exports to foreign nationals within the United States, and change the countries that are covered under general or specific export authorizations.  The amendments also provide certain transition rules to guide companies in complying with this new set of regulations.  The rules become effective on March 25, with limited grandfathering provisions – requiring companies operating in this area to act quickly to seek new authorizations where affected by the amendments, most notably with regard to changes to the countries that benefit from general export authorizations.

The amendments to Part 810 represent the most substantial changes to the regulations since 1986.  DOE undertook these revisions for three main reasons:  (1) to streamline the licensing and approval process; (2) to provide clarity where the regulations were silent or interpretations were inconsistent; and (3) to bring US nuclear export controls more in line with the realities of the modern commercial nuclear market.

Background

Part 810 describes controls on assistance or exports of unclassified technology by  persons subject to US jurisdiction related to the production outside the United States of “special nuclear material” (i.e., nuclear fuel, including plutonium, uranium-233, and enriched uranium-235).  The Final Rule, which implements Section 57(b)(2) of the Atomic Energy Act of 1954 (AEA), as amended by Section 302 of the Nuclear Nonproliferation Act of 1978 (NNPA), also outlines licensing processes and delineates enforcement procedures associated with these activities.  Part 810 does not govern other aspects of the industry, such as imports and exports of nuclear equipment or material under the jurisdiction of the Nuclear Regulatory Commission (NRC), nuclear-related dual-use items subject to the Commerce Department’s Export Administration Regulations (EAR), or defense articles covered by the State Department’s International Traffic in Arms Regulations (ITAR).

The amendments to Part 810 respond to industry’s long-voiced concerns and a 2014 Government Accountability Office (GAO) report on actions needed to improve DOE’s nuclear export control processes. 

As discussed in greater detail below, the Final Rule seeks to address a number of these discrete recommendations while also implementing overarching reforms to the ways in which the US government controls commercial nuclear trade.  

DOE began undertaking the Part 810 amendment process by issuing a notice of proposed rulemaking (NOPR) on September 7, 2011.  The NOPR focused on:  (1) identifying foreign jurisdictions for which most assistance to foreign commercial atomic energy activities would be generally authorized without the need for a specific authorization; (2) recommending activities that would still require specific authorization by DOE; and (3) determining the types of technology transfers that should be governed by Part 810. 

After receiving numerous comments in response to the NOPR, DOE issued a supplemental notice of proposed rulemaking (SNOPR) on August 2, 2013, followed by another round of comments and public meetings.  Commenters generally suggested changes to the scope of activities covered by Part 810, advocated for certain foreign jurisdictions to be generally licensed destinations, and recommended changes to DOE’s Process Improvement Plan to decrease the length of the licensing process. 

Final Rule

DOE’s Final Rule makes significant changes to the structure and substance of Part 810.  Perhaps the most significant change is the replacement of the list of countries requiring specific authorization with a new list of countries that are generally authorized.  The Final Rule also expressly excludes certain activities from the scope of Part 810 and clarifies certain areas of the regulations, most notably the “deemed export” rule.  It provides for certain transition rules to guide companies in complying with this new set of regulations.  We highlight the most significant aspects of the rule changes below.   DOE’s National Nuclear Safety Administration (NNSA) has also published on its website a companion guidance document to the rule.

New Country-Based General Authorizations (Section 810.6(a))

DOE approves Part 810 activities by publishing general authorizations set forth in the regulations or issuing specific authorizations upon request.  General authorizations generally require reporting to DOE but do not require specific pre-approval (except for sensitive nuclear technology and other sensitive activities).  The Final Rule provides a list of countries benefiting from this type of general authorization.  See Appendix A to Part 810.  In contrast, the prior version of Part 810 generally authorized covered activities unless they involved countries that were listed in those regulations as requiring specific authorization.  In other words, a general authorization was the default approach under the old regulations unless a country was listed as requiring specific authorization; under the new Final Rule, the default is a specific authorization requirement, unless the country is expressly included in a general authorization.  As a result of this change, dozens of countries that are generally authorized under the current rules will require specific authorization going forward, including in particular many Central and South American countries.

Most major nuclear trading partners of the United States are still generally authorized, including the United Kingdom, Canada, Japan, Australia, Germany, France, Korea, Italy, Brazil, South Africa, Turkey, and Argentina.  All of these states have current agreements under Section 123 of the AEA (123 Agreements) for peaceful nuclear cooperation with the United States, which govern significant commercial nuclear exports, including special nuclear materials and reactors and their major components.  However, China, India, and Russia still require specific authorization even though they have current 123 Agreements.  Importantly, the Final Rule provides general authorization for the first time to a number of countries, including Kazakhstan, Ukraine, Vietnam, and the United Arab Emirates, all of which have executed 123 Agreements with the United States.  Croatia also became generally authorized after recently joining the EU and the European Atomic Energy Community (EURATOM).  Mexico and Chile remain generally authorized, but only for certain activities within the scope of the trilateral International Atomic Energy Agency (IAEA) agreements with those countries.  And while Ukraine is now generally authorized, it is subject to certain restrictions and reporting requirements.  The Final Rule requires case-by-case approval for transfers to areas not under the control of the Government of Ukraine, which it states may present a proliferation risk.  

While the switch from a general authorization approach to a specific authorization approach may complicate nuclear trade with a number of countries, the addition of several new general authorizations for significant trading partners may simplify export controls with these countries.

Exclusions (Section 810.2(c))

The Final Rule provides for a number of new or modified exclusions that carve out certain activities from the scope of the controls of Part 810.  One notable change is that Part 810 now expressly exempts from control transfers to US green card holders and those with protected status under US asylum or refugee laws.  Previously, the regulations were silent about such persons.  The Final Rule also clarifies overlapping jurisdiction among relevant agencies by carving out from the scope of Part 810’s controls activities authorized by the NRC or the Departments of State or Commerce, whereas the old Part 810 only excluded exports licensed by the NRC.  Other exempt activities under the Final Rule include routine storage, processing, and transportation of spent nuclear fuel, and the production of radiopharmaceuticals not involving special nuclear material.  In addition, the results of fundamental research (i.e., broadly shared basic scientific research, as opposed to proprietary research) are now excluded from Part 810, whereas before the regulations contained a more limited provision stating that participation in open scientific meetings was generally authorized.  Part 810 still does not control “publicly available information,” whereas previously it was generally authorized with no reporting requirement).[1] 

Part 810 also now excludes uranium and thorium mining and milling, which include the production of impure material such as uranium yellowcake and all activities prior to that phase of the nuclear fuel production cycle, as well as nuclear fusion reactors themselves (although certain related activities are covered).  DOE added those exclusions because they do not involve the production or use of special nuclear material.  Previously, the regulations covered certain uranium milling activities.  The Final Rule also excludes steam turbine generator technology, which will be controlled under the EAR.  However, DOE declined to exclude light water reactor (LWR) technology on the grounds that it has been controlled under Part 810 since its inception and it involves the production of special nuclear material (plutonium).

Deemed Exports (Sections 810.2(a) and 810.6(b))

The Final Rule now makes explicit that Part 810 applies to transfers to foreign nationals within the United States, also referred to as “deemed exports.”  While in the past DOE may have in fact controlled deemed exports, making that rule explicit in the regulations provides more clarity.   Section 810.2(a) now states that the controls of Part 810 apply to “the transfer of technology [involving enumerated activities covered by Part 810] either in the United States or abroad . . . .”  The addition of controls on transfers “in the United States” implicitly refers to deemed exports because Part 810 is an export control regime, not a domestic regulation.

In addition, the Final Rule provides a new general authorization (Section 810.6(b)) for the transfer of technology to nationals of countries that are not generally authorized when the individual is working at an NRC-licensed facility under a confidentiality agreement with his or her US employer and with unescorted access rights at the facility.  Importantly, the foreign national does not have to be an employee of the NRC licensee itself.  The Final Rule includes rigorous reporting requirements for the use of this general authorization.

Unaltered Provisions 

One feature of the regulations that the Final Rule does not change is that any Part 810 authorization will still be limited to unclassified information and will not allow the provision of classified information.  See Section 810.8.  Another important restriction that will remain in place is the requirement to obtain specific authorization for the transfer abroad of sensitive nuclear technology, although now that restriction applies to such transfers to “any foreign country or entity” rather than “for an activity in any foreign country.”  See Sections 810.6, 810.7(b).  Sensitive nuclear technology includes information that is important to the design, construction, fabrication, operation, or maintenance of a uranium enrichment or nuclear fuel reprocessing facility or a facility for the production of heavy water.  The new rule also requires specific authorization for certain sensitive activities in any foreign country, including enrichment, fabrication of nuclear fuel containing plutonium, and certain types of heavy water production and hydrogen isotope separation, among others.  See Section 810.7(c).

Transition Rules (Section 810.16)

Companies already active in this industry will need to take note of the limited scope of the grandfathering provisions in the Final Rule.  The Final Rule does allow for grandfathering of specific authorizations granted prior to the effective date of the new rule.  The Final Rule also states that it does not “affect the validity or terms” of activities that were generally authorized under the old rules for which contracts, purchase orders, or licensing arrangements are already in effect.  However, it also states that companies engaged in generally authorized activities that will become subject to specific authorization must request such authorization by August 24 (although DOE will allow the activities to continue until it acts on the request).  While it is not clear in the Final Rule whether companies engaged in activities that were previously generally authorized and for which the contracts were already in effect must also seek specific authorization if those activities will become subject to a specific authorization requirement (i.e., because the Final Rule says it will not “affect the validity or terms” of such generally authorized activities), it would be prudent to resolve this apparent inconsistency or lack of clarity by seeking a specific authorization by August 24 for any activity that was previously generally authorized but that will become subject to a specific authorization requirement under the Final Rule. 

Applications for specific authorization that are pending with DOE must be withdrawn if they relate to activities that will now be generally authorized.  DOE urges companies that have not reported deemed exports that were generally authorized but now will be subject to specific authorization to do so by August 24.  However, the Final Rule does not state this as a requirement (using the word “should”) and does not mention any type of amnesty related to such reports.  Therefore, it would be prudent for companies in that situation to consider carefully how to proceed. 

Retransfers

NNSA’s guidance document makes clear that retransfers of generally authorized technology remain the responsibility of the US exporter.  It provides an example of a US exporter transferring nuclear technology to Canada and states that the US exporter would need to determine who the actual end user will be.  If the final end user will be in a third country that is not generally authorized, the US exporter would have to obtain a specific authorization for the re-export from Canada before proceeding with the initial transfer to Canada.  The guidance document states that DOE evaluates such transfers as if the US exporter were transferring the technology directly to the final end user in the third country and underscores that the US exporter must know and disclose the ultimate recipient and end use.  It is not clear, however, if the US exporter is also responsible for any subsequent transfer of technology by the foreign recipient to a third country that is not generally authorized or to an employee who is a national of a third country.

Applicability to National Labs and Certain DOE contractors

As stated in NNSA’s guidance document, Part 810 applies to all “persons” as defined in Section 810.3.  While DOE is not a person subject to Part 810, DOE’s own exports and those funded and directed by DOE must be consistent with US national security and nonproliferation objectives. Therefore, the NNSA guidance document confirms that DOE laboratories and other entities contracted, funded and/or directed by DOE to transfer nuclear technology to foreign nationals and entities are not required to seek approval from the NNSA Office of Nonproliferation and Arms Control because they are acting as agents of DOE and therefore are not persons subject to Part 810.  However, as the guidance document also notes, any DOE laboratory or other contractor that seeks to transfer technology or assistance to a foreign national, entity, or country independent of DOE, in accordance with Laboratory Directed Research & Development and Work For Others programs, is a person as defined by the rule and therefore subject to the requirements of Part 810. 

DOE Discussion of Comments in Enacting the Final Rule

In publishing its Final Rule, DOE also addressed the written comments it received from 26 entities and oral comments made at public meetings in response to its SNOPR.  DOE considered but did not implement many proposals for changing the SNOPR.  In its discussion of these proposals, DOE provided some additional clarity regarding the amended Part 810. 

Scope of Part 810

DOE received several comments on the proposed scope of Part 810.  While SNOPR added clarity, concerns remained about determining when an activity indirectly constitutes sufficient engagement or participation in the production of special nuclear material to bring that activity within the scope of Part 810.  Commentators also requested that DOE clarify the deemed export rules and treatment of operational safety activities under Part 810.  While clarifying the applicability of the deemed export rule, DOE considered and rejected many of these suggestions for amending the scope of Part 810: 

• LWR Technology:  One commentator suggested that the scope of Part 810 should be limited to technologies that are “especially designed for the production or processing of special nuclear material.”  This would move LWRs outside the scope of Part 810 because they are designed primarily for power production.  The Final Rule, however, retains LWRs within the scope of Part 810 since they directly produce plutonium.
• Transfer of Sales, Marketing, or Sourcing Information:  DOE rejected a recommendation for an exemption or authorization for the transfer of sales, marketing or sourcing information that the proponents argued would provide US businesses with flexibility to compete effectively in international civil nuclear market.  DOE stated that it will continue to focus on the “content” of the transfer in determining Part 810’s applicability to such information.
• Jointly Developed Technologies:  DOE rejected recommendations to provide thresholds or precise clarity on recipient control, modification, or US content in jointly developed technology that would bring the activity within the scope of Part 810.  DOE stated that it does not favor a “mechanistic approach” and would make coverage determinations on the facts and circumstances of each activity, including:  (1) technology to be transferred; (2) the significance of the technology to the production of special nuclear material; (3) end user destination; and (4) end use duration of the activity such as single transfer or an ongoing activity.
• “Control”:  DOE rejected a recommendation to add the term “control-in-fact” in Section 810.3 (Definitions) and apply it in Section 810.2(a)(1) to limit the scope of Part 810.  Under Section 810.2(a)(1) of the Final Rule, Part 810 applies to “all persons subject to the jurisdiction of the United States” who engage or participate in the development or production of any special nuclear material outside the United States.  Moreover, the term “control,” which is used in Section 810.2(a)(2) to identify the transferor of technology (“by such persons or by licensees, contractors or subsidiaries under their direction, supervision, responsibility, or control”), also remains undefined.  Instead of focusing on the corporate governance arrangements to determine control, DOE stated that it will review the fact pattern of the activity.
• US Origin:  DOE rejected a recommendation to limit applicability of Part 810 to the transfer of US origin technology.  Under Section 810.2(a)(1) of the Final Rule, Part 810 applies to the covered activities even when it involves foreign origin technology.
• Definition of “Technology”:  DOE rejected a proposal to define the term “technology” in Section 810.3 to mean assistance or technical data required for the “development, production and use,” instead of “development, production or use” of any plant or facility.  DOE clarified that assistance or technical data required for any one of these three activities are covered by Part 810.

Deemed export and re-export

• DOE did not amend the rules in response to a comment that the deemed export rules as applied to the academic setting will jeopardize the free flow of academic collaboration that is protected by the AEA.  DOE stated that it considers most work performed by academic institutions to qualify as “fundamental research,” which is exempt from Part 810 coverage under Section 810.2(c)(2).  However, activities such as applied research and development that go beyond fundamental research remain covered by Part 810.  DOE also did not change the definition of “fundamental research” – which does not include proprietary “industrial development” and “product utilization.”
• Citizenship:  For the transfer of Part 810-covered technology to individuals with allegiance to multiple countries (e.g., dual citizens), DOE will continue its practice of considering all countries of an individual’s allegiance in making the requisite licensing determination on a case-by-case basis. 
• DOE did not accept a proposal to expand the general authorization in Section 810.6(b) (for foreign nationals working at NRC-licensed facilities who are granted unescorted access in accordance with NRC regulations) to also include foreign nationals working in the United States at non-NRC licensed facilities based on NRC regulations governing access to safeguards information or a US security clearance for access to classified information.  With regard to general authorization for deemed exports to NRC-cleared individuals working in the United States for a US company who are no longer working at the NRC-licensed facility but would require access to Part 810-controlled information, DOE is not making any changes in the Final Rule but has invited applicants for specific authorization to document any NRC clearances granted to foreign nationals that could help DOE to assess whether to authorize a deemed export. 
• DOE continues to require companies to seek authorization to provide access to Part 810-controlled technologies to citizens of specifically authorized countries, wherever located, because such a transfer is considered a deemed export to that specifically authorized country. 
• The Final Rule retains the approach to deemed re-exports in which determining whether a specific authorization is required for a foreign national employed in a foreign country depends on the general or specific authorization designation of the foreign national’s country of citizenship, including when the foreign national is working for a subsidiary of a US company. The Final Rule defines “foreign national” to mean an individual who is not a citizen or national of the United States, but excludes US lawful permanent residents and protected individuals under the Immigration and Naturalization Act.
• DOE clarified that if a US company merely employs a foreign national who would otherwise require a specific authorization, that company would not require specific authorization.  Instead, a specific authorization is required only for the transfer of Part 810-controlled technology or information to such a foreign national.
• DOE did not accept a proposal to streamline Part 810 to clarify that US companies are only required to comply with the deemed export requirements to the extent that compliance is consistent with applicable foreign employment laws.  Companies will need to comply with Part 810 regardless of how it relates to employment laws.
• DOE also clarified that the US company and not the foreign employee will request and be granted authorization for the transfer of Part 810-controlled technology to a foreign employee of that US company. 

Operational Safety Activities:

• DOE did not consolidate the authorizations related to operational safety assistance and technologies contained in Sections 810.6(c)(2) (for existing plants in foreign countries) and 810.6(c)(3) (for US plants) into a single authorization related to operational safety activities. 
• DOE also did not accept a proposal to revise the definition of “operational safety” to broaden the scope of authorization to also include services to improve design or efficiencies of nuclear reactors. 
• DOE clarified that probabilistic risk assessments for existing nuclear plants in foreign countries are generally authorized as “operational safety” activities. 
• In response to comments that Section 810.6(c)(1) will require US companies to demonstrate that no other means can diffuse an emergency before relying on the authorization, DOE clarified that it has the “latitude” to make these determinations even “without the paperwork in place.”  The authorization in Section 810.6(c)(1) is to prevent or correct radiological emergencies that “in DOE’s assessment cannot be met by other means.”

Classification of Foreign Destinations

DOE received several comments on its proposed list of generally authorized destinations.  Commentators argued for inclusion of additional destinations to the generally authorized list.  DOE stated that it does not perform a transaction-specific analysis or obtain specific nonproliferation assurances from the government of a country classified as generally authorized.  With this in mind, DOE retained the generally authorized list proposed in the SNOPR with the following changes: 

• Adding a reporting requirement to the general authorizations for Ukraine:  Ukraine was included in the generally authorized list in the SNOPR.  But in light of the recent geopolitical changes in Ukraine involving the Russian Federation, DOE stated that transfers of nuclear technology and assistance to areas in Ukraine that are not under control of the Government of Ukraine could present a proliferation risk.  The Final Rule therefore adds a new Ukraine-specific requirement in Section 810.14.  Companies are required to submit a report to DOE at least 10 days prior to beginning any generally authorized activity involving Ukraine.  The report should include, among other things, information about the applicant and the “person for which the activity is to be performed,” a description of the activity, its location, status and anticipated date of completion, and a written assurance about the existence of an agreement between the person performing the activity and the recipient that there will be no transfer of technology or information to a country that is not generally authorized by DOE.  Upon receipt of this report, if the Secretary of Energy determines that the transfer is inimical to the interests of the United States, then the applicant would need to file a request for specific authorization in accordance with Sections 810.7 and 810.11.  Within 10 days of completing a generally authorized activity in Ukraine, “every person” completing that activity is also required to provide to DOE a written confirmation that such transfer was completed in accordance with the description provided to DOE. 
• Adding Croatia as a generally authorized destination due to its membership in the EURATOM, which renders 123 Agreement between US and EURATOM applicable to Croatia.
• Adding Vietnam as a generally authorized destination because it entered into a 123 Agreement with the United States since the SNPOR.
• Removing Thailand as a generally authorized destination because its 123 Agreement with the United States expired.

DOE did not add the following countries to the generally authorized list as requested by various commentators:  Chile, China, India, Jamaica, Jordan, Malaysia, Namibia, New Zealand, Nigeria, Philippines, Russia, Saudi Arabia, and Singapore.  Several commentators argued unsuccessfully for the inclusion, in particular, of China, India, and Russia on the generally authorized list.  

Process Issues

Many commentators made suggestions to improve the processing of specific authorization requests.  Apart from the rulemaking, DOE stated that it has underway a Process Improvement Program to reduce specific authorization processing time by making the authorization process more transparent, orderly, and efficient. 

Conclusion

Once the Final Rule becomes effective on March 25, DOE will only offer limited grandfathering of prior activities.  Specific authorizations granted prior to the effective date and transaction documents executed prior to the effective date remain valid.  However, activities previously subject to general authorization that now require specific authorization will not be grandfathered.

Therefore, it will be important for exporters, brokers, recipients, and other participants in the commercial nuclear market to understand these sweeping changes to Part 810, ensure they are compliant with the new rules, determine whether they should voluntarily disclose any noncompliant prior activities, and seek guidance if necessary. 

[1] The definitions in Part 810 of “publicly available” information and technology are separate from the definitions of “publicly available” technology and software in the EAR and “public domain” information in the ITAR; nor is this Final Rule connected to the ongoing effort at the Bureau of Industry and Security and Directorate of Defense Trade Controls to harmonize the definitions used in the EAR and ITAR as part of Export Control Reform.  Section 810.3 defines the term “publicly available information” to mean “information in any form that is generally accessible, without restriction, to the public.”  NNSA’s guidance document states, for example, that information given freely in marketing brochures or other open-forum media is considered publicly available, whereas information that is only available directly from the seller and cannot be shared without permission is not publicly available.