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Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations
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Description of Any Significant Alternatives to the Final Rule That Accomplish the Stated Objectives of Applicable Statutes and That Minimize Any Significant Economic Impact of the Rule on Small Entities This rule will allow the Secretary to review ICTS Transactions to determine whether they present an undue or unacceptable risk, a function which is currently not performed by any other private or public entity. As noted above, private industry often lacks the incentive, information, or resources to review their ICTS purchases for malicious suppliers or other potentially bad actors in the ICTS supply chain.
The U.S. Government is uniquely situated to determine threats and protect the national security, including economic security.
The Department considered two regulatory alternatives to reduce the burden on small entities: 1 Excluding small entities with 5 or fewer employees, and 2 excluding certain industries and sectors. However, the Department determined that neither of these two alternatives would achieve the goal of protecting the national security, nor would they eliminate the rules significant economic impact on a substantial number of small entities.
First, the Department considered providing an exemption for small entities that have 5 or fewer employees.
smallest entities. According to Census Bureaus most recent dataset of number of firms by employee count, about 61% of all firms have less than 5
employees.
Second, the Department examined the feasibility of eliminating the application of the rule to certain small entities involved in specific industries or sectors by excluding: a ICTS Transactions that involve only the acquisition of commercial items as defined by Federal Acquisition Regulation Part 2.101; b ICTS Transactions that are used solely for the purpose of cybersecurity mitigation or legitimate cybersecurity research; and c ICTS Transactions under which a United States person is subject to a security control agreement, special security agreement, or proxy agreement approved by a cognizant security agency to offset foreign ownership, control, or influence pursuant to the National Industrial Security Program regulations 32 CFR
part 2004.
Ultimately, the Department decided against adopting either of these regulatory alternatives. Exempting certain industries or sectors or eliminating the application of the rule to smallest entities could inadvertently
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allow potentially problematic transactions that are substantially similar to those conducted by nonexempt entities to avoid review, undermining the rules national security objectives. For example, a company that is headquartered in a foreign adversary country, regardless of its size or main industry sector, may be involved in legitimate cybersecurity research and development initiatives performed under the National Cooperative Research and Production Act, 15 U.S.C.
430106, and the foreign company may study foreign equipment to gain insights on new innovations or potential network security risks. However, that same company may also be conducting operations during other ICTS
Transactions that could harm U.S.
national security interests. By promulgating the chosen alternative for the rule, the Department sought to remove both the possibility for confusion as well as the ability for malicious actors to argue that some legitimate cybersecurity research performed by a company would exempt all cybersecurity research by a company, legitimate or otherwise. Thus, the rule applies to types of ICTS Transactions most affecting U.S. national security as opposed to exempting entire industries, sectors, or regulated smallest entities from review.
Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as small entity compliance guides. The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules.
D. Paperwork Reduction Act The Paperwork Reduction Act of 1995
44 U.S.C. 3501 et seq. PRA provides that an agency generally cannot conduct or sponsor a collection of information, and no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, unless that collection has obtained Office of Management and Budget OMB approval and displays a currently valid OMB Control Number.
This rulemaking does not contain a collection of information requirement subject to review and approval by OMB
under the PRA.

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E. Unfunded Mandates Reform Act of 1995
This rule would not produce a Federal mandate under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 for State, local, and tribal governments or the private sector.
F. Executive Order 13132 Federalism This rule does not contain policies having federalism implications requiring preparations of a Federalism Summary Impact Statement.
G. Executive Order 12630
Governmental Actions and Interference With Constitutionally Protected Property Rights This rule does not contain policies that have unconstitutional takings implications.
H. Executive Order 13175 Consultation and Coordination With Indian Tribes The Department has analyzed this proposed rule under Executive Order 13175 and has determined that the action would not have a substantial direct effect on one or more Indian tribes, would not impose substantial direct compliance costs on Indian tribal governments, and would not preempt tribal law.
I. National Environmental Policy Act The Department has reviewed this rulemaking action for the purposes of the National Environmental Policy Act 42 U.S.C. 4321 et seq.. It has determined that this final rule would not have a significant impact on the quality of the human environment.
List of Subjects in 15 CFR Part 7
Administrative practice and procedure, Business and industry, Communications, Computer technology, Critical infrastructure, Executive orders, Foreign persons, Investigations, National security, Penalties, Technology, Telecommunications.
This document of the Department of Commerce was signed on January 13, by Wilbur Ross, Secretary of Commerce.
That document with the original signature and date is maintained by the Department of Commerce. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned Department of Commerce Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Commerce. This administrative process in no way alters
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