Federal Register: January 23, 2004 (Volume 69, Number 15)
Page 3397-3400



In the Matter of All Licensees Authorized To Manufacture or 
Initially Transfer Items Containing Radioactive Material for Sale or 
Distribution and Possess Certain Radioactive Material of Concern and 
All Other Persons Who Obtain Safeguards Information Described Herein; 
Order Issued on November 25, 2003 Imposing Requirements for the 
Protection of Certain Safeguards Information (Effective Immediately)


    The Licensees identified in Attachment 1 \1\ to this Order hold 
licenses issued in accordance with the Atomic Energy Act of 1954 by the 
U.S. Nuclear Regulatory Commission (NRC or Commission) or an Agreement 
State authorizing them to manufacture or initially transfer items 
containing radioactive material for sale or distribution. The NRC 
intends to issue security Orders to certain manufacturing and 
distribution licensees in the near future. Orders will be issued to 
both NRC and Agreement State materials licensees who may possess 
radioactive material of concern. The Orders will require compliance 
with specific Additional Security Measures to enhance the security of 
certain radioactive materials. The NRC will issue Orders to both NRC 
and Agreement State Licensees under its authority to protect the common 
defense and security, which has not been relinquished to the Agreement 
States. Before issuing Orders for Additional Security Measures, the 
Commission seeks comments from affected licensees on the draft 
Additional Security Measures, Implementing Guidance, and Regulatory 
Issue Summary Table ``Threat Conditions and Specific Actions for 
Manufacturing and Distribution Licensees.'' However, the Commission has 
determined that these draft documents are Safeguards Information, will 
not be released to the public, and must be protected from unauthorized 
disclosure. Therefore, the Commission is imposing the requirements, as 
set forth in Attachment 2 of this Order, so that affected Licensees can 
receive these draft documents for review and comment. This Order also 
imposes requirements for the protection of Safeguards Information in 
the hands of any person,\2\ whether or not a licensee of the 
Commission, who produces, receives, or acquires Safeguards Information.

    \1\ Attachment 1 contains OFFICIAL USE ONLY sensitive 
information and will not be released to the public.
    \2\ Person means (1) any individual, corporation, partnership, 
firm, association, trust, estate, public or private institution, 
group, government agency other than the Commission or the 
Department, except that the Department shall be considered a person 
with respect to those facilities of the Department specified in 
section 202 of the Energy Reorganization Act of 1974 (88 Stat. 
1244), any State or any political subdivision of, or any political 
entity within a State, any foreign government or nation or any 
political subdivision of any such government or nation, or other 
entity; and (2) any legal successor, representative, agent, or 
agency of the foregoing.


    The Commission has broad statutory authority to protect and 
prohibit the unauthorized disclosure of Safeguards Information. Section 
147 of the Atomic Energy Act of 1954, as amended, grants the Commission 
explicit authority to ``issue such orders, as necessary to prohibit the 
unauthorized disclosure of safeguards information * * *'' This 
authority extends to information concerning special nuclear material, 
source material, and byproduct material, as well as production and 
utilization facilities. Licensees and all persons who produce, receive, 
or acquire Safeguards Information must ensure proper handling and 
protection of Safeguards Information to avoid unauthorized disclosure 
in accordance with the specific requirements for the protection of 
Safeguards Information contained in Attachment 2. The Commission hereby 
provides notice that it intends to treat all violations of the 
requirements contained in Attachment 2 applicable to the handling and 
unauthorized disclosure of Safeguards Information as serious breaches 
of adequate protection of the public health and safety and the common 
defense and security of the United States. Access to Safeguards 
Information is limited to those persons who have established the need 
to know the information, and are considered to be trustworthy and 
reliable. A need to know means a determination by a person having 
responsibility for protecting Safeguards Information that a proposed 
recipient's access to Safeguards Information is necessary in the 
performance of official, contractual, or licensee duties of employment. 
Licensees and all other persons who obtain Safeguards Information must 
ensure that they develop, maintain and implement strict policies and 
procedures for the proper handling of Safeguards Information to prevent 
unauthorized disclosure, in accordance with the requirements in 
Attachment 2. All licensees must ensure that all contractors whose 
employees may have access to Safeguards Information either adhere to 
the Licensee's policies and procedures on Safeguards Information or 
develop, maintain and implement their own acceptable policies and 
procedures. The Licensees remain responsible for the conduct of their 
contractors. The policies and procedures necessary to ensure compliance 
with applicable requirements contained in Attachment 2 must address, at 
a minimum, the following: the general performance requirement that each 
person who produces, receives, or acquires Safeguards Information shall 
ensure that Safeguards Information is protected against unauthorized 
disclosure; protection of Safeguards Information at fixed sites, in use 
and in storage, and while in transit; correspondence containing 
Safeguards Information; access to Safeguards Information; preparation, 
marking, reproduction and destruction of documents; external 
transmission of documents; use of automatic data processing systems; 
and removal of the Safeguards Information category.
    In order to provide assurance that the Licensees are implementing 
prudent measures to achieve a consistent level of protection to 
prohibit the unauthorized disclosure of Safeguards Information, all 
Licensees who hold licenses issued by the U.S. Nuclear Regulatory 
Commission or an Agreement State authorizing them to manufacture or 
initially transfer items containing radioactive material for sale or 
distribution and may possess certain radioactive material of concern 
shall implement the requirements identified in Attachment 2 to this 
Order. In addition, pursuant to 10 CFR 2.202, I find that in light of 
the common defense and security matters identified above, which warrant 
the issuance of this Order, the public health, safety and interest 
require that this Order be effective immediately.


    Accordingly, pursuant to Sections 81, 161b, 161i, 161o, 182 and 186 
of the Atomic Energy Act of 1954, as amended, and the Commission's 
regulations in 10 CFR 2.202, 10 CFR part 30, and 10 CFR part 32, it is 
hereby ordered, effective immediately, that all licensees identified in 
Attachment 1 to this order and all other persons who produce, receive, 
or acquire the additional security measures identified above (whether 
draft or final) or any related safeguards information shall comply with 
the requirements of Attachment 2.

[[Page 3398]]


    In accordance with 10 CFR 2.202, the Licensee must, and any other 
person adversely affected by this Order may, submit an answer to this 
Order, and may request a hearing on this Order, within twenty (20) days 
of the date of this Order. Where good cause is shown, consideration 
will be given to extending the time to request a hearing. A request for 
extension of time in which to submit an answer or request a hearing 
must be made in writing to the Director, Office of Nuclear Material 
Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, 
DC 20555, and include a statement of good cause for the extension. The 
answer may consent to this Order. Unless the answer consents to this 
Order, the answer shall, in writing and under oath or affirmation, 
specifically set forth the matters of fact and law on which the 
Licensee or other person adversely affected relies and the reasons as 
to why the Order should not have been issued. Any answer or request for 
a hearing shall be submitted to the Secretary, Office of the Secretary 
of the Commission, U.S. Nuclear Regulatory Commission, ATTN: 
Rulemakings and Adjudications Staff, Washington, DC 20555. Copies also 
shall be sent to the Director, Office of Nuclear Material Safety and 
Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555, 
to the Assistant General Counsel for Materials Litigation and 
Enforcement at the same address, and to the Licensee if the answer or 
hearing request is by a person other than the Licensee. Because of 
possible disruptions in delivery of mail to United States Government 
offices, it is requested that answers and requests for hearing be 
transmitted to the Secretary of the Commission either by means of 
facsimile transmission to (301) 415-1101 or by e-mail to and also to the Office of the General Counsel 
either by means of facsimile transmission to (301) 415-3725 or by e-
mail to If a person other than the Licensee 
requests a hearing, that person shall set forth with particularity the 
manner in which his interest is adversely affected by this Order and 
shall address the criteria set forth in 10 CFR 2.714(d).
    If a hearing is requested by the Licensee or a person whose 
interest is adversely affected, the Commission will issue an Order 
designating the time and place of any hearing. If a hearing is held, 
the issue to be considered at such hearing shall be whether this Order 
should be sustained.
    Pursuant to 10 CFR 2.202(c)(2)(i), the Licensee may, in addition to 
demanding a hearing, at the time the answer is filed or sooner, move 
the presiding officer to set aside the immediate effectiveness of the 
Order on the ground that the Order, including the need for immediate 
effectiveness, is not based on adequate evidence but on mere suspicion, 
unfounded allegations, or error. In the absence of any request for 
hearing, or written approval of an extension of time in which to 
request a hearing, the provisions specified in Section III above shall 
be final twenty (20) days from the date of this Order without further 
order or proceedings. If an extension of time for requesting a hearing 
has been approved, the provisions specified in Section III shall be 
final when the extension expires if a hearing request has not been 
received. An answer or a request for hearing shall not stay the 
immediate effectiveness of this order.

    Dated this 25th of November 2003.

    For the Nuclear Regulatory Commission.
Martin J. Virgilio,
Director, Office of Nuclear Material Safety and Safeguards.

Attachment 2--Modified Handling Requirements for the Protection of 
Certain Safeguards Information (SGI-M)

General Requirement

    Information and material that the U.S. Nuclear Regulatory 
Commission (NRC) determines are safeguards information must be 
protected from unauthorized disclosure. In order to distinguish 
information needing modified protection requirements from the 
safeguards information for reactors and fuel cycle facilities that 
require a higher level of protection, the term ``Safeguards 
Information-Modified Handling'' (SGI-M) is being used as the 
distinguishing marking for certain materials licensees. Each person who 
produces, receives, or acquires SGI-M shall ensure that it is protected 
against unauthorized disclosure. To meet this requirement, licensees 
and persons shall establish and maintain an information protection 
system that includes the measures specified below. Information 
protection procedures employed by State and local police forces are 
deemed to meet these requirements.

Persons Subject to These Requirements

    Any person, whether or not a licensee of the NRC, who produces, 
receives, or acquires SGI-M is subject to the requirements (and 
sanctions) of this document. Firms and their employees that supply 
services or equipment to materials licensees would fall under this 
requirement if they possess facility SGI-M. A licensee must inform 
contractors and suppliers of the existence of these requirements and 
the need for proper protection. (See more under Conditions for Access.)
    State or local police units who have access to SGI-M are also 
subject to these requirements. However, these organizations are deemed 
to have adequate information protection systems. The conditions for 
transfer of information to a third party, i.e., need-to-know, would 
still apply to the police organization as would sanctions for unlawful 
disclosure. Again, it would be prudent for licensees who have 
arrangements with local police to advise them of the existence of these 

Criminal and Civil Sanctions

    The Atomic Energy Act of 1954, as amended, explicitly provides that 
any person, ``whether or not a licensee of the Commission, who violates 
any regulations adopted under this section shall be subject to the 
civil monetary penalties of section 234 of this Act.'' Section 147a. of 
the Act. Furthermore, willful violation of any regulation or order 
governing safeguards information is a felony subject to criminal 
penalties in the form of fines or imprisonment, or both. See sections 
147b. and 223 of the Act.

Conditions for Access

    Access to SGI-M beyond the initial recipients of the order will be 
governed by the background check requirements imposed by the order. 
Access to SGI-M by licensee employees, agents, or contractors must 
include both an appropriate need-to-know determination by the licensee, 
as well as a determination concerning the trustworthiness of 
individuals having access to the information. Employees of an 
organization affiliated with the licensee's company, e.g., a parent 
company, may be considered as employees of the licensee for access 


    Need-to-know is defined as a determination by a person having 
responsibility for protecting SGI-M that a proposed recipient's access 
to SGI-M is necessary in the performance of official, contractual, or 
licensee duties of employment. The recipient should be made aware that 
the information is SGI-M and those having access to it are subject to 
these requirements as well as criminal and civil sanctions for 
mishandling the information.

[[Page 3399]]

Occupational Groups

    Dissemination of SGI-M is limited to individuals who have an 
established need-to-know and who are members of certain occupational 
groups. These occupational groups are:
    (I) An employee, agent, or contractor of an applicant, a licensee, 
the Commission, or the United States Government;
    (II) A member of a duly authorized committee of the Congress;
    (III) The Governor of a State or his designated representative;
    (IV) A representative of the International Atomic Energy Agency 
(IAEA) engaged in activities associated with the U.S./IAEA Safeguards 
Agreement who has been certified by the NRC;
    (V) A member of a State or local law enforcement authority that is 
responsible for responding to requests for assistance during safeguards 
emergencies; or
    (VI) A person to whom disclosure is ordered pursuant to section 
2.744(e) of part 2 of part 10 of the Code of Federal Regulations.
    (VII) State Radiation Control Program Directors (and State Homeland 
Security Directors) or their designees.
    In a generic sense, the individuals described above in (II) through 
(VII) are considered to be trustworthy by virtue of their employment 
status. For non-governmental individuals in group (I) above, a 
determination of reliability and trustworthiness is required. 
Discretion must be exercised in granting access to these individuals. 
If there is any indication that the recipient would be unwilling or 
unable to provide proper protection for the SGI-M, they are not 
authorized to receive SGI-M.

Information Considered for Safeguards Information Designation

    Information deemed SGI-M is information the disclosure of which 
could reasonably be expected to have a significant adverse effect on 
the health and safety of the public or the common defense and security 
by significantly increasing the likelihood of theft, diversion, or 
sabotage of materials or facilities subject to NRC jurisdiction.
    SGI-M identifies safeguards information which is subject to these 
requirements. These requirements are necessary in order to protect 
quantities of nuclear material significant to the health and safety of 
the public or common defense and security.
    The overall measure for consideration of SGI-M is the usefulness of 
the information (security or otherwise) to an adversary in planning or 
attempting a malevolent act. The specificity of the information 
increases the likelihood that it will be useful to an adversary.

Protection While in Use

    While in use, SGI-M shall be under the control of an authorized 
individual. This requirement is satisfied if the SGI-M is attended by 
an authorized individual even though the information is in fact not 
constantly being used. SGI-M, therefore, within alarm stations, 
continuously manned guard posts or ready rooms need not be locked in 
file drawers or storage containers.
    Under certain conditions the general control exercised over 
security zones or areas would be considered to meet this requirement. 
The primary consideration is limiting access to those who have a need-
to-know. Some examples would be:
    Alarm stations, guard posts and guard ready rooms;
    Engineering or drafting areas if visitors are escorted and 
information is not clearly visible; Plant maintenance areas if access 
is restricted and information is not clearly visible;
    Administrative offices (e.g., central records or purchasing) if 
visitors are escorted and information is not clearly visible;

Protection While in Storage

    While unattended, SGI-M shall be stored in a locked file drawer or 
container. Knowledge of lock combinations or access to keys protecting 
SGI-M shall be limited to a minimum number of personnel for operating 
purposes who have a ``need-to-know'' and are otherwise authorized 
access to SGI-M in accordance with these requirements. Access to lock 
combinations or keys shall be strictly controlled so as to prevent 
disclosure to an unauthorized individual.

Transportation of Documents and Other Matter

    Documents containing SGI-M when transmitted outside an authorized 
place of use or storage shall be enclosed in two sealed envelopes or 
wrappers. The inner envelope or wrapper shall contain the name and 
address of the intended recipient, and be marked both sides, top and 
bottom with the words ``Safeguards Information--Modified Handling.'' 
The outer envelope or wrapper must be addressed to the intended 
recipient, must contain the address of the sender, and must not bear 
any markings or indication that the document contains SGI-M.
    SGI-M may be transported by any commercial delivery company that 
provides nation-wide overnight service with computer tracking features, 
U.S. first class, registered, express, or certified mail, or by any 
individual authorized access pursuant to these requirements.
    Within a facility, SGI-M may be transmitted using a single opaque 
envelope. It may also be transmitted within a facility without single 
or double wrapping, provided adequate measures are taken to protect the 
material against unauthorized disclosure. Individuals transporting SGI-
M should retain the documents in their personal possession at all times 
or ensure that the information is appropriately wrapped and also 
secured to preclude compromise by an unauthorized individual.

Preparation and Marking of Documents

    While the NRC is the sole authority for determining what specific 
information may be designated as ``SGI-M,'' originators of documents 
are responsible for determining whether those documents contain such 
information. Each document or other matter that contains SGI-M shall be 
marked ``Safeguards Information--Modified Handling'' in a conspicuous 
manner on the top and bottom of the first page to indicate the presence 
of protected information. The first page of the document must also 
contain (i) the name, title, and organization of the individual 
authorized to make a SGI-M determination, and who has determined that 
the document contains SGI-M, (ii) the date the document was originated 
or the determination made, (iii) an indication that the document 
contains SGI-M, and (iv) an indication that unauthorized disclosure 
would be subject to civil and criminal sanctions. Each additional page 
shall be marked in a conspicuous fashion at the top and bottom with 
letters denoting ``Safeguards Information--Modified Handling.''
    In addition to the ``Safeguards Information--Modified Handling'' 
markings at the top and bottom of page, transmittal letters or 
memoranda which do not in themselves contain SGI-M shall be marked to 
indicate that attachments or enclosures contain SGI-M but that the 
transmittal does not (e.g., ``When separated from SGI-M enclosure(s), 
this document is decontrolled'').
    In addition to the information required on the face of the 
document, each item of correspondence that contains SGI-M shall, by 
marking or other means, clearly indicate which portions (e.g., 
paragraphs, pages, or appendices) contain SGI-M and which do not. 
Portion marking is not required

[[Page 3400]]

for physical security and safeguards contingency plans.
    All documents or other matter containing SGI-M in use or storage 
shall be marked in accordance with these requirements. A specific 
exception is provided for documents in the possession of contractors 
and agents of licensees that were produced more than one year prior to 
the effective date of the order. Such documents need not be marked 
unless they are removed from file drawers or containers. The same 
exception applies to old documents stored away from the facility in 
central files or corporation headquarters.
    Since information protection procedures employed by State and local 
police forces are deemed to meet NRC requirements, documents in the 
possession of these agencies need not be marked as set forth in this 

Removal From SGI-M Category

    Documents containing SGI-M shall be removed from the SGI-M category 
(decontrolled) only after the NRC determines that the information no 
longer meets the criteria of SGI-M. Licensees have the authority to 
make determinations that specific documents which they created no 
longer contain SGI-M information and may be decontrolled. Consideration 
must be exercised to ensure that any document decontrolled shall not 
disclose SGI-M in some other form or be combined with other unprotected 
information to disclose SGI-M.
    The authority to determine that a document may be decontrolled may 
be exercised only by, or with the permission of, the individual (or 
office) who made the original determination. The document should 
indicate the name and organization of the individual removing the 
document from the SGI-M category and the date of the removal. Other 
persons who have the document in their possession should be notified of 
the decontrolling of the document.

Reproduction of Matter Containing SGI-M

    SGI-M may be reproduced to the minimum extent necessary consistent 
with need without permission of the originator. Newer digital copiers 
which scan and retain images of documents represent a potential 
security concern. If the copier is retaining SGI-M information in 
memory, the copier cannot be connected to a network. It should also be 
placed in a location that is cleared and controlled for the authorized 
processing of SGI-M information. Different copiers have different 
capabilities, including some which come with features that allow the 
memory to be erased. Each copier would have to be examined from a 
physical security perspective.

Use of Automatic Data Processing (ADP) Systems

    SGI-M may be processed or produced on an ADP system provided that 
the system is assigned to the licensee's or contractor's facility and 
requires the use of an entry code/password for access to stored 
information. Licensees are encouraged to process this information in a 
computing environment that has adequate computer security controls in 
place to prevent unauthorized access to the information. An ADP system 
is defined here as a data processing system having the capability of 
long term storage of SGI-M. Word processors such as typewriters are not 
subject to the requirements as long as they do not transmit information 
off-site. (Note: if SGI-M is produced on a typewriter, the ribbon must 
be removed and stored in the same manner as other SGI-M information or 
media.) The basic objective of these restrictions is to prevent access 
and retrieval of stored SGI-M by unauthorized individuals, particularly 
from remote terminals. Specific files containing SGI-M will be password 
protected to preclude access by an unauthorized individual. The 
National Institute of Standards and Technology (NIST) maintains a 
listing of all validated encryption systems at
 SGI-M files may be transmitted over a 
network if the file is encrypted. In such cases, the licensee will 
select a commercially available encryption system that NIST has 
validated as conforming to Federal Information Processing Standards 
(FIPS). SGI-M files shall be properly labeled as ``Safeguards 
Information--Modified Handling'' and saved to removable media and 
stored in a locked file drawer or cabinet.


    SGI-M may not be transmitted by unprotected telecommunications 
circuits except under emergency or extraordinary conditions. For the 
purpose of this requirement, emergency or extraordinary conditions are 
defined as any circumstances that require immediate communications in 
order to report, summon assistance for, or respond to a security event 
(or an event that has potential security significance).
    This restriction applies to telephone, telegraph, teletype, 
facsimile circuits, and to radio. Routine telephone or radio 
transmission between site security personnel, or between the site and 
local police, should be limited to message formats or codes that do not 
disclose facility security features or response procedures. Similarly, 
call-ins during transport should not disclose information useful to a 
potential adversary. Infrequent or non-repetitive telephone 
conversations regarding a physical security plan or program are 
permitted provided that the discussion is general in nature.
    Individuals should use care when discussing SGI-M at meetings or in 
the presence of others to insure that the conversation is not overheard 
by persons not authorized access. Transcripts, tapes or minutes of 
meetings or hearings that contain SGI-M should be marked and protected 
in accordance with these requirements.


    Documents containing SGI-M should be destroyed when no longer 
needed. They may be destroyed by tearing into small pieces, burning, 
shredding or any other method that precludes reconstruction by means 
available to the public at large. Piece sizes one half inch or smaller 
composed of several pages or documents and thoroughly mixed would be 
considered completely destroyed.

[FR Doc. 04-1415 Filed 1-22-04; 8:45 am]