Voluntary Disclosures, 70777-70779 [E7-24069]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 72, Number 239 (Thursday, December 13, 2007)]
[Rules and Regulations]
[Pages 70777-70779]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-24069]


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DEPARTMENT OF STATE

22 CFR Part 127

[Public Notice: 6024]


Voluntary Disclosures

AGENCY: Department of State.

ACTION: Final rule.

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SUMMARY: The Department of State is amending the Voluntary Disclosure 
provisions of the International Traffic in Arms Regulations (ITAR) by 
imposing a 60-calendar day deadline after the initial notification to 
submit a full disclosure, in order to ensure timely submissions; and by 
clarifying what identifying information should be provided, as well as 
who should sign the voluntary disclosure in cases of a major violation, 
a systemic pattern of violations, or in the absence of an effective 
compliance program, in order to improve the government's ability to 
assess and respond to the national security and foreign policy 
consequences of any export violation. These amendments will provide 
integrity to the voluntary disclosure process, but involve only minor 
changes to the current voluntary disclosure process.

EFFECTIVE DATE: This rule is effective December 13, 2007.

ADDRESSES: Interested parties may submit comments at any time by any of 
the following methods:
     E-mail: DDTCResponseTeam@state.gov with an appropriate 
subject line.
     Mail: Department of State, Directorate of Defense Trade 
Controls, Office of Defense Trade Controls Compliance, ATTN: Regulatory 
Change, 12th Floor, SA-1, Washington, DC 20522-0112.
     Fax: 202-261-8695.
     Hand Delivery or Courier (regular work hours only:) 
Department of State, Directorate of Defense Trade Controls, Office of 
Defense Trade Controls Compliance, ATTENTION: Regulatory Change, SA-1, 
12th Floor, 2401 E Street, NW., Washington, DC 20037.
    Persons with access to the Internet may also view this notice by 
going to the regulations.gov Web site at: https://www.regulations.gov/
index.cfm.

FOR FURTHER INFORMATION CONTACT: Glenn Smith, Office of Defense Trade 
Controls Compliance, Department of State, 12th Floor, SA-1, Washington 
DC 20522-0112; Telephone 202-736-9230 or FAX 202-261-8695; e-mail: 
DDTCResponseTeam@state.gov. ATTN: Regulatory Change.

SUPPLEMENTARY INFORMATION: Section 127.12(c)(1)(i) imposes a 60-
calendar day deadline after the initial notification to submit a full 
disclosure. A party may request an extension to the 60-calendar day 
deadline, and, in certain cases, the Department may require the 
requester to provide a written certification that the full disclosure 
in accordance with Sec.  127.12(c)(2) will be submitted within a 
specified time period. Failure to submit a full disclosure may result 
in a decision by the Directorate of Defense Trade Controls not to 
consider the initial notification as a mitigating factor in determining 
the appropriate disposition of the violation.
    Section 127.12(c)(2)(iii) is amended to provide additional details 
and examples of identifying information to be included in a voluntary 
disclosure.
    Section 127.12(c)(2)(vi) is amended to clarify that corrective 
actions and compliance initiatives implemented must be directly in 
response to the violation in the voluntary disclosure, and designed to 
deter that particular violation from occurring again.
    Further, Section 127.12(e) is amended to provide that, in cases of 
a major violation, a systemic pattern of violations, or the absence of 
an effective compliance program, DDTC may require that the written 
certification be signed by a senior officer.
    The Directorate of Defense Trade Controls' website at Sec.  
127.12(g) is updated.

[[Page 70778]]

Regulatory Analysis and Notices

Administrative Procedure Act

    This amendment involves a foreign affairs function of the United 
States and, therefore, is not subject to the procedures contained in 5 
U.S.C. 553 and 554.

Regulatory Flexibility Act

    Since this rule involves a foreign affairs function of the United 
States, it does not require analysis under the Regulatory Flexibility 
Act.

Unfunded Mandates Act of 1995

    This rule will not have an effect on State, local, or tribal 
governments that would require analysis under the Unfunded Mandates 
Reform Act.

Small Business Regulatory Enforcement Fairness Act of 1996

    This amendment has been found not to be a major rule within the 
meaning of the Small Business Regulatory Enforcement Fairness Act of 
1996. It will not have substantial direct effects on the States, the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Executive Orders 12372 and 13132

    It is determined that this rule does not have sufficient federalism 
implications to warrant application of the consultation provisions of 
Executive Orders 12372 and 13132.

Executive Order 12866

    This amendment is exempt from review under Executive Order 12866, 
but has been reviewed internally by the Department of State to ensure 
consistency with the purposes thereof.

Paperwork Reduction Act

    This rule does not impose any new reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 
35.

List of Subjects in 22 CFR Part 127

    Arms and munitions, Crime, Exports, Penalties, Seizures and 
forfeitures.

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Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, part 127 is amended as follows:

PART 127--VIOLATIONS AND PENALTIES

0
1. The authority citation for part 127 continues to read as follows:

    Authority: Secs. 2, 38, and 42, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2791); E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp., 
p. 79; 22 U.S.C. 401; 22 U.S.C. 2651a; 22 U.S.C. 2779a; 22 U.S.C. 
2780.


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2. Section 127.12 is amended by revising paragraphs (a), (b)(1), 
(b)(2), (b)(3) introductory text, (b)(3)(i), (b)(3)(ii), (b)(3)(iv), 
(b)(3)(v), (b)(4), (c), (d)(1) introductory text, (d)(1)(i), (e), (f), 
and (g) to read as follows:


Sec.  127.12  Voluntary disclosures.

    (a) General policy. The Department strongly encourages the 
disclosure of information to the Directorate of Defense Trade Controls 
by persons (see Sec.  120.14 of this subchapter) that believe they may 
have violated any export control provision of the Arms Export Control 
Act, or any regulation, order, license, or other authorization issued 
under the authority of the Arms Export Control Act. The Department may 
consider a voluntary disclosure as a mitigating factor in determining 
the administrative penalties, if any, that should be imposed. Failure 
to report a violation may result in circumstances detrimental to U.S. 
national security and foreign policy interests, and will be an adverse 
factor in determining the appropriate disposition of such violations.
    (b) Limitations. (1) The provisions of this section apply only when 
information is provided to the Directorate of Defense Trade Controls 
for its review in determining whether to take administrative action 
under part 128 of this subchapter concerning a violation of the export 
control provisions of the Arms Export Control Act and these 
regulations.
    (2) The provisions of this section apply only when information is 
received by the Directorate of Defense Trade Controls for review prior 
to such time that either the Department of State or any other agency, 
bureau, or department of the United States Government obtains knowledge 
of either the same or substantially similar information from another 
source and commences an investigation or inquiry that involves that 
information, and that is intended to determine whether the Arms Export 
Control Act or these regulations, or any other license, order, or other 
authorization issued under the Arms Export Control Act has been 
violated.
    (3) The violation(s) in question, despite the voluntary nature of 
the disclosure, may merit penalties, administrative actions, sanctions, 
or referrals to the Department of Justice to consider criminal 
prosecution. In the latter case, the Directorate of Defense Trade 
Controls will notify the Department of Justice of the voluntary nature 
of the disclosure, although the Department of Justice is not required 
to give that fact any weight. The Directorate of Defense Trade Controls 
has the sole discretion to consider whether ``voluntary disclosure,'' 
in context with other relevant information in a particular case, should 
be a mitigating factor in determining what, if any, administrative 
action will be imposed. Some of the mitigating factors the Directorate 
of Defense Trade Controls may consider are:
    (i) Whether the transaction would have been authorized, and under 
what conditions, had a proper license request been made;
    (ii) Why the violation occurred;
* * * * *
    (iv) Whether the person has instituted or improved an internal 
compliance program to reduce the likelihood of future violation;
    (v) Whether the person making the disclosure did so with the full 
knowledge and authorization of the person's senior management. (If not, 
then the Directorate will not deem the disclosure voluntary as covered 
in this section.)
    (4) The provisions of this section do not, nor should they be 
relied on to, create, confer, or grant any rights, benefits, 
privileges, or protection enforceable at law or in equity by any person 
in any civil, criminal, administrative, or other matter.
    (c) Notification. (1) Any person wanting to disclose information 
that constitutes a voluntary disclosure should, in the manner outlined 
below, initially notify the Directorate of Defense Trade Controls 
immediately after a violation is discovered and then conduct a thorough 
review of all defense trade transactions where a violation is 
suspected.
    (i) If the notification does not contain all the information 
required by 127.12(c)(2) of this section, a full disclosure must be 
submitted within 60 calendar days of the notification, or the 
Directorate of Defense Trade Controls will not deem the notification to 
qualify as a voluntary disclosure.
    (ii) If the person is unable to provide a full disclosure within 
the 60 calendar day deadline, an empowered official (see Sec.  120.25 
of this subchapter) or a senior officer may request an extension of 
time in writing. A request for an extension must specify what 
information required by Sec.  127.12(c)(2) of this section could not be 
immediately provided and the reasons why.
    (iii) Before approving an extension of time to provide the full 
disclosure, the Directorate of Defense Trade Controls

[[Page 70779]]

may require the requester to certify in writing that they will provide 
the full disclosure within a specific time period.
    (iv) Failure to provide a full disclosure within a reasonable time 
may result in a decision by the Directorate of Defense Trade Controls 
not to consider the notification as a mitigating factor in determining 
the appropriate disposition of the violation. In addition, the 
Directorate of Defense Trade Controls may direct the requester to 
furnish all relevant information surrounding the violation.
    (2) Notification of a violation must be in writing and should 
include the following information:
    (i) A precise description of the nature and extent of the violation 
(e.g., an unauthorized shipment, doing business with a party denied 
U.S. export privileges, etc.);
    (ii) The exact circumstances surrounding the violation (a thorough 
explanation of why, when, where, and how the violation occurred);
    (iii) The complete identities and addresses of all persons known or 
suspected to be involved in the activities giving rise to the violation 
(including mailing, shipping, and e-mail addresses; telephone and fax/
facsimile numbers; and any other known identifying information);
    (iv) Department of State license numbers, exemption citation, or 
description of any other authorization, if applicable;
    (v) U.S. Munitions List category and subcategory, product 
description, quantity, and characteristics or technological capability 
of the hardware, technical data or defense service involved;
    (vi) A description of corrective actions already undertaken that 
clearly identifies the new compliance initiatives implemented to 
address the causes of the violations set forth in the voluntary 
disclosure and any internal disciplinary action taken; and how these 
corrective actions are designed to deter those particular violations 
from occurring again;
    (vii) The name and address of the person making the disclosure and 
a point of contact, if different, should further information be needed.
    (3) Factors to be addressed in the voluntary disclosure include, 
for example, whether the violation was intentional or inadvertent; the 
degree to which the person responsible for the violation was familiar 
with the laws and regulations, and whether the person was the subject 
of prior administrative or criminal action under the AECA; whether the 
violations are systemic; and the details of compliance measures, 
processes and programs, including training, that were in place to 
prevent such violations, if any. In addition to immediately providing 
written notification, persons are strongly urged to conduct a thorough 
review of all export-related transactions where a possible violation is 
suspected.
    (d) Documentation. (1) The written disclosure should be accompanied 
by copies of substantiating documents. Where appropriate, the 
documentation should include, but not be limited to:
    (i) Licensing documents (e.g., license applications, export 
licenses and end-user statements), exemption citation, or other 
authorization description, if any;
* * * * *
    (e) Certification. A certification must be submitted stating that 
all of the representations made in connection with the voluntary 
disclosure are true and correct to the best of that person's knowledge 
and belief. Certifications should be executed by an empowered official 
(See Sec.  120.25 of this subchapter), or by a senior officer (e.g. 
chief executive officer, president, vice-president, comptroller, 
treasurer, general counsel, or member of the board of directors). If 
the violation is a major violation, reveals a systemic pattern of 
violations, or reflects the absence of an effective compliance program, 
the Directorate of Defense Trade Controls may require that such 
certification be made by a senior officer of the company.
    (f) Oral presentations. Oral presentation is generally not 
necessary to augment the written presentation. However, if the person 
making the disclosure believes a meeting is desirable, a request should 
be included with the written presentation.
    (g) Send voluntary disclosures to the Office of Defense Trade 
Controls Compliance, Directorate of Defense Trade Controls. Consult the 
Directorate of Defense Trade Controls Web site at https://
www.pmddtc.state.gov for the appropriate street address.

    Dated: November 30, 2007.
John C. Rood,
Acting Under Secretary for Arms Control and International Security, 
Department of State.
[FR Doc. E7-24069 Filed 12-12-07; 8:45 am]
BILLING CODE 4710-25-P