Amendment to the International Traffic in Arms Regulations: Dual Nationals and Third-Country Nationals Employed by End-Users, 48625-48627 [2010-19833]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 75, Number 154 (Wednesday, August 11, 2010)]
[Proposed Rules]
[Pages 48625-48627]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19833]


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DEPARTMENT OF STATE

22 CFR Parts 124 and 126

[Public Notice: 7116]
RIN 1400-AC68


Amendment to the International Traffic in Arms Regulations: Dual 
Nationals and Third-Country Nationals Employed by End-Users

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State is proposing to amend the 
International Traffic in Arms Regulations (ITAR) to update the policies 
regarding end-user employment of dual nationals and third-country 
nationals.

DATES: Comment Due Date: The Department of State will accept comments 
on this proposed rule until September 10, 2010.

ADDRESSES: Interested parties may submit comments within 30 days of the 
date of the publication by any of the following methods:
     E-mail: DDTCResponseTeam@state.gov with an appropriate 
subject line.
     Mail: PM/DDTC, SA-1, 12th Floor, Directorate of Defense 
Trade Controls, Office of Defense Trade Controls Policy, ATTN: 
Regulatory Change--Nationals, Bureau of Political Military Affairs, 
U.S. Department of State, Washington, DC 20522-0112.
     Persons with access to the Internet may also view this 
notice by searching for its RIN on the U.S. Government regulations Web 
site at https://regulations.gov/index.cfm.

FOR FURTHER INFORMATION CONTACT: Director Charles B. Shotwell, Office 
of Defense Trade Controls Policy, Department of State, Telephone (202) 
663-1282 or Fax (202) 261-8199; E-mail DDTCResponseTeam@state.gov. 
ATTN: Regulatory Change, Nationals.

SUPPLEMENTARY INFORMATION: This is part of the President's Export 
Control Reform effort. The Department of State is amending Parts 124 
and 126 of the ITAR to reflect new policy regarding end-user employment 
of dual-nationals and third-country nationals.
    As a result of the President's Task Force on Export Control Reform, 
the previous policy regarding the treatment of dual nationals and 
foreign nationals was reconsidered. The current requirement for the 
provision of additional information within a license to cover dual 
national and third-country national foreign employees has created a 
tremendous administrative burden on approved end-users and has evolved 
into a human rights issue, which has become a focus of contention 
between the U.S. and allies and friends without a commensurate gain in 
national security. Based on available intelligence and law enforcement 
information, and given the current licensing requirements regarding 
access by dual or third country national employees, most diversions of 
U.S. Munitions List (USML) items appears to occur outside the scope of 
approved licenses, not within foreign companies or organizations 
providing access to properly screened dual national or third country 
national employees. This amendment will place the affirmative 
responsibility upon the foreign company, government, or international 
organization, with the understanding

[[Page 48626]]

that by accepting the USML defense article, they must comply with the 
provisions of U.S. laws and regulations to prevent the possible 
diversion of U.S. defense articles and technology. This change, by no 
means, reduces the due diligence requirements of the applicant to 
ensure, to the best of their ability, that the end-use and end-user are 
consistent with the approved authorization. The Department views due 
diligence as a requirement for security clearances or other effective 
screening procedures as a condition for access to ITAR-controlled 
defense articles and technology.

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 amendment is not subject to the provisions of 5 U.S.C. 
553(b), it does not require analysis under the Regulatory Flexibility 
Act.

Unfunded Mandates Reform Act of 1995

    This amendment does not involve a mandate that will result in the 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any year and it 
will not significantly or uniquely affect small governments. Therefore, 
no actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

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.

Executive Orders 12372 and 13132

    This amendment will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this amendment does not have 
sufficient federalism implications to require consultations or warrant 
the preparation of a federalism summary impact statement. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this amendment.

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.

Executive Order 12988

    The Department of State has reviewed the proposed amendment in 
light of sections 3(a) and 3(b)(2) of Executive Order 12988 to 
eliminate ambiguity, minimize litigation, establish clear legal 
standards, and reduce burden.

Executive Order 13175

    The Department of State has determined that this rulemaking will 
not have tribal implications, will not impose substantial direct 
compliance costs on Indian tribal governments, and will not pre-empt 
tribal law. Accordingly, the requirement of Section 5 of Executive 
Order 13175 does not apply to this rulemaking.

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 Parts 124 and Part 126

    Arms and munitions, Exports.

    For the reasons set out in the preamble, the Department of State, 
proposes to amend 22 CFR parts 124 and 126 as follows:

PART 124--AGREEMENTS, OFF-SHORE PROCUREMENT AND OTHER DEFENSE 
SERVICES

    1. The authority citation for part 124 continues to read as 
follows:

    Authority:  Sec. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311; 3 CFR 1977 Comp. 
p. 79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub. L. 105-261

    2. In Sec.  124.8, paragraph (5) is revised to read as follows:


Sec.  124.8  Clauses required both in manufacturing license agreements 
and technical assistance agreements.

* * * * *
    (5) The technical data or defense service exported from the United 
States in furtherance of this agreement and any defense article which 
may be produced or manufactured from such technical data or defense 
service may not be transferred to a foreign person except pursuant to 
Sec.  126.18 or as specifically authorized in this agreement unless the 
prior written approval of the Department of State has been obtained.
* * * * *


Sec.  126.16  [Removed]

    3. Section 124.16 is removed.

PART 126--LICENSE FOR THE EXPORT OF DEFENSE ARTICLES

    4. The authority citation for part 126 continues to read as 
follows:

    Authority: Secs. 2, 38, 40, 42, and 71, Pub. L. 90-629, 90 Stat. 
744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); E.O. 11958, 42 FR 
4311; 3 CFR, 1977 Comp., p.79; 22 U.S.C. 2651a; 22 U.S.C. 287c; E.O. 
12918; 59 FR 28205, 3 CFR, 1994 Comp. p. 899; Sec. 1225, Pub. L. 
108-375.


Sec. Sec.  126.16 and 126.17  [Reserved]

    5. Sections 126.16 and 126.17 are reserved.
    6. Section 126.18 is added to read as follows:


Sec.  126.18  Exemptions Regarding Intra-company Transfers to Employees 
who are Dual Nationals or Third-Country Nationals.

    (a) Subject to the requirements of paragraphs (b) and (c) of this 
section, no approval is needed from the Directorate of Defense Trade 
Controls (DDTC) for the transfer of defense articles, including 
technical data, within a foreign business entity, foreign governmental 
entity, or international organization that is an approved end-user or 
consignee for those defense articles (including technical data), 
including the transfer to dual nationals or third country nationals who 
are bona fide, regular employees, directly employed by the foreign 
business entity, foreign governmental entity, or international 
organization. The transfer of defense articles pursuant to this section 
must take place completely within the physical territories of the 
country where the end-user is located or the consignee operates, and be 
within the scope of an approved export license, other export 
authorization, or license exemption.
    (b) The provisions of Sec.  127.1(b) are applicable to any transfer 
under this section. As a prerequisite to receiving any defense article, 
any foreign business entity, foreign governmental entity, or 
international organization, as a ``foreign person'' within the meaning 
of Sec.  120.16, that receives a defense article, including technical 
data, is responsible for implementing effective procedures to prevent 
diversion to destinations, entities, or for purposes other than those 
authorized by the applicable export license or other authorization 
(e.g., written approval or exemption) and

[[Page 48627]]

must comply with U.S. laws and regulations (including the ITAR).
    (c) (1)Pursuant to paragraph (b) of this section, the end-users or 
consignees can meet the above conditions, prior to access to defense 
articles, by requiring:
    (i) A security clearance approved by the host nation government for 
its employees, or
    (ii) The end-user or consignee have in place a process to screen 
its employees and to have executed a Non-Disclosure Agreement that 
provides assurances that the employee will not transfer any information 
to persons or entities unless specifically authorized by the consignee 
or end-user.
    (2) The end-user or consignee must screen its employees for 
substantive contacts with restricted or prohibited countries listed in 
Sec.  126.1. Substantive contacts include, but are not limited to, 
recent or regular travel to such countries, recent or continuing 
contact with agents and nationals of such countries, continued 
allegiance to such countries, or acts otherwise indicating a risk of 
diversion. Though nationality does not, in and of itself, prohibit 
access to defense articles or defense services, an employee that has 
substantive contacts with persons from countries listed in Sec.  
126.1(a) shall be presumed to raise a risk of diversion, unless DDTC 
determines otherwise. End-users and consignees must maintain a 
technology security/clearance plan that details its procedures for 
screening employees for such substantive contacts and maintain records 
of such screening. The technology security/clearance plan and screening 
records will be available to DDTC or its agents upon request.

    Dated: July 8, 2010.
Ellen O. Tauscher,
Under Secretary, Arms Control and International Security, Department of 
State.
[FR Doc. 2010-19833 Filed 8-10-10; 8:45 am]
BILLING CODE 4710-25-P