Implementation of Defense Trade Cooperation Treaties, 72246-72268 [2011-29328]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 76, Number 225 (Tuesday, November 22, 2011)]
[Proposed Rules]
[Pages 72246-72268]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29328]



[[Page 72245]]

Vol. 76

Tuesday,

No. 225

November 22, 2011

Part II





Department of State





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22 CFR Parts 120, 123, 124, et al.





Implementation of Defense Trade Cooperation Treaties; Proposed Rule

Federal Register / Vol. 76, No. 225 / Tuesday, November 22, 2011 / 
Proposed Rules

[[Page 72246]]


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DEPARTMENT OF STATE

22 CFR Parts 120, 123, 124, 126, 127, and 129

[Public Notice 7683]
RIN 1400-AC95


Implementation of Defense Trade Cooperation Treaties

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 implement the 
Defense Trade Cooperation Treaty between the United States and 
Australia and the Defense Trade Cooperation Treaty between the United 
States and the United Kingdom, and identify via a supplement the 
defense articles and defense services that may not be exported pursuant 
to the Treaties. Additionally, the Department of State proposes to 
amend the section pertaining to the Canadian exemption to reference the 
new supplement, and, with regard to Congressional certification, the 
Department of State proposes to add Israel to the list of countries and 
entities that have a shorter certification time period and a higher 
dollar value reporting threshold.

DATES: The Department of State will accept comments on this proposed 
rule until December 22, 2011.

ADDRESSES: Interested parties may submit comments within 30 days of the 
date of the publication by any of the following methods:
     Email: DDTCResponseTeam@state.gov with the subject line, 
Regulatory Change--Treaties.
     Persons with access to the Internet may also view and 
comment on this notice by searching for its RIN on the U.S. Government 
regulations Web site at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade 
Controls Policy, Department of State, Telephone (202) 663-2809; Fax 
(202) 261-8199; or Email DDTCResponseTeam@state.gov. ATTN: Regulatory 
Change--Treaties.

SUPPLEMENTARY INFORMATION:

------------------------------------------------------------------------
             ITAR Part                         Proposed change
------------------------------------------------------------------------
Part 120..........................  Section 120.19 revised to clarify
                                     meaning of reexport or retransfer;
                                     new Sec.  Sec.   120.33 and 120.34
                                     added to provide definitions of the
                                     Defense Trade Cooperation Treaties
                                     between the United States and
                                     Australia and the U.K.,
                                     respectively; new Sec.  Sec.
                                     120.35 and 120.36 added to define
                                     the implementing arrangements
                                     pursuant to the Treaties between
                                     the United States and Australia and
                                     the United States and the U.K.,
                                     respectively.
Part 123..........................  Clarifying edits made throughout
                                     section and references to new
                                     proposed Sec.  Sec.   126.16 and
                                     126.17 added; Israel added to Sec.
                                      123.9(e).
Part 124..........................  Sec.   124.11 revised to add Israel
                                     to the list of countries and
                                     entities subject to the 15-day time
                                     period regarding Congressional
                                     certification.
Part 126..........................  Clarifying edits made throughout
                                     section; Sec.   126.5(b) revised to
                                     reference the new supplement to
                                     part 126, consequently, Sec.  Sec.
                                      126.5(b)(1)-(21) are removed; Sec.
                                       126.16 added to describe the
                                     exemption pursuant to the Defense
                                     Trade Cooperation Treaty between
                                     the United States and Australia;
                                     Sec.   126.17 added to describe the
                                     exemption pursuant to the Defense
                                     Trade Cooperation Treaty between
                                     the United States and the United
                                     Kingdom; Supplement No. 1 to part
                                     126 added.
Part 127..........................  Clarifying edits made throughout
                                     section; revised to make reference
                                     to new proposed Sec.  Sec.   126.16
                                     and 126.17.
Part 129..........................  Sections 129.6(b)(2),
                                     129.7(a)(1)(vii), and 129.7(a)(2)
                                     revised to include Israel in the
                                     listing of countries and entities.
------------------------------------------------------------------------

These proposed amendments are pursuant to the Security Cooperation Act 
of 2010 (Pub. L. 111-266), with the inclusion of other proposed 
changes. Title I of the Security Cooperation Act, the Defense Trade 
Cooperation Treaties Implementation Act of 2010, implements the Defense 
Trade Cooperation Treaty between the United States and Australia, done 
at Sydney, Australia, on September 5, 2007; and the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom, 
done at Washington, DC and London on June 21 and 26, 2007, respectively 
(collectively referred to herein as the ``Treaties''). We propose a 
supplement to part 126 that will identify those defense articles and 
defense services exempt from the scope of the Treaties. These proposed 
amendments would affect parts 120, 123, 126, and 127, with new sections 
in part 126 describing the licensing exemptions pursuant to the 
Treaties.

    Title III of the Security Cooperation Act creates for Israel a 
status in law similar to the North Atlantic Treaty Organization (NATO), 
the member countries of NATO, Australia, Japan, New Zealand, and the 
Republic of Korea concerning certification to the Congress. Pursuant to 
the proposed change, we would require certification for transfers to 
Israel prior to granting any license or other approval for transactions 
of major defense equipment sold under a contract in the amount of 
$25,000,000 or more (currently required for amounts of $14,000,000 or 
more), or for defense articles and defense services sold under a 
contract in the amount of $100,000,000 or more (currently required for 
amounts of $50,000,000 or more), and provided the transfer does not 
include any other countries. The change would also shorten from thirty 
(30) to fifteen (15) calendar days the certification time period during 
which approval may not be granted. This proposed amendment would affect 
parts 123, 124, and 129.
    Additionally, we are revising Sec.  126.5, describing the Canadian 
exemption, to reference the proposed supplement to part 126. This 
proposed amendment would affect part 126. Section by section 
identification of the proposed changes follows.
    We are revising the authority citation for part 120 to include 
Public Law 111-266; section 120.1 to reference the Treaties as 
authorities; and section 120.19 to clarify the meaning of reexport or 
retransfer. In Sec.  120.28, we are correcting an outdated reference 
(Shipper's Export Declaration) to refer to the Electronic Export 
Information. We are proposing new Sec. Sec.  120.33 and 120.34 to 
provide definitions of the Defense Trade Cooperation Treaties between 
the United States and Australia and the U.K., respectively. Also, we 
are proposing new Sec. Sec.  120.35 and 120.36 to define the 
implementing arrangements pursuant to the Treaties between the United 
States and Australia and the United States and the U.K., respectively.
    The proposed change in Sec.  123.4 replaces the word ``export'' 
with the word ``exporter.'' In the last sentence in

[[Page 72247]]

Sec.  123.9(a), ``a person'' will replace ``exporters,'' and we are 
adding ``destination'' as an item that must be determined prior to the 
submission of an application or the claiming of an exemption. We are 
adding a note following this section. We are revising section 123.9(b) 
to expand the reference to documents, and to reference the new proposed 
Sec. Sec.  126.16 and 126.17. We are adding clarifying language to 
Sec. Sec.  123.9(c), (c)(1), and (c)(2); and adding the language of the 
current (c)(4) to (c)(3). New language pertaining to new Sec. Sec.  
126.16 and 126.17 will comprise a new (c)(4). We are removing and 
reserving section 123.9(d). We are adding Israel to the list of 
countries and entities in Sec.  123.9(e); citing the new Sec. Sec.  
126.16 and 126.17 in Sec.  123.9(e)(1); and adding clarifying language 
to Sec. Sec.  123.9(e)(3) and (e)(4). We are adding Israel to the list 
of countries and entities in Sec. Sec.  123.15(a)(1), (a)(2), and (b). 
We are adding Australia and the United Kingdom to Sec.  123.16(a), and 
reference to the Electronic Export Information replaces reference to 
the Shipper's Export Declaration in this section and in Sec.  
123.16(b)(1)(iii). We are clarifying documents in Sec.  
123.16(b)(2)(vi), and adding new Sec. Sec.  123.16(c) and (d) 
referencing the new Sec. Sec.  126.16 and 126.17. Section 123.22(b)(2) 
replaces references to the Shipper's Export Declaration with the 
Electronic Export Information. We are revising the title and text for 
Sec.  123.26.
    We are revising the authority citation for part 124 to include 
Public Law 111-266. We are revising section 124.11 to add Israel to the 
list of countries and entities subject to the 15-day time period 
regarding Congressional certification.
    We are revising the authority citation for part 126 to include 
Public Law 111-266, and revising section 126.1(e) for clarification. We 
are adding a section (e)(1), to contain the current requirement found 
in (e) to notify the Directorate of Defense Trade Controls of any 
transactions that contravene the prohibitions of Sec.  126.1(a). We are 
reserving section (e)(2). We are revising section 126.3 to change 
``Director'' to ``Managing Director'' and ``Office'' to 
``Directorate.'' We are replacing references to Shipper's Export 
Declaration with Electronic Export Information in Sec.  126.4(d). We 
are revising section 126.5(a) to change ``Port Director'' to ``Port 
Directors.'' We are revising section 126.5(b) to reference the new 
supplement to part 126; consequently, we are removing Sec. Sec.  
126.5(b)(1)-(21). We are removing and reserving section 126.5(c) 
(defense services not subject to exemption will be covered by the new 
supplement to part 126). We are revising Section 126.5(d) to change 
``re-transfer'' to ``retransfer,'' and revising Sec.  126.5(d)(2) Note 
2 to reference the proposed new supplement to part 126. We are adding 
the terms ``criminal complaint'' and ``other criminal charge'' to Sec.  
126.7(a)(3), and adding clarifying language to Sec.  126.7(a)(7). We 
are revising section 126.13(a) to include reference to Sec.  123.9; 
revising Sec.  126.13(a)(1) to add the terms ``criminal complaint'' and 
``other criminal charge''; and revising Sec.  126.13(a)(4) to include 
reference to Sec.  123.9. We are proposing section 126.16 to describe 
the exemption pursuant to the Defense Trade Cooperation Treaty between 
the United States and Australia, and proposing Sec.  126.17 to describe 
the exemption pursuant to the Defense Trade Cooperation Treaty between 
the United States and the United Kingdom. We are proposing the addition 
of Supplement No. 1 to part 126, and this provision will delineate 
those items of the U.S. Munitions List that are outside the scope of 
the exemptions established by the Treaties and the Canadian exemptions 
at Sec.  126.5.
    We are revising the authority citation for part 127 to include 
Public Law 111-266. We are revising section 127.1 to make reference, 
where appropriate, to new proposed Sec. Sec.  126.16 and 126.17, and we 
are providing clarifying language, leading to the inclusion of a new 
proposed Sec.  127.1(e). We are adding the words ``or attempt to use'' 
in Sec.  127.2(a); ``subchapter'' will replace ``section'' in Sec.  
127.2(b); we are adding ``reexport'' and ``retransfer to Sec.  
127.2(b)(1); adding ``Electronic Export Information filing'' to Sec.  
127.2(b)(2); and proposing a new Sec.  127.2(b)(14). We are adding 
clarifying language to Sec.  127.3(a); adding the words ``or by 
exemption'' to Sec.  127.4(a); adding the words ``or claim of an 
exemption'' to Sec.  127.4(c); and proposing new Sec.  127.4(d). We are 
revising section 127.7(a) to remove the words ``for which a license or 
approval is required by this subchapter.'' In Sec.  127.10(a), we are 
modifying the word ``approval'' with addition of the word ``written.'' 
We are proposing new Sec.  127.12(b)(5). We are revising the structure 
of Sec.  127.12(d), removing an unnecessary level, and expanding the 
example list for ``shipping documents''.
    We are revising sections 129.6(b)(2), 129.7(a)(1)(vii), and 
129.7(a)(2) to include Israel in the listing of countries and entities.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense services is a foreign affairs function of 
the United States Government and that rules implementing this function 
are exempt from Sec.  553 (Rulemaking) and Sec.  554 (Adjudications) of 
the Administrative Procedure Act. Although the Department is of the 
opinion that this proposed rule is exempt from the rulemaking 
provisions of the APA, the Department is publishing this proposed rule 
with a 30-day provision for public comment and without prejudice to its 
determination that controlling the import and export of defense 
services is a foreign affairs function.

Regulatory Flexibility Act

    Since this proposed amendment is not subject to the notice-and-
comment procedures of 5 U.S.C. 553, it does not require analysis under 
the Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

    This proposed 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.

Executive Order 13175

    The Department of State has determined that this proposed amendment 
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 Executive Order 13175 does 
not apply to this proposed amendment.

Small Business Regulatory Enforcement Fairness Act of 1996

    This proposed 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 proposed 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

[[Page 72248]]

levels of government. Therefore, in accordance with Executive Order 
13132, it is determined that this proposed 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 proposed amendment.

Executive Order 12866

    The Department is of the opinion that restricting defense articles 
exports is a foreign affairs function of the United States Government 
and that rules governing the conduct of this function are exempt from 
the requirements of Executive order 12866. However, the Department has 
nevertheless reviewed this regulation to ensure its consistency with 
the regulatory philosophy and principles set forth in that Executive 
Order.

Executive Order 12988

    The Department of State has reviewed this 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 13563

    The Department of State has considered this rule in light of 
Executive Order 13563, dated January 18, 2011, and affirms that this 
regulation is consistent with the guidance therein.

Paperwork Reduction Act

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

List of Subjects

22 CFR Parts 120, 123, 124, and 126

    Arms and Munitions, Exports.

22 CFR Part 127

    Arms and Munitions, Crime, Exports, Penalties, Seizures and 
Forfeitures.

22 CFR Part 129

    Arms and Munitions, Exports, Brokering.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 120, 123, 124, 126, 127, and 129 are proposed to be 
amended as follows:

PART 120--PURPOSE AND DEFINITIONS

    1. The authority citation for Part 120 is revised to read as 
follows:

    Authority: Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; E.O. 11958, 42 FR 4311; 
E.O. 13284, 68 FR 4075; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; 
Pub. L. 105-261, 112 Stat. 1920; Pub. L. 111-266.

    2. Section 120.1 is amended by revising paragraphs (a), (c), and 
(d) to read as follows:


Sec.  120.1  General authorities and eligibility.

    (a) Section 38 of the Arms Export Control Act (22 U.S.C. 2778), as 
amended, authorizes the President to control the export and import of 
defense articles and defense services. The statutory authority of the 
President to promulgate regulations with respect to exports of defense 
articles and defense services was delegated to the Secretary of State 
by Executive Order 11958, as amended. This subchapter implements that 
authority. Portions of this subchapter also implement the Defense Trade 
Cooperation Treaty between the United States and Australia and the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom. (Note, however, that the Treaties are not the source of 
authority for the prohibitions in part 127, but instead are the source 
of one limitation on the scope of such prohibitions.) By virtue of 
delegations of authority by the Secretary of State, these regulations 
are primarily administered by the Deputy Assistant Secretary of State 
for Defense Trade and Regional Security and the Managing Director of 
Defense Trade Controls, Bureau of Political-Military Affairs.
* * * * *
    (c) Receipt of Licenses and Eligibility.
    (1) A U.S. person may receive a license or other approval pursuant 
to this subchapter. A foreign person may not receive such a license or 
other approval, except as follows:
    (i) A foreign governmental entity in the United States may receive 
an export license or other export approval;
    (ii) A foreign person may receive a reexport or retransfer 
approval; and
    (iii) A foreign person may receive a prior approval for brokering 
activities.
    Requests for a license or other approval other than by a person 
referred to in paragraphs (c)(1)(i) and (c)(1)(ii) will be considered 
only if the applicant has registered with the Directorate of Defense 
Trade Controls pursuant to part 122 or 129 of this subchapter, as 
appropriate.
    (2) Persons who have been convicted of violating the criminal 
statutes enumerated in Sec.  120.27 of this subchapter, who have been 
debarred pursuant to part 127 or 128 of this subchapter, who are 
subject to indictment or are otherwise charged (e.g., by information) 
for violating the criminal statutes enumerated in Sec.  120.27 of this 
subchapter, who are ineligible to contract with, or to receive a 
license or other form of authorization to import defense articles or 
defense services from any agency of the U.S. Government, who are 
ineligible to receive an export license or other approval from any 
other agency of the U.S. Government, or who are subject to a Department 
of State policy of denial, suspension or revocation under Sec.  
126.7(a) of this subchapter, or to interim suspension under Sec.  127.8 
of this subchapter, are generally ineligible to be involved in 
activities regulated under this subchapter.
    (d) The exemptions provided in this subchapter do not apply to 
transactions in which the exporter, any party to the export (as defined 
in Sec.  126.7(e) of this subchapter), any source or manufacturer, 
broker or other participant in the brokering activities, is generally 
ineligible as set forth above in paragraph (c) of this section, unless 
prior written authorization has been granted by the Directorate of 
Defense Trade Controls.
    3. Section 120.19 is revised to read as follows:


Sec.  120.19  Reexport or retransfer.

    Reexport or retransfer means the transfer of defense articles or 
defense services to an end-use, end-user, or destination not previously 
authorized by license, written approval, or exemption pursuant to this 
subchapter.
    4. Section 120.28 is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  120.28  Listing of forms referred to in this subchapter.

* * * * *
    (b) * * *
    (2) Electronic Export Information filed via the Automated Export 
System.
* * * * *
    5. Section 120.33 is added to read as follows:


Sec.  120.33  Defense Trade Cooperation Treaty between the United 
States and Australia.

    Defense Trade Cooperation Treaty between the United States and 
Australia means the Treaty between the Government of the United States 
of America and the Government of

[[Page 72249]]

Australia Concerning Defense Trade Cooperation, done at Sydney, 
September 5, 2007. For additional information on making exports 
pursuant to this treaty, see Sec.  126.16 of this subchapter.
    6. Section 120.34 is added to read as follows:


Sec.  120.34  Defense Trade Cooperation Treaty between the United 
States and the United Kingdom.

    Defense Trade Cooperation Treaty between the United States and the 
United Kingdom means the Treaty between the Government of the United 
States of America and the Government of the United Kingdom of Great 
Britain and Northern Ireland Concerning Defense Trade Cooperation, done 
at Washington DC and London, June 21 and 26, 2007. For additional 
information on making exports pursuant to this treaty, see Sec.  126.17 
of this subchapter.
    7. Section 120.35 is added to read as follows:


Sec.  120.35  Australia Implementing Arrangement.

    Australia Implementing Arrangement means the Implementing 
Arrangement Pursuant to the Treaty between the Government of the United 
States of America and the Government of Australia Concerning Defense 
Trade Cooperation, done at Washington, March 14, 2008, as it may be 
amended.
    8. Section 120.36 is added to read as follows:


Sec.  120.36  United Kingdom Implementing Arrangement.

    United Kingdom Implementing Arrangement means the Implementing 
Arrangement Pursuant to the Treaty between the Government of the United 
States of America and the Government of the United Kingdom of Great 
Britain and Northern Ireland Concerning Defense Trade Cooperation, done 
at Washington DC, February 14, 2008, as it may be amended.

PART 123--LICENSES FOR THE EXPORT OF DEFENSE ARTICLES

    9. The authority citation for part 123 continues to read as 
follows:

    Authority: Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); 22 U.S.C. 2753; 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, 112 Stat. 1920; Sec 1205(a), Pub. L. 107-228.

    10. Section 123.4 is amended by revising paragraph (d) introductory 
text to read as follows:


Sec.  123.4  Temporary import license exemptions.

* * * * *
    (d) Procedures. To the satisfaction of the Port Directors of U.S. 
Customs and Border Protection, the importer and exporter must comply 
with the following procedures:
* * * * *
    11. Section 123.9 is amended by revising paragraphs (a), (b), (c), 
(e), (e)(1), (e)(3), (e)(4), and removing and reserving paragraph (d), 
to read as follows:


Sec.  123.9  Country of ultimate destination and approval of reexports 
or retransfers.

    (a) The country designated as the country of ultimate destination 
on an application for an export license, or in an Electronic Export 
Information filing where an exemption is claimed under this subchapter, 
must be the country of ultimate end use. The written approval of the 
Directorate of Defense Trade Controls must be obtained before 
reselling, transferring, reexporting, retransferring, transshipping, or 
disposing of a defense article to any end-user, end-use, or destination 
other than as stated on the export license, or in the Electronic Export 
Information filing in cases where an exemption is claimed under this 
subchapter, except in accordance with the provisions of an exemption 
under this subchapter that explicitly authorizes the resell, transfer, 
reexport, retransfer, transshipment, or disposition of a defense 
article without such approval. A person must determine the specific 
end-user, end-use, and destination prior to submitting an application 
to the Directorate of Defense Trade Controls or claiming an exemption 
under this subchapter.

    Note to paragraph (a): In making the aforementioned 
determination, a person is expected to review all readily available 
information, including information available to the public generally 
as well as information available from other parties to the 
transaction.

    (b) The exporter shall incorporate the following statement as an 
integral part of the bill of lading, airway bill, or other shipping 
documents and the invoice whenever defense articles or defense services 
are to be exported or transferred pursuant to a license, other written 
approval, or an exemption under this subchapter, other than the 
exemptions contained in Sec.  126.16 and Sec.  126.17 of this 
subchapter (Note: for exports made pursuant to Sec.  126.16 or Sec.  
126.17 of this subchapter, see Sec.  126.16(j)(5) or Sec.  
126.17(j)(5)): ``These commodities are authorized by the U.S. 
Government for export only to [country of ultimate destination] for use 
by [end-user]. They may not be transferred, transshipped on a non-
continuous voyage, or otherwise be disposed of, to any other country or 
end-user, either in their original form or after being incorporated 
into other end-items, without the prior written approval of the U.S. 
Department of State.''
    (c) Any person requesting written approval from the Directorate of 
Defense Trade Controls for the reexport, retransfer, other disposition, 
or change in end use, end user, or destination of a defense article or 
defense service initially exported or transferred pursuant to a license 
or other written approval, or an exemption under this subchapter, must 
submit all the documentation required for a permanent export license 
(see Sec.  123.1 of this subchapter) and shall also submit the 
following:
    (1) The license number, written authorization, or exemption under 
which the defense article or defense service was previously authorized 
for export from the United States (Note: For exports under exemptions 
at Sec.  126.16 or Sec.  126.17 of this subchapter, the original end-
use, program, project, or operation under which the item was exported 
must be identified.);
    (2) A precise description, quantity, and value of the defense 
article or defense service;
    (3) A description and identification of the new end-user, end-use, 
and destination; and
    (4) With regard to any request for such approval relating to a 
defense article or defense service initially exported pursuant to an 
exemption contained in Sec.  126.16 or Sec.  126.17 of this subchapter, 
written request for the prior approval of the transaction from the 
Directorate of Defense Trade Controls must be submitted:
    (i) By the original U.S. exporter, provided a written request is 
received from a member of the Australian Community, as identified in 
Sec.  126.16 of this subchapter, or the United Kingdom Community, as 
identified in Sec.  126.17 of this subchapter (where such a written 
request includes a written certification from the member of the 
Australian Community or the United Kingdom Community providing the 
information set forth in this subsection); or
    (ii) By a member of the Australian Community or the United Kingdom 
Community, where such request provides the information set forth in 
this section.
    (d) [Reserved]
    (e) Reexports or retransfers of U.S.-origin components incorporated 
into a foreign defense article to NATO, NATO agencies, a government of 
a NATO

[[Page 72250]]

country, or the governments of Australia, Israel, Japan, New Zealand, 
or the Republic of Korea are authorized without the prior written 
approval of the Directorate of Defense Trade Controls, provided:
    (1) The U.S.-origin components were previously authorized for 
export from the United States, either by a license, written 
authorization, or an exemption other than those described in either 
Sec.  126.16 or Sec.  126.17 of this subchapter;
* * * * *
    (3) The person reexporting the defense article provides written 
notification to the Directorate of Defense Trade Controls of the 
retransfer not later than 30 days following the reexport. The 
notification must state the articles being reexported and the recipient 
government.
    (4) The original license or other approval of the Directorate of 
Defense Trade Controls did not include retransfer or reexport 
restrictions prohibiting use of this exemption.
    12. Section 123.15 is amended by revising paragraphs (a)(1), 
(a)(2), and (b) to read as follows:


Sec.  123.15  Congressional certification pursuant to Section 36(c) of 
the Arms Export Control Act.

    (a) * * *
    (1) A license for the export of major defense equipment sold under 
a contract in the amount of $14,000,000 or more, or for defense 
articles and defense services sold under a contract in the amount of 
$50,000,000 or more, to any country that is not a member of the North 
Atlantic Treaty Organization (NATO), or Australia, Israel, Japan, New 
Zealand, or the Republic of Korea that does not authorize a new sales 
territory; or
    (2) A license for export to a country that is a member country of 
the North Atlantic Treaty Organization (NATO), or Australia, Israel, 
Japan, New Zealand, or the Republic of Korea, of major defense 
equipment sold under a contract in the amount in the amount of 
$25,000,000 or more, or for defense articles and defense services sold 
under a contract in the amount of $100,000,000 or more, and provided 
the transfer does not include any other countries; or
* * * * *
    (b) Unless an emergency exists which requires the proposed export 
in the national security interests of the United States, approval may 
not be granted for any transaction until at least 15 calendar days have 
elapsed after receipt by the Congress of the certification required by 
22 U.S.C. 2776(c)(1) involving the North Atlantic Treaty Organization, 
or Australia, Israel, Japan, New Zealand, or the Republic of Korea or 
at least 30 calendar days have elapsed for any other country; in the 
case of a license for an export of a commercial communications 
satellite for launch from, and by nationals of, the Russian Federation, 
Ukraine, or Kazakhstan, until at least 15 calendar days after the 
Congress receives such certification.
* * * * *
    13. Section 123.16 is amended by revising paragraphs (a) 
introductory text, (b)(1)(iii), (b)(2)(vi), and adding paragraphs (c) 
and (d), to read as follows:


Sec.  123.16  Exemptions of general applicability.

    (a) The following exemptions apply to exports of unclassified 
defense articles for which no approval is needed from the Directorate 
of Defense Trade Controls. These exemptions do not apply to: Proscribed 
destinations under Sec.  126.1 of this subchapter; exports for which 
Congressional notification is required (see Sec.  123.15 of this 
subchapter); MTCR articles; Significant Military Equipment (SME); and 
may not be used by persons who are generally ineligible as described in 
Sec.  120.1(c) of this subchapter. All shipments of defense articles, 
including but not limited to those to and from Australia, Canada, and 
the United Kingdom, require an Electronic Export Information (EEI) 
filing or notification letter. If the export of a defense article is 
exempt from licensing, the EEI filing must cite the exemption. Refer to 
Sec.  123.22 of this subchapter for EEI filing and letter notification 
requirements.
    (b) * * *
    (1) * * *
    (iii) The exporter certifies in the EEI filing that the export is 
exempt from the licensing requirements of this subchapter. This is done 
by writing, ``22 CFR 123.16(b)(1) and the agreement or arrangement 
(identify/state number) applicable''; and
* * * * *
    (2) * * *
    (vi) The exporter must certify on the invoice, the bill of lading, 
air waybill, or shipping documents and in the EEI filing that the 
export is exempt from the licensing requirements of this subchapter. 
This is done by writing ``22 CFR 123.16(b)(2) applicable''.
* * * * *
    (c) For exports to Australia pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia refer to 
Sec.  126.16 of this subchapter.
    (d) For exports to the United Kingdom pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom 
refer to Sec.  126.17 of this subchapter.
    14. Section 123.22 is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  123.22  Filing, retention, and return of export licenses and 
filing of export information.

* * * * *
    (b) * * *
    (2) Emergency shipments of hardware that cannot meet the pre-
departure filing requirements. U.S. Customs and Border Protection may 
permit an emergency export of hardware by truck (e.g., departures to 
Mexico or Canada) or air, by a U.S. registered person, when the 
exporter is unable to comply with the Electronic Export Information 
(EEI) filing timeline in paragraph (b)(1)(i) of this section. The 
applicant, or an agent acting on the applicant's behalf, in addition to 
providing the EEI using the AES, must provide documentation required by 
the U.S. Customs and Border Protection and this subchapter. The 
documentation provided to the U.S. Customs and Border Protection at the 
port of exit must include the External Transaction Number (XTN) or 
Internal Transaction Number (ITN) for the shipment and a copy of a 
notification to the Directorate of Defense Trade Controls stating that 
the shipment is urgent accompanied by an explanation for the urgency. 
The original of the notification must be immediately provided to the 
Directorate of Defense Trade Controls. The AES filing of the export 
information when the export is by air must be at least two hours prior 
to any departure from the United States; and, when a truck shipment, at 
the time when the exporter provides the articles to the carrier or at 
least one hour prior to departure from the United States, when the 
permanent export of the hardware has been authorized for export:
* * * * *
    15. Section 123.26 is revised to read as follows:


Sec.  123.26  Recordkeeping for exemptions.

    Any person engaging in any export, reexport, transfer, or 
retransfer of a defense article or defense service pursuant to an 
exemption must maintain records of each such export, reexport, 
transfer, or retransfer. The records shall include the following 
information: A description of the defense article, including technical 
data, or defense service; the name and address of the end-user and 
other available contact information (e.g., telephone number and 
electronic mail address); the name of the natural person

[[Page 72251]]

responsible for the transaction; the stated end-use of the defense 
article or defense service; the date and time of the transaction; the 
Electronic Export Information (EEI) Internal Transaction Number (ITN); 
and the method of transmission. The person using or acting in reliance 
upon the exemption shall also comply with any additional recordkeeping 
requirements enumerated in the text of the regulations concerning such 
exemption.
* * * * *

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

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

    Authority: Secs. 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.

    17. Section 124.11 is amended by revising paragraph (b) to read as 
follows:


Sec.  124.11  Congressional certification pursuant to Section 36(d) of 
the Arms Export Control Act.

* * * * *
    (b) Unless an emergency exists which requires the immediate 
approval of the agreement in the national security interests of the 
United States, approval may not be granted until at least 15 calendar 
days have elapsed after receipt by the Congress of the certification 
required by 22 U.S.C. 2776(d)(1) involving the North Atlantic Treaty 
Organization, any member country of that Organization, or Australia, 
Israel, Japan, New Zealand, or the Republic of Korea or at least 30 
calendar days have elapsed for any other country. Approvals may not be 
granted when the Congress has enacted a joint resolution prohibiting 
the export.
* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

    18. The authority citation for part 126 is revised 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. 7089, Pub. L. 111-117; Pub. L. 111-266.

    19. Section 126.1 is amended by revising paragraph (e) to read as 
follows:


Sec.  126.1  Prohibited exports, imports, and sales to or from certain 
countries.

* * * * *
    (e) Proposed sales. No sale, export, transfer, reexport, or 
retransfer and no proposal to sell, export, transfer, reexport, or 
retransfer any defense articles or defense services subject to this 
subchapter may be made to any country referred to in this section 
(including the embassies or consulates of such a country), or to any 
person acting on its behalf, whether in the United States or abroad, 
without first obtaining a license or written approval of the 
Directorate of Defense Trade Controls. However, in accordance with 
paragraph (a) of this section, it is the policy of the Department of 
State to deny licenses and approvals in such cases.
    (1) Duty to Notify: Any person who knows or has reason to know of 
such a proposed or actual sale, export, transfer, reexport, or 
retransfer of such articles, services, or data must immediately inform 
the Directorate of Defense Trade Controls. Such notifications should be 
submitted to the Office of Defense Trade Controls Compliance, 
Directorate of Defense Trade Controls.
    (2) [Reserved]
* * * * *
    20. Section 126.3 is revised to read as follows:


Sec.  126.3  Exceptions.

    In a case of exceptional or undue hardship, or when it is otherwise 
in the interest of the United States Government, the Managing Director, 
Directorate of Defense Trade Controls, may make an exception to the 
provisions of this subchapter.
    21. Section 126.4 is amended by revising paragraph (d) to read as 
follows:


Sec.  126.4  Shipments by or for United States Government agencies.

* * * * *
    (d) An Electronic Export Information (EEI) filing, required under 
Sec.  123.22 of this subchapter, and a written statement by the 
exporter certifying that these requirements have been met must be 
presented at the time of export to the appropriate Port Directors of 
U.S. Customs and Border Protection or Department of Defense transmittal 
authority. A copy of the EEI filing and the written certification 
statement shall be provided to the Directorate of Defense Trade 
Controls immediately following the export.
    22. Section 126.5 is amended by removing and reserving paragraph 
(c) and revising paragraphs (a), (b), (d) introductory text, and Notes 
1 and 2, to read as follows:


Sec.  126.5  Canadian exemptions.

    (a) Temporary import of defense articles. Port Directors of U.S. 
Customs and Border Protection and postmasters shall permit the 
temporary import and return to Canada without a license of any 
unclassified defense articles (see Sec.  120.6 of this subchapter) that 
originate in Canada for temporary use in the United States and return 
to Canada. All other temporary imports shall be in accordance with 
Sec. Sec.  123.3 and 123.4 of this subchapter.
    (b) Permanent and temporary export of defense articles. Except as 
provided in Supplement No. 1 to part 126 of this subchapter and for 
exports that transit third countries, Port Directors of U.S. Customs 
and Border Protection and postmasters shall permit, when for end-use in 
Canada by Canadian Federal or Provincial governmental authorities 
acting in an official capacity or by a Canadian-registered person for 
return to the United States, the permanent and temporary export to 
Canada without a license of unclassified defense articles and defense 
services identified on the U.S. Munitions List (22 CFR 121.1). The 
exceptions noted above are subject to meeting the requirements of this 
subchapter, to include 22 CFR 120.1(c) and (d), parts 122 and 123 
(except insofar as exemption from licensing requirements is herein 
authorized) and Sec.  126.1, and the requirement to obtain non-transfer 
and use assurances for all significant military equipment. For purposes 
of this section, ``Canadian-registered person'' is any Canadian 
national (including Canadian business entities organized under the laws 
of Canada), dual citizen of Canada and a third country other than a 
country listed in Sec.  126.1, and permanent resident registered in 
Canada in accordance with the Canadian Defense Production Act, and such 
other Canadian Crown Corporations identified by the Department of State 
in a list of such persons publicly available through the Internet Web 
site of the Directorate of Defense Trade Controls and by other means.
    (c) [Reserved]
    (d) Reexports/retransfer. Reexport/retransfer in Canada to another 
end user or end use or from Canada to another destination, except the 
United States, must in all instances have the prior approval of the 
Directorate of Defense Trade Controls. Unless otherwise exempt in this 
subchapter, the original exporter is responsible, upon request from a 
Canadian-registered person, for obtaining or providing reexport/
retransfer approval. In any instance when the U.S. exporter is no 
longer available to the Canadian end user the

[[Page 72252]]

request for reexport/retransfer may be made directly to the Directorate 
of Defense Trade Controls. All requests must include the information in 
Sec.  123.9(c) of this subchapter. Reexport/retransfer approval is 
acquired by:
* * * * *

    Notes to Sec.  126.5: 1. In any instance when the exporter has 
knowledge that the defense article exempt from licensing is being 
exported for use other than by a qualified Canadian-registered 
person or for export to another foreign destination, other than the 
United States, in its original form or incorporated into another 
item, an export license must be obtained prior to the transfer to 
Canada.
    2. Additional exemptions exist in other sections of this 
subchapter that are applicable to Canada, for example Sec. Sec.  
123.9, 125.4, and 124.2, that allow for the performance of defense 
services related to training in basic operations and maintenance, 
without a license, for certain defense articles lawfully exported, 
including those identified in Supplement No. 1 to part 126 of this 
subchapter.


    23. Section 126.7 is amended by revising the section heading and 
paragraphs (a)(3), (a)(7) and (e) introductory text to read as follows:


Sec.  126.7  Denial, revocation, suspension, or amendment of licenses 
and other approvals.

    (a) * * *
    (3) An applicant is the subject of a criminal complaint, other 
criminal charge (e.g., an information), or indictment for a violation 
of any of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter; or
* * * * *
    (7) An applicant has failed to include any of the information or 
documentation expressly required to support a license application, 
exemption, or other request for approval under this subchapter, or as 
required in the instructions in the applicable Department of State form 
or has failed to provide notice or information as required under this 
subchapter; or
* * * * *
    (e) Special definition. For purposes of this subchapter, the term 
``Party to the Export'' means:
* * * * *
    24. Section 126.13 is amended by revising paragraphs (a) 
introductory text, (a)(1), and (a)(4) to read as follows:


Sec.  126.13  Required information.

    (a) All applications for licenses (DSP-5, DSP-61, DSP-73, and DSP-
85), all requests for approval of agreements and amendments thereto 
under part 124 of this subchapter, and all requests for other written 
authorizations (including requests for retransfer or reexport pursuant 
to Sec.  123.9 of this subchapter) must include a letter signed by a 
responsible official empowered by the applicant and addressed to the 
Directorate of Defense Trade Controls, stating whether:
    (1) The applicant or the chief executive officer, president, vice-
presidents, other senior officers or officials (e.g., comptroller, 
treasurer, general counsel) or any member of the board of directors is 
the subject of a criminal complaint, other criminal charge (e.g., an 
information), or indictment for or has been convicted of violating any 
of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter since the effective date of the Arms Export Control Act, 
Public Law 94-329, 90 Stat. 729 (June 30, 1976);
* * * * *
    (4) The natural person signing the application, notification or 
other request for approval (including the statement required by this 
subsection) is a citizen or national of the United States, has been 
lawfully admitted to the United States for permanent residence (and 
maintains such lawful permanent residence status under the Immigration 
and Nationality Act, as amended (8 U.S.C. 1101(a), section 101(a)20, 60 
Stat. 163), or is an official of a foreign government entity in the 
United States, or is a foreign person making a request pursuant to 
Sec.  123.9 of this subchapter.
* * * * *
    25. Section 126.16 is added to read as follows:


Sec.  126.16  Exemption pursuant to the Defense Trade Cooperation 
Treaty between the United States and Australia.

    (a) Scope of exemption and required conditions.
    (1) Definitions.
    (i) An export means, for purposes of this section only, the initial 
movement of defense articles or defense services from the United States 
Community to the Australian Community.
    (ii) A transfer means, for purposes of this section only, the 
movement of a defense article or defense service, previously exported, 
by a member of the Australian Community within the Australian 
Community, or between a member of the United States Community and a 
member of the Australian Community.
    (iii) Retransfer and reexport have the meaning provided in Sec.  
120.19 of this subchapter.
    (iv) Intermediate consignee means, for purposes of this section, an 
entity or person who receives defense articles, including technical 
data, but who does not have access to such defense articles, for the 
sole purpose of effecting onward movement to members of the Approved 
Community.
    (2) Persons or entities exporting or transferring defense articles 
or defense services are exempt from the otherwise applicable licensing 
requirements if such persons or entities comply with the regulations 
set forth in this section. Except as provided in Supplement No. 1 to 
part 126 of this subchapter, Port Directors of U.S. Customs and Border 
Protection and postmasters shall permit the permanent and temporary 
export without a license to members of the Australian Community (see 
paragraph (d) of this section regarding the identification of members 
of the Australian Community) of defense articles and defense services 
not listed in Supplement No. 1 to part 126, for the end-uses 
specifically identified pursuant to paragraphs (e) and (f) of this 
section. The purpose of this section is to specify the requirements to 
export, transfer, reexport, retransfer, or otherwise dispose of a 
defense article or defense service pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia.
    (3) Export. In order for an exporter to export a defense article or 
defense service pursuant to the Defense Trade Cooperation Treaty 
between the United States and Australia, all of the following 
conditions must be met:
    (i) The exporter must be registered with the Directorate of Defense 
Trade Controls and must be eligible, according to the requirements and 
prohibitions of the Arms Export Control Act, this subchapter, and other 
provisions of United States law, to obtain an export license (or other 
forms of authorization to export) from any agency of the U.S. 
Government without restriction (see paragraphs (b) and (c) of this 
section for specific requirements);
    (ii) The recipient of the export must be a member of the Australian 
Community (see paragraph (d) of this section regarding the 
identification of members of the Australian Community). Australian 
entities and facilities that become ineligible for such membership will 
be removed from the Australian Community;
    (iii) Intermediate consignees involved in the export must be 
eligible, according to the requirements and prohibitions of the Arms 
Export Control Act, this subchapter, and other provisions of United 
States law, to handle or receive a defense article or defense service 
without restriction (see paragraph (k) of this section for specific 
requirements);
    (iv) The export must be for an end-use specified in the Defense 
Trade

[[Page 72253]]

Cooperation Treaty between the United States and Australia and mutually 
agreed to by the U.S. Government and the Government of Australia 
pursuant to the Defense Trade Cooperation Treaty between the United 
States and Australia and the Implementing Arrangement thereto (the 
Australia Implementing Arrangement) (see paragraphs (e) and (f) of this 
section regarding authorized end-uses);
    (v) The defense article or defense service is not excluded from the 
scope of the Defense Trade Cooperation Treaty between the United States 
and Australia (see paragraph (g) of this section and Supplement No. 1 
to part 126 of this subchapter for specific information on the scope of 
items excluded from export under this exemption) and is marked or 
identified, at a minimum, as ``Restricted USML'' (see paragraph (j) of 
this section for specific requirements on marking exports);
    (vi) All required documentation of such export is maintained by the 
exporter and recipient and is available upon the request of the U.S. 
Government (see paragraph (l) of this section for specific 
requirements); and
    (vii) The Department of State has provided advance notification to 
the Congress, as required, in accordance with this section (see 
paragraph (o) of this section for specific requirements).
    (4) Transfers. In order for a member of the Australian Community to 
transfer a defense article or defense service under the Defense Trade 
Cooperation Treaty between the United States and Australia, all of the 
following conditions must be met:
    (i) The defense article or defense service must have been 
previously exported in accordance with paragraph (a)(3) of this section 
or transitioned from a license or other approval in accordance with 
paragraph (i) Transitions of this section;
    (ii) The transferor and transferee of the defense article or 
defense service are members of the Australian Community (see paragraph 
(d) of this section regarding the identification of members of the 
Australian Community) or the United States Community (see paragraph (b) 
for information on the United States Community/approved exporters);
    (iii) The transfer is required for an end-use specified in the 
Defense Trade Cooperation Treaty between the United States and 
Australia and mutually agreed to by the United States and the 
Government of Australia pursuant to the terms of the Defense Trade 
Cooperation Treaty between the United States and Australia and the 
Australia Implementing Arrangement (see paragraphs (e) and (f) of this 
section regarding authorized end-uses);
    (iv) The defense article or defense service is not identified in 
paragraph (g) of this section and Supplement No. 1 to part 126 of this 
subchapter as ineligible for export under this exemption, and is marked 
or otherwise identified, at a minimum, as ``Restricted USML'' (see 
paragraph (j) of this section for specific requirements on marking 
exports);
    (v) All required documentation of such transfer is maintained by 
the transferor and transferee and is available upon the request of the 
U.S. Government (see paragraph (l) of this section for specific 
requirements); and
    (vi) The Department of State has provided advance notification to 
the Congress in accordance with this section (see paragraph (o) of this 
section for specific requirements).
    (5) This section does not apply to the export of defense articles 
or defense services from the United States pursuant to the Foreign 
Military Sales program.
    (b) Authorized exporters. The following persons compose the United 
States Community and may export defense articles and defense services 
pursuant to the Defense Trade Cooperation Treaty between the United 
States and Australia:
    (1) Departments and agencies of the U.S. Government, including 
their personnel, with, as appropriate, a security clearance and a need-
to-know; and
    (2) Nongovernmental U.S. persons registered with the Directorate of 
Defense Trade Controls and eligible, according to the requirements and 
prohibitions of the Arms Export Control Act, this subchapter, and other 
provisions of United States law, to obtain an export license (or other 
forms of authorization to export) from any agency of the U.S. 
Government without restriction, including their employees acting in 
their official capacity with, as appropriate, a security clearance and 
a need-to-know.
    (c) An exporter that is otherwise an authorized exporter pursuant 
to subsection (b) above may not export pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia if the 
exporter's president, chief executive officer, any vice-president, any 
other senior officer or official (e.g., comptroller, treasurer, general 
counsel); any member of the board of directors of the exporter; any 
party to the export; or any source or manufacturer is ineligible to 
receive export licenses (or other forms of authorization to export) 
from any agency of the U.S. Government.
    (d) Australian Community. For purposes of the exemption provided by 
this section, the Australian Community consists of the Australian 
entities and facilities identified as members of the Approved Community 
through the Directorate of Defense Trade Controls Web site at the time 
of a transaction under this section; Australian entities and facilities 
that become ineligible for such membership will be removed from the 
Australian Community.
    (e) Authorized End-uses. The following end-uses, subject to 
subsection (f), are specified in the Defense Trade Cooperation Treaty 
between the United States and Australia:
    (1) United States and Australian combined military or counter-
terrorism operations;
    (2) United States and Australian cooperative security and defense 
research, development, production, and support programs;
    (3) Mutually determined specific security and defense projects 
where the Government of Australia is the end-user; or
    (4) U.S. Government end-use.
    (f) Procedures for identifying authorized end-uses pursuant to 
paragraph (e) of this section:
    (1) Operations, programs, and projects that can be publicly 
identified will be posted on the Directorate of Defense Trade Controls' 
Web site;
    (2) Operations, programs, and projects that cannot be publicly 
identified will be confirmed in written correspondence from the 
Directorate of Defense Trade Controls; or
    (3) U.S. Government end-use will be identified specifically in a 
U.S. Government contract or solicitation as being eligible under the 
Treaty.
    (4) No other operations, programs, projects, or end-uses qualify 
for this exemption.
    (g) Items eligible under this section. With the exception of items 
listed in Supplement No. 1 to part 126 of this subchapter, defense 
articles and defense services may be exported under this section 
subject to the following:
    (1) An exporter authorized pursuant to paragraph (b)(2) of this 
section may market a defense article to the Government of Australia if 
that exporter has been licensed by the Directorate of Defense Trade 
Controls to export (as defined by Sec.  120.17 of this subchapter) the 
identical type of defense article to any foreign person.
    (2) The export of any defense article specific to the existence of 
(e.g., reveals the existence of or details of) anti-tamper measures 
made at U.S. Government direction always requires

[[Page 72254]]

prior written approval from the Directorate of Defense Trade Controls.
    (3) U.S.-origin classified defense articles or defense services may 
be exported only pursuant to a written request, directive, or contract 
from the U.S. Department of Defense that provides for the export of the 
classified defense article(s) or defense service(s).
    (4) Defense articles specific to developmental systems that have 
not obtained written Milestone B approval from the Department of 
Defense milestone approval authority are not eligible for export unless 
such export is pursuant to a written solicitation or contract issued or 
awarded by the Department of Defense for an end-use identified pursuant 
to paragraphs (e)(1), (2), or (4) of this section.
    (5) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category 
XI(a)(3) electronically scanned array radar) that are embedded in a 
larger system that is eligible to ship under this section (e.g., a ship 
or aircraft) must separately comply with any restrictions placed on 
that embedded defense article under this subsection. The exporter must 
obtain a license or other authorization from the Directorate of Defense 
Trade Controls for the export of such embedded defense articles (for 
example, USML Category XI(a)(3) electronically scanned array radar 
systems that are exempt from this section that are incorporated in an 
aircraft that is eligible to ship under the this section continue to 
require separate authorization from the Directorate of Defense Trade 
Controls for their export, transfer, reexport, or retransfer).
    (6) No liability shall be incurred by or attributed to the U.S. 
Government in connection with any possible infringement of privately 
owned patent or proprietary rights, either domestic or foreign, by 
reason of an export conducted pursuant to this section.
    (7) Sales by exporters made through the U.S. Government shall not 
include either charges for patent rights in which the U.S. Government 
holds a royalty-free license, or charges for information which the U.S. 
Government has a right to use and disclose to others, which is in the 
public domain, or which the U.S. Government has acquired or is entitled 
to acquire without restrictions upon its use and disclosure to others.
    (h) Transfers, Retransfers, and Reexports.
    (1) Any transfer of a defense article or defense service not 
exempted in Supplement No. 1 to part 126 of this subchapter by a member 
of the Australian Community (see paragraph (d) of this section for 
specific information on the identification of the Community) to another 
member of the Australian Community or the United States Community for 
an end-use that is authorized by this exemption (see paragraphs (e) and 
(f) of this section regarding authorized end-uses) is authorized under 
this exemption.
    (2) Any transfer or other provision of a defense article or defense 
service for an end-use that is not authorized by the exemption provided 
by this section is prohibited without a license or the prior written 
approval of the Directorate of Defense Trade Controls (see paragraphs 
(e) and (f) of this section regarding authorized end-uses).
    (3) Any retransfer or reexport, or other provision of a defense 
article or defense service by a member of the Australian Community to a 
foreign person that is not a member of the Australian Community, or to 
a U.S. person that is not a member of the United States Community, is 
prohibited without a license or the prior written approval of the 
Directorate of Defense Trade Controls (see paragraph (d) of this 
section for specific information on the identification of the 
Australian Community).
    (4) Any change in the use of a defense article or defense service 
previously exported, transferred, or obtained under this exemption by 
any foreign person, including a member of the Australian Community, to 
an end-use that is not authorized by this exemption is prohibited 
without a license or other written approval of the Directorate of 
Defense Trade Controls (see paragraphs (e) and (f) of this section 
regarding authorized end-uses).
    (5) Any retransfer, reexport, or change in end-use requiring such 
approval of the U.S. Government shall be made in accordance with Sec.  
123.9 of this subchapter.
    (6) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category 
XI(a)(3) electronically scanned array radar) that are embedded in a 
larger system that is eligible to ship under this section (e.g., a ship 
or aircraft) must separately comply with any restrictions placed on 
that embedded defense article unless otherwise specified. A license or 
other authorization must be obtained from the Directorate of Defense 
Trade Controls for the retransfer, reexport or change in end-use of any 
such embedded defense article (for example, USML Category XI(a)(3) 
electronically scanned radar systems that are exempt from this section 
that are incorporated in an aircraft that is eligible to ship under the 
this section continue to require separate authorization from the 
Directorate of Defense Trade Controls for their export, transfer, 
reexport, or retransfer).
    (7) A license or prior approval from the Directorate of Defense 
Trade Controls is not required for a transfer, retransfer, or reexport 
of an exported defense article or defense service under this section, 
if:
    (i) The transfer of defense articles or defense services is made by 
a member of the United States Community to Australian Departmen