Amendment to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reform, 22740-22759 [2013-08351]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 78, Number 73 (Tuesday, April 16, 2013)]
[Rules and Regulations]
[Pages 22740-22759]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08351]


-----------------------------------------------------------------------

DEPARTMENT OF STATE

22 CFR Parts 120, 121, and 123

RIN 1400-AD37
[Public Notice: 8269]


Amendment to the International Traffic in Arms Regulations: 
Initial Implementation of Export Control Reform

AGENCY: Department of State.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: As part of the President's Export Control Reform (ECR) effort, 
the Department of State is amending the International Traffic in Arms 
Regulations (ITAR) to revise four U.S Munitions List (USML) categories 
and provide new definitions and other changes. Additionally, policies 
and procedures regarding the licensing of items moving from the export 
jurisdiction of the Department of State to the Department of Commerce 
are provided. The revisions contained in this rule are part of the 
Department of State's retrospective plan under E.O. 13563 completed on 
August 17, 2011.

DATES: This rule is effective October 15, 2013.

ADDRESSES: The Department of State's full plan can be accessed at 
https://www.state.gov/documents/organization/181028.pdf.

FOR FURTHER INFORMATION CONTACT: Ms. Candace M. J. Goforth, Director, 
Office of Defense Trade Controls Policy, Department of State, telephone 
(202) 663-2792; email DDTCResponseTeam@state.gov. ATTN: Regulatory 
Change, First ECR Final Rule.

SUPPLEMENTARY INFORMATION: The Directorate of Defense Trade Controls 
(DDTC), U.S. Department of State, administers the International Traffic 
in Arms Regulations (ITAR) (22 CFR parts 120-130). The items subject to 
the jurisdiction of the ITAR, i.e., ``defense articles'' and ``defense 
services,'' are identified on the ITAR's U.S. Munitions List (USML) (22 
CFR 121.1). With few exceptions, items not subject to the export 
control jurisdiction of the ITAR are subject to the jurisdiction of the 
Export Administration Regulations (``EAR,'' 15 CFR parts 730-774, which 
includes the Commerce Control List (CCL) in Supplement No. 1 to part 
774), administered by the Bureau of Industry and Security (BIS), U.S. 
Department of Commerce. Both the ITAR and the EAR impose license 
requirements on exports, reexports, and retransfers. Items not subject 
to the ITAR or to the exclusive licensing jurisdiction of any other set 
of regulations are subject to the EAR.
    All references to the USML in this rule are to the list of defense 
articles controlled for the purpose of export or temporary import 
pursuant to the ITAR, and not to the defense articles on the USML that 
are controlled by the Bureau of Alcohol, Tobacco, Firearms and 
Explosives (ATF) for the purpose of permanent import under its 
regulations. See 27 CFR part 447. Pursuant to section 38(a)(1) of the 
Arms Export Control Act (AECA), all defense articles controlled for 
export or import are part of the USML under the AECA. For the sake of 
clarity, the list of defense articles controlled by ATF for the purpose 
of permanent import is the U.S. Munitions Import List (USMIL). The 
transfer of defense articles from the ITAR's USML to the EAR's CCL for 
the purpose of export control does not affect the list of defense 
articles controlled on the USMIL under the AECA for the purpose of 
permanent import.

Export Control Reform Update

    Pursuant to the President's Export Control Reform (ECR) initiative, 
the Department has published proposed revisions to twelve USML 
categories to create a more positive control list and eliminate where 
possible ``catch all'' controls. The Department, along with the 
Departments of Commerce and Defense, reviewed the public comments the 
Department received on the proposed rules and has, where appropriate, 
revised the rules. A discussion of the comments is included later on in 
this notice. The Department continues to review the remaining USML 
categories and will publish them as proposed rules in the coming 
months.
    The Department intends to publish final rules implementing the 
revised USML categories and related ITAR amendments periodically, 
beginning with this rule.
    Pursuant to ECR, the Department of Commerce, at the same time, has 
been publishing revisions to the EAR, including various revisions to 
the CCL. Revision of the USML and CCL are coordinated so there is 
uninterrupted regulatory coverage for items moving from the 
jurisdiction of the Department of State to that of the Department of 
Commerce. For the Department of Commerce's companion to this rule, 
please see, ``Revisions to the Export Administration Regulations: 
Initial Implementation of Export Control Reform,'' elsewhere in this 
edition of the Federal Register.

Changes in This Rule

    The following changes are made to the ITAR with this final rule: 
(i) Revision of USML Categories VIII (Aircraft and Related Articles), 
XVII (Classified Articles, Technical Data, and Defense Services Not 
Otherwise Enumerated), and XXI (Articles, Technical Data, and Defense 
Services Not Otherwise Enumerated); (ii) addition of USML Category XIX 
(Gas Turbines Engines and Associated Equipment); (iii) establishment of 
definitions for the terms ``specially designed'' and ``subject to the 
EAR''; (iv) creation of a new licensing procedure for the export of 
items subject to the EAR that are to be exported with defense articles; 
and (v) related amendments to other ITAR sections.

Revision of USML Category VIII

    This final rule revises USML Category VIII, covering aircraft and 
related articles, to establish a clearer line between the USML and the 
CCL regarding controls over these articles. The revised USML Category 
VIII narrows the types of aircraft and related articles controlled on 
the USML to only those that warrant control under the requirements of 
the AECA. Changes include moving similar articles controlled in 
multiple categories into a single category, including moving gas

[[Page 22741]]

turbine engines for articles controlled in this category to the newly 
established USML Category XIX, described elsewhere in this notice, and 
CCL Export Control Classification Numbers (ECCNs) in the 9Y619 format, 
in a rule published separately by the Department of Commerce (see 
elsewhere in this issue of the Federal Register.) In addition, articles 
common to the Missile Technology Control Regime (MTCR) Annex and 
articles in this category are identified with the parenthetical 
``(MT)'' at the end of each section containing such articles.
    The revised USML Category VIII does not contain controls on all 
generic parts, components, accessories, and attachments specifically 
designed or modified for a defense article, regardless of their 
significance to maintaining a military advantage for the United States. 
Rather, it contains, with one principal exception, a positive list of 
specific types of parts, components, accessories, and attachments that 
continue to warrant control on the USML. The exception pertains to 
parts, components, accessories, and attachments ``specially designed'' 
(see definition of this term in this rule) for the following U.S.-
origin aircraft that have low observable features or characteristics: 
the B-1B, B-2, F-15SE, F/A-18 E/F/G, F-22, F-35, and future variants 
thereof; or the F-117 or U.S. Government technology demonstrators. All 
other parts, components, accessories, and attachments specially 
designed for a military aircraft and related articles are subject to 
the new ``600 series'' controls in Category 9 of the CCL.
    This rule also revises ITAR Sec.  121.3 to more clearly define 
``aircraft'' for purposes of the revised USML Category VIII.
    This revision of USML Category VIII was first published as a 
proposed rule (RIN 1400-AC96) on November 7, 2011, for public comment 
(see 76 FR 68694). The comment period ended December 22, 2011. Thirty-
one parties filed comments recommending changes, which were reviewed 
and considered by the Department and other agencies. The Department's 
evaluation of the written comments and recommendations follows.
    The Department received numerous proposals for alternative 
definitions for aircraft and alternative phrasing for other sections of 
USML Category VIII and ITAR Sec.  121.3. The Department has reviewed 
these recommendations with the objective of realizing the intent of the 
President's ECR Initiative. In certain instances, the regulation was 
amended or otherwise edited for fidelity to ECR objectives and for 
clarity.
    Two commenting parties stated that referencing the ITAR Sec.  121.3 
definition of ``aircraft'' in USML Category VIII(a) while not doing so 
for USML Category VIII(h) is inconsistent and potentially confusing to 
the exporter. The Department notes that paragraph (h) is to control 
parts, components, accessories, attachments, and associated equipment 
regardless of whether the aircraft is controlled on the USML or the 
CCL. Therefore, a reference to ITAR Sec.  121.3 in paragraph (h) would 
be inappropriate.
    Two commenting parties recommended removing references to specific 
aircraft in USML Category VIII(h), as referencing specific aircraft 
would control parts and components common to other unlisted aircraft. 
The Department believes proper application of the definition for 
specially designed will avoid this occurrence, and therefore did not 
accept this recommendation.
    Three commenting parties recommended removing the sections 
providing USML coverage for parts, components, etc., manufactured or 
developed using classified information, with the rationale that use of 
this type of information in these stages of production should not 
automatically designate these articles as defense articles. Upon 
review, the Department revised this section, but for different reasons. 
The Department removed the section regarding the use of classified 
information during manufacture because this information would not be 
readily available to exporters and other parties. The Department, 
however, did not remove the section regarding development of such 
articles using classified information because such information would be 
available to developers. Additionally, prudence dictates that the 
development stage of production using classified information be USML 
controlled, without prejudice to the eventual jurisdictional 
designation of the article once it enters production.
    To address the concerns of two commenting parties that including 
``strategic airlift aircraft'' in the definition of ``aircraft'' in 
ITAR Sec.  121.3 would control on the USML aircraft more appropriately 
controlled on the CCL, the Department has added the phrase ``with a 
roll-on/roll-off ramp'' to further focus the control on military 
critical capabilities.
    One commenting party recommended enumerating ``tilt rotor 
aircraft'' in USML Category VIII(a) and providing corresponding 
descriptive and defining text in ITAR Sec.  121.3. The Department notes 
that this type aircraft is effectively covered in USML Category 
VIII(a)(11), and therefore did not amend the regulation to enumerate 
tilt rotor aircraft.
    One commenting party noted that not all items in Wassenaar 
Munitions List Category 10, which covers aircraft and related items, 
seem to be specifically enumerated in the new regulations. The 
Department has reviewed this matter and concludes that all of Wassenaar 
Munitions List Category 10 is captured on the USML and the CCL. The 
Department notes, however, that there will not be a one-for-one 
accounting of all entries between the Wassenaar Munitions List and the 
USML and CCL, as the lists are constructed differently.
    One commenting party recommended the term ``armed,'' as found in 
ITAR Sec.  121.3(a)(3), be defined, to avoid ambiguity and regulatory 
overreach. Examples provided of articles potentially captured, but 
which the Department surely would not have intended to be captured, are 
aircraft ``armed'' with water cannons or paintball guns. While the term 
``armed'' is gainfully employed in many contexts, it is the 
Department's opinion that in the context of defense trade, ``armed'' 
can be understood in its plain English meaning. One dictionary 
consulted by the Department defined ``armed'' as ``furnished with 
weapons.'' Another dictionary provides ``having weapons'' as the 
primary meaning. Yet another defined it as ``equipped with weapons.'' 
The Department notes the consensus on the meaning of ``armed,'' and has 
no quibble or concern with it.
    One commenting party recommended the word ``equipped'' be removed 
from USML Category VIII(a)(11), and the terms ``incorporated'' and 
``integrated'' be used in its place, on the grounds that ``equipped'' 
is ``overly expansive'' and inconsistent with terminology used 
elsewhere in the rule. The Department accepts this comment and has 
replaced ``equipped'' with ``incorporates,'' the term used in ITAR 
Sec.  121.3(a)(6).
    One commenting party recommended that Optionally Piloted Vehicles 
(OPV) without avionics and software installed that would allow the 
aircraft to be flown unmanned should be considered manned for purposes 
of the USML. The Department has clarified the control for OPVs at USML 
Category VIII(a)(13) and ITAR Sec.  121.3(a)(7).
    One commenting party voiced concern over the potential ``chilling 
effect'' of controlling on the USML the products of Department of 
Defense-funded fundamental research. USML Category VIII(f) provides for 
the control of developmental aircraft and specially designed parts, 
components, accessories, and attachments therefor

[[Page 22742]]

developed under a contract with the Department of Defense. For the 
final rule, the Department has added a note to USML Category VIII(f) 
providing for developmental aircraft to be ``subject to the EAR'' (see 
definition of this term in this rule) if a commodity jurisdiction 
request leads to such a determination or if the relevant Department of 
Defense contract stipulates the aircraft is being developed for both 
civil and military applications. The Department draws a distinction 
between developmental aircraft developed under a contract funded by the 
Department of Defense and the conduct of fundamental research. 
``Fundamental research'' is defined at ITAR Sec.  120.11(a)(8). 
Pursuant to that section, research is not ``fundamental research'' if 
the results are restricted for proprietary reasons or specific U.S. 
Government access and dissemination controls, the researchers accept 
other restrictions on publication of information resulting from the 
activity, or the research is funded by the U.S. Government and specific 
access and dissemination controls protecting information resulting from 
the research are applicable. Fundamental research--i.e., research 
without the aforementioned restrictions--is in the public domain, even 
if funded by the U.S. Government. A few other commenting parties voiced 
concerns with the scope of this control; the Department intends the 
answer provided here to address those concerns.
    The Department did not accept the recommendation of three 
commenting parties to retain the note to USML Category VIII(h) (the 
``17(c)'' note), which discussed jurisdiction of certain aircraft parts 
and components, because application of the specially designed 
definition will serve that purpose for the exporter.
    One commenting party recommended that wing folding systems not be 
controlled on the USML, as such a system has been developed (but not 
sold) for commercial use and therefore is not inherently a military 
item. Similarly, one commenting party recommended the removal of short 
take-off, vertical landing (STOVL) technology from the USML, as it has 
commercial benefits. The Department notes these systems and technology 
have military application, but no demonstrated commercial application. 
Therefore, the Department did not accept these recommendations.
    In response to several comments regarding the scope of the control 
in USML Category VIII(h)(16), covering computer systems, the Department 
has revised it to specifically capture such systems that perform a 
purely military function (e.g., fire control computers) or are 
specially designed for aircraft controlled in USML Category VIII or 
ECCN 9A610.
    Three commenting parties recommended the defining criteria of 
``aircraft'' in ITAR Sec.  121.3 be included in USML Category VIII. The 
Department notes Category VIII and ITAR Sec.  121.3 serve different 
purposes, with the former providing the control parameters and the 
latter providing the definition of the main articles controlled in 
Category VIII. Therefore, the Department did not accept this 
recommendation.
    One commenting party, noting the developing market for civil 
application of unmanned aerial vehicles (UAVs), recommended additional 
specifications for their control in USML Category VIII. A second 
commenting party recommended criteria be provided to establish a 
``bright line'' between UAVs controlled on the USML and those 
controlled on the CCL. Two other commenting parties recommended control 
on the CCL of UAVs specially designed for a military application but 
which do not have a specially designed capability controlled on the 
USML. While a few commenting parties did respond to the Department's 
request for input on the provision of criteria for the establishment of 
export jurisdiction that would not result in the removal from the USML 
of UAVs that should be covered by it, none of them was acceptable. In 
addition, it is the Department's assessment that the technical 
capabilities of UAVs specially designed for a military application are 
such as to render ineffective any means of differentiating between 
critical and any non-critical military systems. Therefore, the 
Department is publishing the UAV controls as first proposed. The CCL's 
ECCN 9A012 specifies those UAVs for export under the Department of 
Commerce's jurisdiction; in conjunction with USML Categories VIII(a)(5) 
and (a)(6), the Department believes the controls for UAVs meet the 
needs of U.S. foreign policy and national security.
    The Department accepted the recommendation of three commenting 
parties to revise USML Category VIII(h)(6) to exclude coverage of 
external stores support systems that do not have a military application 
by adding the words ``for ordnance or weapons.''
    The Department accepted the recommendation of ten commenting 
parties regarding the broad control of lithium-ion batteries in USML 
Category VIII(h)(13) and has limited coverage to such batteries that 
provide greater than 28 VDC nominal.
    The Department accepted the recommendation of one commenting party 
to provide a definition for the term ``equipment.'' A proposed 
definition has been published by the Department (see ``Amendment to the 
International Traffic in Arms Regulations: Revision of U.S. Munitions 
List Category XI and Definition for `Equipment,' '' 77 FR 70958).
    The Department does not believe the issuance of a patent for thrust 
vectoring on commercial aircraft is sufficient justification to change 
the regulation regarding non-surface-based flight control systems and 
effectors. Therefore, the Department did not accept this 
recommendation.
    Several commenting parties noted changes to USML Category VIII 
entailing the addition of articles previously covered in other USML 
categories. Generally, the main intent of these changes is to group 
articles in a sensible manner. So, for example, the Department believes 
it is sensible to control as aircraft components computer systems 
specially designed for aircraft.
    One commenting party requested clarification of the jurisdictional 
scope of the term ``jet powered'' as used in USML Category VIII(a)(3). 
The Department has replaced that term with ``turbofan- or turbojet-
powered'' to more precisely describe the intent of the control.
    One commenting party recommended retention of the following 
sentence in USML Category VIII(d): ``Fixed land-based arresting gear is 
not included in this paragraph.'' As this is the intent of the 
regulation, and including the sentence would provide clarity to the 
control, the Department accepted this recommendation.
    One commenting party recommended extending the definition of 
``classified'' in USML Category VIII(h) to include designations made by 
``other collective defense organization[s].'' The Department has 
revised the definition to include such designations made by 
``international organizations.''
    One commenting party recommended the Department allow for public 
comment on a revised USML Category VIII again once a final definition 
of specially designed is published because analysis of and concerns 
with USML Category VIII were premised on the definition of specially 
designed as provided in the proposed rule. Three other commenting 
parties expressed similar concerns. The Department disagrees with this 
argument. The extent to which articles are controlled on the USML 
pursuant to application of the

[[Page 22743]]

specially designed definition is reflective of the definition itself, 
and not the controls as provided in USML Category VIII, or any of the 
other USML categories. Therefore, the Department did not accept this 
recommendation.
    Because of staggered implementation of revised USML categories and 
the inter-category movement of some articles, the Department has found 
it necessary to establish temporary USML entries to avoid lack of 
appropriate controls during the transition. For example, although 
reserved in the proposed rule, USML Category VIII(e) has been removed 
from reserved status in the final rule. The articles controlled therein 
are to be covered in revised USML Category XII. Similarly, USML 
Categories VIII(h)(21) through (h)(26) have been added.
    As described in greater detail in the section of this notice 
addressing the transition plan, a new ``(x) paragraph'' has been added 
to USML Category VIII, allowing ITAR licensing for commodities, 
software, and technical data subject to the EAR provided those 
commodities, software, and technical data are to be used in or with 
defense articles controlled in USML Category VIII and are described in 
the purchase documentation submitted with the application. This same 
construct will be incorporated in other USML categories (to include new 
USML Category XIX in this rule).
    In response to public comments on the transition plan, the 
Department has added a note to USML Category VIII to address USML 
controlled systems, parts, components, accessories, and attachments 
incorporated into 600 series items.

Establishment of USML Category XIX for Gas Turbine Engines and 
Associated Equipment

    This rule establishes USML Category XIX to cover gas turbine 
engines and associated equipment formerly covered in USML Categories 
IV, VI, VII, and VIII. The intent of this change is to make clear that 
gas turbine engines for cruise missiles, surface vessels, vehicles, and 
aircraft meeting certain objective parameters are controlled on the 
USML. Articles common to the Missile Technology Control Regime (MTCR) 
Annex and articles in this category are identified with the 
parenthetical ``(MT)'' at the end of each section containing such 
articles.
    Because of the staggered implementation of revised USML categories, 
it would seem that USML Category XIX controls gas turbine engines still 
covered in USML Categories IV, VI, and VII. However, the new Category 
XIX does in fact supersede the controls under USML Categories IV, VI, 
and VII.
    The establishment of USML Category XIX (RIN 1400-AC98) was first 
published as a proposed rule on December 6, 2011, for public comment 
(see 76 FR 76097). The comment period ended January 20, 2012. Ten 
parties filed comments recommending changes, which were reviewed and 
considered by the Department and other agencies. The Department's 
evaluation of the written comments and recommendations follows.
    Several commenting parties recommended including the term 
``military'' in the category heading to avoid controlling on the ITAR 
engines developed for civil application. The controls are intended to 
capture articles on the basis of their capabilities, and not their 
intended end-use per se. Therefore, the Department did not accept this 
recommendation. The Department has, however, in response to 
recommendations in public comments, revised the category, in particular 
paragraphs (a) and (b), to better focus the control on those engines of 
military significance.
    Two commenting parties stated the creation of a separate category 
for engines, rather than controlling them under the categories that 
cover systems in which they are placed, adds unnecessary complexity to 
the regulations and would be costly for industry to implement in its 
licensing and compliance programs. The Department understands that 
revision of the categories controlling gas turbine engines, as well as 
the larger ECR effort to revise the USML and the CCL, would require 
industry to update its licensing and compliance programs, but believes 
the eventual benefits to national security of the new ITAR and EAR 
controls will justify any burdens imposed on industry to transition to 
the new structure.
    Three commenting parties recommended removal of the phrase, 
``whether in development, production, or inventory,'' from USML 
Categories XIX(a), (b), and (c), as it may have the unintended effect 
of not controlling certain engines (e.g., those engines temporarily 
removed from active service). The Department accepted this 
recommendation, and has removed the phrase from the final rule.
    One commenting party noted potential confusion between USML 
Categories IV and XIX regarding engine controls, and the need to update 
ITAR Sec.  121.16 to account for changes in those controls. In line 
with a major goal of ECR, the Department is revising the categories to 
make clearer which articles they control. USML Category IV will, to use 
examples provided by the commenting party, control ramjets and 
scramjets. In addition, the Department will discontinue identifying 
those articles common to the USML and the Missile Technology Control 
Regime Annex in ITAR Sec.  121.16, and instead identify those articles 
with the parenthetical ``(MT)'' at the end of each USML category 
section containing such articles.
    One commenting party requested clarification of the controls for 
printed circuit boards designed for USML articles, and their related 
designs or digital data. Printed circuit boards ``specially designed'' 
(see definition of this term in this rule) for articles in USML 
Category XIX, as well as for articles in all other USML categories, are 
controlled in USML Category XI and their related designs or digital 
data are controlled as technical data, per ITAR Sec.  120.10. However, 
the Department does not consider printed circuit boards themselves to 
be technical data. The Department notes that printed circuit boards are 
to be enumerated in the revised USML Category XI. In the meantime, as 
noted elsewhere in this notice, USML Category VIII and Category XIX 
contain a temporary enumeration of printed circuit boards.
    Noting that the phrase ``or capable of'' introduces into the 
regulation a criterion not descriptive of the actual article, four 
commenting parties recommended its removal. The Department has accepted 
this recommendation, and has revised those sections accordingly, 
replacing ``capable of'' with ``specially designed.''
    Five commenting parties disagreed with a number of the parameters 
used in USML Categories XIX(a) and (b) to distinguish military from 
commercial capabilities, saying commercial articles routinely or 
increasingly have those performance criteria. The Department has 
reviewed the criteria and has revised some to better describe articles 
requiring control on the USML. Changes include increasing the altitude 
threshold for the high altitude extraction parameter from 40,000 feet 
to 50,000 feet and removing cooled pressure turbines from the control. 
In addition, proposed paragraph (a)(6), for thrust reversers, has been 
revised and moved to USML Category VIII as paragraph (h)(19).
    Three commenting parties recommended revising USML Category XIX(d) 
to describe the technologies of concern and not list specific engine 
families in the regulation because, over time, the listing would 
capture obsolete engines or not include engines that

[[Page 22744]]

merit control as defense articles. The Department deems it appropriate 
to enumerate these engines, as they are used specifically in USML-
controlled platforms or share critical technologies with such engines. 
The Department will amend the regulations as necessary to keep the 
category updated, and therefore did not accept this recommendation.
    One commenting party recommended the inclusion of a definition for 
digital engine controls, the subject of USML Category XIX(e). The 
Department has included a note to paragraph (e) describing ``digital 
electronic control systems for gas turbine engines.''
    Six commenting parties noted that proposed USML Category XIX(f)(2) 
would expand the description of ``hot section'' components, and thereby 
expand controls on these articles. The Department has revised paragraph 
(f)(2) for the final rule, and added new paragraph (f)(3) and (f)(4) 
without Significant Military Equipment designations, to address this 
matter.
    Four commenting parties recommended removal of engine monitoring 
systems from USML Category XIX(f) because such systems used for 
commercial engines would also be covered. The Department believes 
appropriate application of the specially designed definition would 
preclude this occurrence, and therefore did not accept this 
recommendation. The Department believes there are engine monitoring 
systems specially designed for USML Category XIX engines and therefore 
did not accept one commenting party's recommendation to control all 
such systems on the CCL. And, regarding the comment by one party that 
undefined terms in that section would lead to overregulation, the 
Department believes appropriate application of the specially designed 
definition will preclude this occurrence.
    Pursuant to a recommendation from one commenting party, the 
Department corrected its omission of an asterisk denoting the 
designation of Significant Military Equipment for classified articles 
controlled in USML Category XIX(f)(6).
    Two commenting parties recommended revising USML Category XIX(g) to 
control only technical data and defense services directly related to 
the ``military functionality'' of a defense article, for otherwise data 
and services common to commercial engines would be captured. The 
Department believes the ITAR definitions for ``technical data'' and 
``defense service'' would preclude this occurrence, and therefore did 
not accept these recommendations.

Definition for ``Specially Designed''

    Although one of the goals of the ECR initiative is to describe USML 
controls without using design intent criteria, certain sections in the 
revised categories nonetheless use the term ``specially designed.'' It 
is, therefore, necessary for the Department to define the term.
    The specially designed definition provided in this notice has a 
two-paragraph structure. Paragraph (a) identifies which commodities and 
software are specially designed'' and paragraph (b) identifies which 
parts, components, accessories, attachments, and software are excluded 
from specially designed.
    Paragraph (a) begins with the phrase, ``Except for commodities 
described in (b), a commodity is `specially designed' if it [is within 
the scope of any one of two subparagraphs discussed below].'' It is the 
beginning of the ``catch'' in the ``catch and release'' structure of 
the definition. For USML sections containing the term ``specially 
designed,'' a defense article is ``caught''--it is ``specially 
designed''--if any of the two elements of paragraph (a) applies and 
none of the elements of paragraph (b) applies.
    Paragraph (a)(1) is limited by the phrase, ``if, as a result of 
development.'' The definition also includes a note to paragraph (b)(3) 
that contains the following definition of ``development'' for purposes 
of the specially designed definition: `` `Development' is related to 
all stages prior to serial production, such as: design, design 
research, design analyses, design concepts, assembly and testing of 
prototypes, pilot production schemes, design data, process of 
transforming design data into a product, configuration design, 
integration design, layouts.'' Therefore, a defense article is caught 
by the threshold requirement of paragraph (a) only if someone is 
engaged in any of these ``development'' activities with respect to the 
article at issue. Thus one may ask the following to determine if a 
defense article is within the scope of paragraph (a)(1): Does the 
commodity or software, as a result of development, have properties 
peculiarly responsible for achieving or exceeding the controlled 
performance levels, characteristics, or functions described in the 
relevant USML paragraph? If the answer is ``no,'' then the commodity or 
software is not specially designed and further analysis pursuant to 
paragraph (b) is not necessary. If the answer is ``yes,'' then the 
exporter or reexporter must determine whether any one of the five 
exclusions in paragraph (b) of the definition applies. If any one of 
the five paragraph (b) exclusions applies, then the commodity or 
software is not specially designed. If none does, then the commodity or 
software is specially designed.
    Paragraph (a)(1) captures a commodity or software if it, as a 
result of ``development,'' ``has properties peculiarly responsible for 
achieving or exceeding the controlled performance levels, 
characteristics, or functions described in the relevant U.S. Munitions 
List paragraph.'' So, even if a commodity or software is capable of use 
with a defense article, it is not captured by paragraph (a)(1) unless 
someone did something during the commodity's development for it to 
achieve or exceed the performance levels, characteristics, or functions 
described in a referenced USML paragraph.
    Paragraph (a)(2) has been revised to incorporate the proposed 
paragraph (a)(3) as follows: ``(2) is a part (see Sec.  121.8(d) of 
this subchapter), component (see Sec.  121.8(b) of this subchapter), 
accessory (see Sec.  121.8(c) of this subchapter), attachment (see 
Sec.  121.8(c) of this subchapter), or software for use in or with a 
defense article.'' The Department realizes this element is similar to 
paragraph (a)(1), but believes it needs to be listed separately because 
not all descriptions of parts and components on the USML include 
performance levels, characteristics, or functions as a basis for 
control. Thus one may ask the following to determine if a defense 
article is within the scope of paragraph (a)(2): Is the part, 
component, accessory, attachment, or software for use in or with a 
defense article? If the answer is ``no,'' then the commodity or 
software is not specially designed and further analysis pursuant to 
paragraph (b) is not necessary. If the answer is ``yes,'' then the 
exporter or reexporter must determine whether any one of the five 
exclusions in paragraph (b) of the definition applies. If any one does 
apply, then the commodity or software is not specially designed. If 
none does, then the commodity or software is specially designed.
    Paragraph (a)(2) is broad enough to capture all the defense 
articles that would be potentially specially designed, but in practice 
would capture a larger set of parts, components, accessories, 
attachments, and software than is intended. Paragraph (b) works to 
release from inclusion under specially designed specific and non-
specific parts, components, accessories, attachments, and software 
consistent with existing U.S. export control and international 
commitments. Specifically, any part, component, accessory, attachment, 
or

[[Page 22745]]

software described in an exclusion paragraph under (b)(1), (b)(2), 
(b)(3), (b)(4), or (b)(5), would not be controlled by a USML ``catch-
all'' paragraph. In this way, paragraphs (a) and (b) are inextricably 
linked and are intended to work together to identify the parts, 
components, accessories, attachments, and software that need to be 
treated as specially designed for purposes of the ``catch-all'' 
provisions on the USML.
    Paragraph (b) codifies the principle in ITAR Sec.  120.3 that, in 
general, a commodity should not be ITAR controlled if it has a 
predominant civil application or has performance equivalent (defined by 
form, fit, and function) to a commodity used for civil applications. If 
such a commodity warrants control under the ITAR because it provides 
the United States with a critical military or intelligence advantage or 
for another reason, then it is or should be enumerated on the USML.
    Paragraph (a) creates more objective tests for what defense 
articles are specially designed based on the criteria identified in 
(a)(1) or (a)(2). Paragraph (b) creates more objective tests for which 
parts, components, accessories, attachments, and software are excluded 
from specially designed under the exclusion criteria identified in 
(b)(1), (b)(2), (b)(3), (b)(4) or (b)(5). The objective criteria 
identified in paragraph (a), working with the objective exclusion 
criteria identified in paragraph (b), allow this specially designed 
definition to achieve the nine objectives for the definition (see 
``Proposed Revisions to the Export Administration Regulations (EAR): 
Control of Items the President Determines No Longer Warrant Control 
under the United States Munitions List (USML),'' 76 FR 41958).
    The definition for specially designed was first published as a 
proposed rule (RIN 1400-AD22) on June 19, 2012, for public comment (see 
77 FR 36428). The comment period ended August 3, 2012. Twenty-eight 
parties filed comments during the established comment period 
recommending changes. The Department's evaluation of the written 
comments and recommendations follows.
    Many of the commenting parties submitted recommendations and 
proposals for the specific wording of the specially designed 
definition, and provided analysis of the text of the definition 
provided by the Department. The Department carefully reviewed these 
submissions with the objective of clarifying and improving the 
definition. In many instances, it has accepted these recommendations, 
as is reflected in the definition in this rule. Selections of these 
comments are discussed in the following paragraphs.
    One commenting party expressed concern with the concurrent 
existence of the terms ``specifically designed'' with ``specially 
designed'' in the USML, given that the revision of the USML will occur 
in stages. The Department notes that where the concept is to be 
retained, the term ``specifically designed'' will be replaced with 
``specially designed'' throughout the USML and ITAR, and the Department 
understands that in the process of revising the USML, application of 
both concepts will not be ideal.
    Six commenting parties expressed concern about the relation of 
specially designed with the current text in ITAR Sec.  120.3. The 
commenting parties recommended revising ITAR Sec.  120.3 to be 
consistent with the definition of specially designed and the revision 
of the USML into a positive list. The Department accepted this 
recommendation and provides a revised ITAR Sec.  120.3 as part of this 
final rule.
    Two commenting parties recommended the text and definitions 
regarding ``development'' be correlated to the Defense Department's 
acquisition milestones in terms of technology development phases. The 
commenting parties noted this will improve the clarity for defense 
contractors already familiar with Defense Department terminology. The 
Department did not accept this recommendation as ``development'' is 
already defined in the multilateral regimes and the EAR.
    One commenting party requested confirmation of the intention to 
remove any perceived obligation on the part of a manufacturer to 
monitor post-release sales, and to confirm that a first sale to or 
predominant use by military end-users will not confer specially 
designed status on an article. The Department confirms this intention 
and has revised ITAR Sec.  120.3 accordingly. In addition, the 
Department believes that appropriate application of the specially 
designed definition will not capture those articles that do not warrant 
USML control.
    One commenting party recommended ITAR Sec.  120.41(a) should 
specify what type of commodity (i.e., part, component, or end-item) 
should be considered specially designed if it is ``in development.'' 
The Department accepted this recommendation and revised ITAR Sec.  
120.41(a) accordingly.
    One commenting party recommended reconsideration of limiting the 
term ``development'' (and thus ``specially designed'') to the phase 
prior to serial production, noting a manufacturer could theoretically 
design a lesser capability item and then institute a post-production 
design change to avoid an article being defined as specially designed. 
This recommendation was accepted in part. The revised Note 3 to ITAR 
Sec.  120.41(b)(3) addresses this concern.
    Two commenting parties requested clarification of the Department's 
policy objective for software and the applicability of specially 
designed to it. The Department confirms the control of software is 
directly related to its applicability to defense articles on the USML, 
and the Department has added the term to the definition. In addition, 
the Department confirms that only materials specifically enumerated on 
the USML are controlled by the ITAR.
    One commenting party recommended the definition of ``commodity'' 
should include software as well as hardware, to parallel the Department 
of Commerce's definition. The Department did not accept this 
recommendation. Software is distinct from the definition of commodity 
in the EAR and is controlled separately.
    One commenting party recommended the adoption of specially designed 
should be made concurrently with the transition policy to avoid 
jurisdictional ambiguity. The Department accepted this recommendation. 
The transition guidance is provided in this final rule.
    One commenting party recommended a final extended comment period 
for specially designed should be permitted following publication of all 
``critical elements'' of ECR. The Department did not accept this 
recommendation. The regulations, to include the definition of specially 
designed, can be amended if necessary.
    Four commenting parties requested confirmation that application of 
specially designed will not reverse existing commodity jurisdiction 
(CJ) determinations and recommended revision of the definition to so 
stipulate. The Department accepted this recommendation and has revised 
ITAR Sec.  120.41(b)(1) accordingly.
    One commenting party recommended adding the words ``tooling and 
test and support equipment'' to both Note 2 and the lead-in sentence to 
paragraph (b) to exclude simple tooling and equipment (e.g., wrenches, 
winches, dollies). The Department did not accept this recommendation. 
Tooling and test and support equipment are only controlled if 
specifically enumerated on the USML. The B group of the new 600 series 
(e.g., ECCN 9B610) on the CCL should be reviewed for potential controls 
on tooling and test and support equipment.

[[Page 22746]]

    In response to the query of one commenting party, the Department 
confirms that, as is noted in Note 1 to the definition, if a commodity 
is enumerated on the USML it is ITAR-controlled even if it described on 
the CCL.
    One commenting party requested there be a mechanism by which 
industry can provide input for determining whether an item is specially 
designed without the need to notify Congress or change the definition 
itself. The Department concurs that industry may submit a request in 
order to clarify the applicability of specially designed. The 
appropriate mechanism would be a CJ request through which the 
Department will determine the proper notification requirement.
    One commenting party was concerned with the potential inadvertent 
application of specially designed to aircraft engines not covered by 
USML Category XIX. The Department confirms that the export jurisdiction 
of a part specially designed for an engine is determined by the export 
jurisdiction of the engine for which it is specially designed, and not 
the jurisdictional status of the aircraft on which it is installed.
    One commenting party expressed concern that the proposed definition 
will require exporters and original equipment manufacturers to engage 
in extensive analyses of the jurisdictional and classification status 
of their parts and components, which could result in different 
exporters coming to different determinations of the same items and a 
significant increase the number of CJ determination requests due to the 
unintended consequences of misclassification of items. The Department 
acknowledges this concern, but believes the long-term benefits of 
reforming the regulations will outweigh the short-term burdens of 
adjustment that inevitably accompany such reforms.
    One commenting party recommended that after promulgation of the 
specially designed definition, the agencies continue to provide 
advisories that include examples of end-items, parts, components, 
accessories, and attachments that meet or do not meet the standards of 
the definition. The Department accepts this recommendation, and will 
provide further guidance and conduct outreach efforts as necessary.
    One commenting party noted the application of the ``as a result of 
`development' '' standard in the proposed definition is limited by the 
principle that it will only apply to enumerated items. For this reason, 
it is essential for Government and the private sector to understand how 
the ``as a result of development'' standard works when applied to the 
600 series in subparagraph ``.y.'' The Department agrees with this 
comment and revised ITAR Sec.  120.41(a) to apply the ``as a result of 
development'' standard to ITAR Sec.  120.41(a)(1) and not the broader 
``catch-all'' in ITAR Sec.  120.41(a)(2).
    One commenting party discussed its interpretation of the impact the 
specially designed definition will have on the control of forgings, 
castings, machined bodies, etc., destined for aircraft or other defense 
articles. ITAR Sec.  121.10 continues to apply in determining the 
appropriate controls for these articles.
    One commenting party expressed concern that ITAR Sec.  120.41(a) 
(and its ``as a result of `development' '' standard) and ITAR Sec.  
120.41(b)(3) of the definition, when taken together, appear to mean 
that only commercial off the shelf (``COTS'') items with no changes in 
form or fit are released from the definition of specially designed. The 
Department revised the paragraphs in question to address this concern 
because the Department did not intend such a conclusion to be an 
implication of the definition.
    Two commenting parties recommended the Department use the phrasing 
provided in the note to paragraph (b) that identifies a ``catch all'' 
paragraph in all instances of their occurrence in USML categories. The 
Department accepts this recommendation, and notes that not all USML 
categories will contain ``catch-all'' control paragraphs.
    One commenting party noted the definition still reflects an 
underlying focus on design intent rather than a focus solely on 
national security interests and the military functionality of the item. 
The commenting party also noted regulatory interpretation and 
compliance would be facilitated if the definition moved further from 
the concept of design intent towards an analysis of the unique 
characteristics of the item that imbue it with its military 
functionality. As noted in the opening of this section, the Department 
acknowledges that it has not completely ended the practice of 
determining export jurisdiction based on the item's design intent 
rather than its performance levels, characteristics, or functions, but 
it has endeavored to keep it to a minimum.
    One commenting party requested clarification on the order of review 
for USML jurisdiction determination using existing criteria and the 
specially designed definition. The Department accepted this 
recommendation and has moved the guidance in the preamble to the 
specially designed definition provided in the proposed rule to a 
revised ITAR Sec.  121.1, which is included in this final rule. This 
revised section also provides guidance on the composition of a category 
and order of review.
    Three commenting parties recommended the word ``commodity'' in ITAR 
Sec.  120.41(a)(1) refer to the same universe of items as the word 
``item'' in the same section of the Department of Commerce's definition 
for specially designed. The commenting parties further requested the 
term ``commodity'' explicitly include technology, technical data and 
assistance, and software. The Department accepted this recommendation 
in part by including the term ``software'' in ITAR Sec.  120.41(a).
    One commenting party recommended the addition of a note to ITAR 
Sec.  120.41(a)(1) that would include examples of when an item is not 
covered. The Department did not accept this recommendation. The 
Department believes the revised, more ``positive,'' USML categories is 
the appropriate starting point for determining whether an article is 
covered by the USML. The provisions of examples in the negative would 
negate the purpose of a positive list.
    One commenting party recommended that changes in dimension, 
material, coatings, or lubricants to an otherwise excluded item 
(aircraft fasteners in particular) that do not result in low-observable 
capability should remain excluded. The Department did not accept this 
comment. The revisions to ITAR Sec.  120.41(b)(2) and (b)(3) should 
provide the necessary clarification.
    The Department has revised ITAR Sec.  120.41(b) and added an 
additional note to ITAR Sec.  120.41(b)(3) in response to several 
commenting parties' recommendations to more specifically address the 
issue of minor modifications to a commodity. The concerns centered on 
changes to ``fit'' and ``form'' that have no bearing on changes to the 
``function'' of a commodity. The Department added the term 
``equivalent'' to ITAR Sec.  120.41(b)(3) to account for a commodity 
whose form was modified solely for fit purposes.
    One commenting party noted that limiting ITAR Sec.  120.41(b)(2) to 
single, unassembled parts will result in continued ITAR licensing of 
minor components that do not meet the requirements for exclusion. The 
commenting party recommended including in ITAR Sec.  120.41(b)(2) 
``small assemblies and components of a type commonly used in multiple 
types of commodities.'' The Department did not

[[Page 22747]]

accept this recommendation because the proposed change would make the 
``release'' too broad and would create the potential for multiple 
interpretations of the same set of facts.
    One commenting party recommended removing as a criterion in ITAR 
Sec.  120.41(b)(3) the issue of whether a part, component, accessory, 
or attachment is in production. The Department did not accept this 
recommendation. Whether a commodity is in development or production is 
an important factor. The inclusion of this criterion is meant to 
implement the purpose of ITAR Sec.  120.3 but without imposing the 
``predominant'' standard, which is difficult or impossible for many 
exporters to know or to stay current with as military and civil markets 
change over the lifecycle of a product.
    One commenting party recommended clarification of the terms 
``form'' and ``fit.'' The Department accepted this recommendation, and 
includes a revised ITAR Sec.  120.4 addressing this matter in this 
final rule.
    The Department did not accept the recommendation of one commenting 
party to remove the term ``serial production'' in Note 1 to ITAR Sec.  
120.41(b)(3) because this term is not expressly used in that paragraph. 
The definition of ``production'' in Note 1 is the EAR definition, which 
includes the concept of ``serial production.'' ``Production'' is not 
defined in the ITAR therefore the Department is providing the EAR 
definition for the purposes of consistency between the USML and CCL 
versions of the term specially designed.
    One commenting party recommended the definitions for the terms 
``production'' and ``development'' in Notes 1 and 2 to ITAR Sec.  
120.41(b)(3) apply to the entire ITAR and not just to the specially 
designed definition. The Department did not accept this recommendation. 
While the adoption of the specially designed definition necessitated 
the defining of the terms ``production'' and ``development,'' the 
adoption of the definitions for those terms outside of the specially 
designed definition was beyond the scope of this review.
    One commenting party stated that discriminating between the 
classifications of ``production'' and ``development'' for commodities 
in ``production'' that are undergoing ``development'' was unclear, as 
described in Note 3 to ITAR Sec.  120.41(b)(3), and requested 
clarification. The Department has accepted this recommendation and has 
revised Note 3.
    One commenting party requested clarification that the intent of 
ITAR Sec.  120.41(b)(3) is to provide the same function as the note to 
USML Category VIII (the ``Section 17(c) rule'') and that its scope 
extends beyond USML Category VIII. The Department confirms this 
understanding.
    One commenting party requested revision of ITAR Sec.  120.41(b)(4) 
to specifically provide that once an item or commodity is determined to 
be excluded from a ``catch-all'' provision, the determination remains 
effective after the item or commodity has entered the marketplace. 
Although the Department agrees there is no need to revisit a 
determination made pursuant to ITAR Sec.  120.41(b)(4), it did not 
revise the regulations in this regard. The Department believes such a 
revision is unnecessary.
    One commenting party noted the difficulty an exporter may have in 
applying ITAR Sec.  120.41(b)(4) because he may not have knowledge of 
what the original developer's market expectations were at the time of 
development. The Department notes exporters would generally use ITAR 
Sec.  120.41(b)(3) to determine the applicability of specially designed 
in such cases because its application does not depend upon knowledge of 
a developer's intent. Developers and manufacturers would generally be 
the parties to use ITAR Sec.  120.41(b)(4), although (b)(4) would not 
preclude a developer or manufacturer from informing other exporters of 
the applicability of the (b)(4) exclusion. In addition, the Department 
added a new note to ITAR Sec.  120.41(b)(4) and (b)(5) regarding 
``knowledge'' to address the underlying concern of the comment.
    One commenting party expressed concern with the effect the 
specially designed definition would have on the control over 
fundamental research. In particular, the concern was with ITAR Sec.  
120.41(b)(5), as the commenting party believes it is not reasonable for 
there to be development of a part, component, accessory, or attachment 
with no reasonable expectation of use for a particular application. The 
definition of ``fundamental research'' contained in ITAR Sec.  120.11 
is not changed by the definition of specially designed. The Department 
has revised ITAR Sec.  120.41(b)(5) to more accurately describe the 
intent of that exclusion. In particular, it has replaced the phrase 
``reasonable expectation'' with ``knowledge'' and added a definition of 
``knowledge'' to a new note to ITAR Sec.  120.41(b)(4) and (b)(5). This 
addresses the instance when research or other knowledge indicates a 
potential market for an un-enumerated mechanical function or electronic 
function but does not indicate whether the future buyers will use the 
function for a civil application, a military application, or both, 
which was the concern of another commenting party.
    The Department accepted one commenting party's recommendation to 
remove the note to ITAR Sec.  120.41(b)(5), agreeing with the 
observation that it was redundant.

Transition Plan

    With the intention of establishing certain necessary licensing 
procedures stemming from ECR implementation and mitigating the impact 
of the changes involved in the revision of the USML and the CCL on U.S. 
license holders and the defense export industry, the Department 
implements the following ``Transition Plan,'' which will describe (1) 
timelines for implementation of changes, (2) certain temporary 
licensing procedures for items transitioning from the USML to the CCL, 
and (3) certain permanent licensing procedures pertaining to the export 
of any item ``subject to the EAR'' (see definition of this term in this 
rule) to be used in or with defense articles controlled on the USML.
    The Department notes the following main points regarding licensing 
procedure during the transition, and thereafter:
     There will be a 180-day transition period between the 
publication of the final rule for each revised USML category and the 
effective date of the transition to the CCL for items that will undergo 
a change in export jurisdiction. This period will allow U.S. license 
holders time to review their current authorizations and prepare for the 
transition to the new ECCNs.
     A license or authorization issued by the Department will 
be effective for up to two years from the effective date of the revised 
USML category if all the items listed on the license or authorization 
have transitioned to the export jurisdiction of the Department of 
Commerce.
     A license or authorization issued by the Department will 
be valid until its expiration if some of the items listed on the 
license or authorization have transitioned to the export jurisdiction 
of the Department of Commerce.
     USML categories will have a new (x) paragraph, the purpose 
of which is to allow for ITAR licensing for commodities, software, and 
technical data subject to the EAR, provided those commodities, 
software, and technical data are to be used in or with defense articles 
controlled on the USML and are described in the purchase

[[Page 22748]]

documentation submitted with the application.
    The Department first presented for public comment its plan for 
licensing policies and procedures regarding items moving from the 
export jurisdiction of the Department of State to the Department of 
Commerce on June 21, 2012 (see ``Export Control Reform Transition 
Plan,'' 77 FR 37346). The comment period ended August 6, 2012. 
Seventeen parties filed comments during the established comment period 
recommending changes. The Department's evaluation of the written 
comments and recommendations follows.
    Eight commenting parties stated that the 45-day transition period 
was insufficient time to accomplish all that was necessary to adapt 
company systems to the changes and recommended longer transition 
periods of varying lengths. The Department has accepted this 
recommendation and has changed the transition period to 180 days.
    In response to the recommendation of several commenting parties for 
shared licensing authority for items changing export jurisdiction, the 
Department's transition guidance will provide that, for 180 days 
following the effective date of a revised USML category, licenses will 
be accepted by both DDTC and BIS for items moving from the USML to the 
CCL. In addition, DDTC authorizations that pertain wholly to 
transitioned items will expire two years after the effective date of 
the relevant final rule moving the items to the CCL. In addition, 
licenses that have some items remaining on the USML will be valid for 
all items covered by the license at the time it was issued until it 
expires. Applicants should refer to the Department of Commerce's 
companion to this rule (see elsewhere in this issue of the Federal 
Register) for information related to BIS licenses adjudicated during 
the transition period.
    Two commenting parties stated that dual jurisdiction/licensing will 
create a heavy compliance burden for USML end-item manufacturers with 
international supply chains, as each of the export authorities has 
different compliance obligations. It will also create confusion as 
foreign parties may be party to a USML technical assistance agreement 
and receive items for the project under a Department of Commerce 
license or Strategic Trade Authorization (STA) license exception. The 
Department acknowledges this complexity, but notes that ECR will not 
create a new context in this regard, as current projects routinely 
require both defense articles and commercial items for completion. Dual 
compliance requirements already exist and the Department believes the 
benefits derived from changes implemented under ECR outweigh these 
concerns.
    Two commenting parties recommended that license applications and 
agreements submitted after publication date of the final rule revising 
the relevant USML category, but before the implementation date, should 
be processed as prepublication applications and agreements: valid for 
two years, or until amended or returned. The Department accepted this 
recommendation and revised the guidance accordingly.
    One commenting party requested clarification of whether sending to 
a foreign supplier technical data on a USML end-item to allow 
installation of a 600 series component is both a USML technical data 
export and CCL installation technology export, creating dual licensing 
for most foreign sourced commodities. If the technical data is directly 
related to a defense article, the technical data will be ITAR 
controlled. If the technical data is for the production, development, 
etc., of a 600 series or CCL item to be installed in a defense article, 
the technical data remains EAR controlled. The jurisdiction of the 
technical data follows the jurisdiction of the related commodity or 
item.
    Five commenting parties recommended that amendments to licenses and 
authorizations should be allowed during the transition period. The 
Department accepted this recommendation and revised the guidance 
accordingly.
    Three commenting parties recommended allowing temporary import and 
export authorizations to last until expired or returned. As the items 
temporarily imported or exported are to return to their point of 
origin, per the requirements of the authorizations, there is no 
national security risk in maintaining the original authorizations. The 
Department accepted this recommendation and revised the guidance 
accordingly.
    One commenting party noted that currently approved agreements 
covering dual/third country national employees of the foreign party 
will be affected by the need to obtain deemed export licenses, and that 
two years may not be sufficient time to fulfill this requirement. The 
Department notes that as long as the currently approved agreement has 
been amended to provide authority for the transitioned items in 
accordance with the guidance in this notice, the dual/third country 
national authority would still apply.
    Five commenting parties recommended that existing reexport/
retransfer authorizations should be grandfathered without expiration. 
Foreign parties who purchased transitioned items under authorizations 
that allowed perpetual foreign sales should not have to reauthorize 
those sales and the U.S. Government should not re-review the 
authorizations. The Department accepted this recommendation and revised 
the guidance accordingly. The three scenarios for which this applies 
are: 1) reexport/retransfer authority granted through a program status 
DSP-5; 2) the sales territory of a manufacturing license or warehouse 
and distribution agreement if the agreement continues to be the export 
authority; and 3) any stand-alone reexport/retransfer authorization 
received pursuant to ITAR Sec.  123.9(c).
    Two commenting parties recommended requiring U.S. exporters to 
identify ECCNs and prior USML classifications on export documentation 
for two years following the effective date of transitioned items and 
mandate prompt responses to requests for ECCNs for legacy items. The 
Department accepted this recommendation in part. The Department has 
revised ITAR Sec.  123.9(b) to require identification of the license or 
other approval to the foreign party.
    Seven commenting parties recommended that previously issued 
commodity jurisdiction (CJ) determinations designating items as not 
subject to the export jurisdiction of the Department remain valid. This 
will preserve EAR99 status for items previously so designated and would 
relieve exporters who have obtained CJ determinations from having to 
reclassify items. The Department accepted this recommendation and 
clarified the guidance accordingly.
    One commenting party inquired what Automated Export System (AES) 
entry would be required for items that have transitioned to control 
under the CCL but are to be exported under a legacy DDTC authorization. 
The AES entry will remain the same as is required now for a DDTC 
authorization.
    In response to one commenting party's inquiry on what effect the 
transition will have on recordkeeping requirements, the Department 
notes records must be maintained for five years following the last 
transaction, regardless of jurisdiction.
    After consideration of the comments received, and in furtherance of 
the principles of ECR, the Department has decided to institute a new 
permanent licensing procedure that will allow

[[Page 22749]]

ITAR licensing for commodities, software, and technical data subject to 
the EAR, provided those commodities, software, and technical data are 
to be used in or with defense articles controlled on the USML and are 
described in the purchase documentation submitted with the application. 
This procedure is to be effected by the exporter by use of ``(x) 
paragraph,'' added to USML Categories VIII and XIX in this rule, and to 
be added to other USML categories as they are revised. The Department 
will begin accepting licenses citing a (x) paragraph entry once the 
180-day transition period is effective for the related USML category. 
The President has provided for this delegation of authority from the 
Secretary of Commerce to the Secretary of State, and Executive Order 
13222 has been amended accordingly (see 78 FR 16129). The Department 
has revised various sections of, and added certain sections to, the 
ITAR to accommodate this delegation of authority: ITAR Sec.  120.5 to 
add a new paragraph (b) to address the delegation; the addition of ITAR 
Sec.  120.42 to provide a definition of ``subject to the EAR''; ITAR 
Sec.  123.1 to provide guidance on how to use the (x) paragraph; and 
ITAR Sec.  123.9(b) to identify additional requirements when using the 
(x) paragraph. The Department of Commerce will have the authority to 
review ``pre-positioned'' license applications during the 180-day 
transition period for items transitioning to EAR jurisdiction. This 
means the Department of Commerce will be able to review and process 
license applications for transitioning items. However, these Department 
of Commerce licenses would not be issued until on or after the 
effective date of the relevant final rule moving items from the USML to 
the CCL. Further guidance is provided in the Department of Commerce's 
companion to this rule (see ``Revision to the Export Administration 
Regulations: Initial Implementation of Export Control Reform,'' 
elsewhere in this edition of the Federal Register).

Transition Plan

Transition Period
    There will be a 180-day transition period between the publication 
of the final rule for each revised U.S. Munitions List (USML) category 
and the effective date of the transition to the Commerce Control List 
(CCL) for items that will undergo a change in export jurisdiction. 
During this period, license applications will be accepted by both DDTC 
and BIS for items moving from the USML to the CCL, but BIS will not 
issue approved licenses for such items until on or after the applicable 
effective date.
DSP-5 Licenses
    Licenses for items transitioning to the CCL that are issued prior 
to the effective date of the final rule for each revised USML category, 
and that do not include any items that will remain on the USML, will 
remain valid until expired, returned by the license holder, or for a 
period of two years from the effective date of the final rule, 
whichever occurs first, unless otherwise revoked, suspended, or 
terminated. Licenses containing both transitioning and non-
transitioning items (mixed authorizations) will remain valid until 
expired or returned by the license holder, unless otherwise revoked, 
suspended, or terminated. Any limitation, proviso, or other requirement 
imposed on the DDTC authorization will remain in effect if the DDTC 
authorization is relied upon for export. License amendment requests 
(DSP-6) received by DDTC during the transition period amending licenses 
affected by the transition will be adjudicated on a case-by-case basis 
up until the effective date of the relevant rule.
DSP-61 and DSP-73 Licenses
    All temporary licenses that are issued in the period prior to the 
effective date of the final rule for each revised USML category will 
remain valid until expired or returned by the license holder, unless 
otherwise revoked, suspended, or terminated. Any limitation, proviso, 
or other requirement imposed on the DDTC authorization will remain in 
effect if the DDTC authorization is relied upon for export. License 
amendment requests (DSP-62 and DSP-74) received by DDTC during the 
transition period amending licenses affected by the transition will be 
adjudicated on a case-by-case basis until the effective date of the 
relevant rule.
License Applications Received After the Transition Period
    All license applications, including amendments, received after the 
effective date for items that have transitioned to the CCL that are not 
identified in a (x) paragraph entry will be Returned Without Action 
with instructions to contact the Department of Commerce.
Technical Assistance Agreements, Manufacturing License Agreements, 
Warehouse and Distribution Agreements, and Related Reporting 
Requirements
    Agreements and amendments containing both USML and CCL items will 
be adjudicated up to the effective date of the relevant final rule. 
Agreements containing transitioning and non-transitioning items that 
are issued prior to the effective date of the relevant final rule will 
remain valid until expired, unless they require an amendment, or for a 
period of two years from the effective date of the relevant final rule, 
whichever occurs first, unless otherwise revoked, suspended, or 
terminated. In order for an agreement to remain valid beyond two years, 
an amendment must be submitted to authorize the CCL items using the new 
(x) paragraph from the relevant USML category. Any activity conducted 
under an agreement will remain subject to all limitations, provisos, 
and other requirements stipulated in the agreement.
    Agreements containing solely transitioning items that are issued 
prior to the effective date of the final rule will remain valid for a 
period of two years from the effective date of the relevant USML 
category, unless revoked, suspended, or terminated. After the two year 
period ends, any on-going activity must be conducted under the 
appropriate Department of Commerce authorization. Agreements and 
agreement amendments solely for items moving to the CCL which are 
received after the effective date will be Returned Without Action with 
instructions to contact the Department of Commerce.
    All reporting requirements for Manufacturing License Agreements 
under ITAR Sec.  124.9(a)(6) and Warehouse and Distribution Agreements 
under ITAR Sec.  124.14(c)(6) must be complied with and such reports 
must be submitted to the Department of State while the agreement is 
relied upon as an export authorization by the exporter.
ITAR Licensing of Items Subject to the EAR
    USML categories will have a new (x) paragraph, to be a permanent 
feature of ITAR licensing. The purpose of this procedure is to allow 
for ITAR licensing for commodities, software, and technical data 
subject to the Export Administration Regulations (EAR) provided those 
commodities, software, and technical data are to be used in or with 
defense articles controlled on the USML and are described in the 
purchase documentation submitted with the application.
Commodity Jurisdiction Determinations
    Previously issued commodity jurisdiction (CJ) determinations for 
items deemed to be subject to the EAR shall remain valid. Previously 
issued CJ determinations for items deemed to be USML but that are 
subsequently

[[Page 22750]]

transitioning to the CCL pursuant to a published final rule will be 
superseded by the newly revised lists. Exporters are encouraged to 
review each revised USML category along with its companion CCL category 
to determine whether the items subject to a CJ have transitioned to the 
jurisdiction of the Department of Commerce. These CJs are limited to 
the specific commodity identified in the final determination letter. 
Consistent with the recordkeeping requirements of the ITAR and the EAR, 
licensees and foreign persons subject to licenses must maintain records 
reflecting their assessments of the proper regulatory jurisdiction over 
their items. License holders unable to ascertain the proper 
jurisdiction of their items may request a CJ determination from DDTC 
through the established procedure.
    License holders who are certain their items have transitioned to 
the CCL are encouraged to review the appropriate Export Control 
Classification Number (ECCN) to determine the classification of their 
item. License holders who are unsure of the proper ECCN designation may 
submit a Commodity Classification Automated Tracking System request 
(CCATS) to the Department of Commerce. See 15 CFR 748.3.
    Parties making a classification self-determination or submitting a 
CCATS are advised that only a CJ determination provides an official and 
exclusive decision on whether or not an item is a defense article on 
the USML.
Reexport/Retransfer of USML Items That Have Transitioned to the CCL
    Following the effective date of transition, foreign persons (i.e., 
end-users, foreign consignees, and foreign intermediate consignees) who 
receive, via a Department of State authorization, an item that they are 
certain has transitioned to the CCL (e.g., confirmed in writing by 
manufacturer or supplier), should treat the item as such and submit 
requests for post-transition reexports or retransfers to the Department 
of Commerce, as may be required by the EAR.
    If reexport or retransfer was previously authorized under a DDTC 
authorization, then that reexport or retransfer authority remains 
valid. The three scenarios for which this applies are: 1) reexport/
retransfer authority granted through a program status DSP-5; 2) the 
sales/distribution territory of a manufacturing license or warehouse 
and distribution agreement if the agreement continues to provide the 
export authority; or 3) any stand-alone reexport/retransfer 
authorization received pursuant to ITAR Sec.  123.9.
    Foreign persons or U.S. persons abroad that have USML items in 
their inventory at the effective date of transition should review both 
the USML and the CCL to determine the proper jurisdiction. If the item 
is controlled by the Department of Commerce, any reexport or retransfer 
must comply with the requirements of the EAR. If doubt exists on 
jurisdiction of the items, the foreign person should contact the 
original exporter or manufacturer.
Regulatory Oversight Responsibilities
    For those items transitioning from the USML to the CCL, the 
Department of Commerce will exercise regulatory oversight, as of the 
effective date, for the purposes of licensing and enforcement of 
exports from the United States where no Department of State 
authorization is being used. The Department of State will continue to 
exercise regulatory oversight concerning all Department of State 
licenses, agreements, and other authorizations, including those where 
exporters, temporary importers, manufacturers, and brokers continue to 
use previously issued Department of State licenses and agreements, 
until the activity is covered by a Department of Commerce 
authorization.
    License holders may decide to apply for and use Department of 
Commerce authorizations for export of the newly transitioned CCL items 
rather than continue to use previously issued Department of State 
authorizations. In such cases, license holders must return the 
Department of State licenses in accordance with ITAR Sec.  123.22 after 
they have obtained the required Department of Commerce authorizations.
Violations and Voluntary Disclosures of Possible Violations
    Exporters, temporary importers, manufacturers, and brokers are 
cautioned to closely monitor ITAR and EAR compliance concerning 
Department of State licenses and agreements for items transitioning 
from the USML to the CCL.
    On the effective date of each rule that adds an item to the CCL 
that was previously subject to the ITAR, that item will be subject to 
the EAR. Authorizations issued by DDTC before the effective date may 
continue to be used as described above by exporters, temporary 
importers, manufacturers, and brokers. The violation of a previously 
issued DDTC authorization (including any condition of a DDTC 
authorization) that is continued to be used as described above is a 
violation of the ITAR.
    With respect to a transitioned item, persons who discover a 
possible violation of the ITAR, the EAR, or any license or 
authorization issued thereunder, are strongly encouraged to disclose 
this violation to DDTC, BIS, or both offices, as appropriate, pursuant 
to established procedures for submitting voluntary disclosures.
    License holders and foreign persons must obtain Department of State 
authorization before disposing, reselling, transshipping, or otherwise 
transferring any item in their possession that remains on the USML.
Registration
    Manufacturers, exporters, and brokers are required to register with 
the Department of State if their activities involve USML defense 
articles or defense services.
    Registered manufacturers, exporters, temporary importers, defense 
service providers and brokers (``registrants'') are reminded of the 
requirement to notify DDTC in writing when they are no longer in the 
business of manufacturing, exporting, or brokering USML defense 
articles or defense services. Registrants who determine that all of 
their activities involve articles or services that will transition from 
the USML to the CCL and therefore are no longer required to register 
with the Department of State must provide such written notification to 
the Department of State. Instructions for providing such notification 
are accessible on the DDTC Web site (www.pmddtc.state.gov). Note that 
DDTC will not cancel or revoke those registrations, but will allow the 
registration to expire. Registrants who determine that all of their 
activities will be subject to Department of Commerce jurisdiction as a 
result of the transition from the USML to the CCL must nevertheless 
maintain registration with the Department of State until the effective 
date of the applicable final rule transitioning the registrant's items 
to the CCL.
    Registrants who determine they will no longer be required to 
register with the Department of State after the effective date of the 
final rule transitioning the registrant's items to the CCL, and who 
have registration renewal dates that occur after publication of the 
final rule but before its effective date, may request to have their 
registration expiration date extended to the effective date of 
transition and not be charged a registration fee. In those cases, 
registrants must insert the following statement as the first paragraph 
in the written notification previously mentioned: ``(Insert company 
name) requests DDTC extend our registration

[[Page 22751]]

expiration date to the effective date of transition to CCL for USML 
Category (insert Category number) items and waive the registration fee. 
(insert company name) certifies that no changes in our eligibility from 
what is represented in our previously submitted DS-2032 Statement of 
Registration has occurred (otherwise specify change in eligibility 
status).'' If a registrant subsequently determines that its 
registration with the Department of State must instead be renewed, the 
registration renewal fee will be recalculated to include any Department 
of State licenses the registrant received during the period when the 
registration expiration date was extended.
    Registrants that avail themselves of the opportunity to continue 
using previously issued Department of State authorizations (licenses 
and agreements) for items that have transitioned to the CCL must 
maintain current registration with the Department of State, which 
includes payment of registration fees.

Additional Required Changes

    As noted in the responses to the public comments for specially 
designed and transition guidance, the Department has identified the 
following ITAR amendments as necessary and beneficial for the 
implementation of the transition plan and the application of the 
specially designed definition.
    The Department has revised ITAR Sec.  120.2 to specify the method 
by which changes are made to the U.S. Munitions List.
    The Department has revised ITAR Sec.  120.3 to more accurately 
describe the policy used in completing the revisions to the USML 
categories and to account for the definition of specially designed. In 
concert with this change, the Department also revised ITAR Sec.  
120.4(d) to reflect the policy and provide instruction on applying the 
terms ``form,'' ``fit,'' ``function,'' and ``performance capability.''
    Pursuant to amendment to Executive Order 13222 and upon agreement 
of the Secretaries of State and Commerce, the Department amended ITAR 
Sec.  120.5 to provide for ITAR licensing of items subject to the EAR, 
provided these items meet certain criteria provided in amended ITAR 
Sec.  123.1. In addition, a definition for the term ``subject to the 
EAR'' is established in Sec.  120.42.
    In the revision of the USML categories, the Department has added 
specific entries regarding classified articles and data. Section 120.10 
and USML Category XVII have been amended to account for classified 
articles and data not clearly enumerated on the USML.
    With the adoption of the new definition of specially designed, the 
Department has revised USML Category XXI and ITAR Sec.  121.8(g) to 
remove the phrases, ``specifically designed, developed, configured, 
adapted, or modified for military purposes'' and ``specifically 
designed, modified or adapted.''
    The Department has revised ITAR Sec.  121.1 to incorporate a 
portion of the instruction included in the specially designed 
definition included in the proposed rule in a revised introduction to 
the USML. The revised introduction also includes further guidance on 
use of the USML.
    The Department has revised ITAR Sec.  121.10 for forgings, 
castings, and machined bodies for consistency with the CCL and the 
Wassenaar Arrangement.
    Sections 120.29 and 121.1(c) are revised to update the information 
provided on the Missile Technology Control Regime (MTCR) Annex and to 
introduce the new method of identifying articles common to the MTCR 
Annex and the USML. Section 121.2 is revised to remove reference to 
ITAR Sec.  121.16. Once all revised USML categories are published as 
final rules, ITAR Sec.  121.16 will be placed in reserve, and the 
parenthetical ``(MT)'' will be used at the end of each USML section 
containing such articles.
    Section 123.1 is revised to provide guidance on the use of 
paragraph (x) in USML categories and other administrative changes.
    The Department has revised ITAR Sec.  123.9(b) to update the 
destination control statement to require the inclusion of the license 
number or exemption citation and clarify the need for all parties to 
the transaction to obtain this information. As well, it requires 
applicants using paragraph (x) of the revised USML categories to 
provide additional information to the foreign parties regarding the 
jurisdiction of items exported pursuant to paragraph (x). These changes 
are necessary to ensure industry compliance with the correct licensing 
authority.

Adoption of Proposed Rules and Other Changes

    Having reviewed and evaluated the comments and recommended changes 
for the USML Category VIII, USML Category XIX, and specially designed 
proposed rules, the Department has determined that it will, and hereby 
does, adopt them, with changes noted and other edits, and promulgates 
them in final form under this rule.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense articles and services is a foreign affairs 
function of the United States Government and that rules implementing 
this function are exempt from sections 553 (rulemaking) and 554 
(adjudications) of the Administrative Procedure Act (APA). Although the 
Department is of the opinion that this rule is exempt from the 
rulemaking provisions of the APA, the Department has published this 
rule as separate proposed rules identified as 1400-AC96, 1400-AC98, and 
1400-AD22, each with a 45-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 the Department is of the opinion that this rule is exempt 
from the provisions of 5 U.S.C. 553, there is no requirement for an 
analysis under the Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

    This rulemaking 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 rulemaking 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 rulemaking 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 rulemaking 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

[[Page 22752]]

Federal programs and activities do not apply to this rulemaking.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributed impacts, and equity). These executive orders 
stress the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has been designated a ``significant regulatory action,'' 
although not economically significant, under section 3(f) of Executive 
Order 12866. Accordingly, this rule has been reviewed by the Office of 
Management and Budget (OMB).

Executive Order 12988

    The Department of State has reviewed this rulemaking 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 provisions of Executive Order 13175 do not 
apply to this rulemaking.

Paperwork Reduction Act

    Following is a listing of approved collections that will be 
affected by revision, pursuant to the President's Export Control Reform 
(ECR) initiative, of the U.S. Munitions List (USML) and the Commerce 
Control List. This final rule begins implementation of ECR. Other final 
rules will follow. The list of collections and the description of the 
manner in which they will be affected pertains to revision of the USML 
in its entirety, not only to the categories published in this rule:
    (1) Statement of Registration, DS-2032, OMB No. 1405-0002. The 
Department estimates that 1,000 of the currently-registered persons 
will not need to maintain registration following full revision of the 
USML. This would result in a burden reduction of 1,000 hours annually.
    (2) Application/License for Permanent Export of Unclassified 
Defense Articles and Related Unclassified Technical Data, DSP-5, OMB 
No. 1405-0003. The Department estimates that there will be 35,000 fewer 
DSP-5 submissions annually following full revision of the USML. This 
would result in a burden reduction of 35,000 hours annually. In 
addition, the DSP-5 will allow respondents to select USML Category XIX, 
a newly-established category, as a description of articles to be 
exported.
    (3) Application/License for Temporary Import of Unclassified 
Defense Articles, DSP-61, OMB No. 1405-0013. The Department estimates 
that there will be 200 fewer DSP-61 submissions annually following full 
revision of the USML. This would result in a burden reduction of 100 
hours annually. In addition, the DSP-61 will allow respondents to 
select USML Category XIX, a newly-established category, as a 
description of articles to be temporarily imported.
    (4) Application/License for Temporary Export of Unclassified 
Defense Articles, DSP-73, OMB No. 1405-0023. The Department estimates 
that there will be 800 fewer DSP-73 submissions annually following full 
revision of the USML. This would result in a burden reduction of 800 
hours annually. In addition, the DSP-73 will allow respondents to 
select USML Category XIX, a newly-established category, as a 
description of articles to be temporarily exported.
    (5) Application for Amendment to License for Export or Import of 
Classified or Unclassified Defense Articles and Related Technical Data, 
DSP-6, -62, -74, -119, OMB No. 1405-0092. The Department estimates that 
there will be 2,000 fewer amendment submissions annually following full 
revision of the USML. This would result in a burden reduction of 1,000 
hours annually. In addition, the amendment forms will allow respondents 
to select USML Category XIX, a newly-established category, as a 
description of articles the subject of the amendment request.
    (6) Request for Approval of Manufacturing License Agreements, 
Technical Assistance Agreements, and Other Agreements, DSP-5, OMB No. 
1405-0093. The Department estimates that there will be 1,000 fewer 
agreement submissions annually following full revision of the USML. 
This would result in a burden reduction of 2,000 hours annually. In 
addition, the DSP-5, the form used for the purposes of electronically 
submitting agreements, will allow respondents to select USML Category 
XIX, a newly-established category, as a description of articles to be 
exported.
    (7) Maintenance of Records by Registrants, OMB No. 1405-0111. The 
requirement to actively maintain records pursuant to provisions of the 
International Traffic in Arms Regulations (ITAR) will decline 
commensurate to the drop in the number of persons who will be required 
to register with the Department pursuant to the ITAR. As stated above, 
the Department estimates that 1,000 of the currently-registered persons 
will not need to maintain registration following full revision of the 
USML. This would result in a burden reduction of 20,000 hours annually. 
The ITAR does provide, though, for the maintenance of records for a 
period of five years. Therefore, persons newly relieved of the 
requirement to register with the Department may still be required to 
maintain records.
    (8) Export Declaration of Defense Technical Data or Services, DS-
4071, OMB No. 1405-0157. The Department estimates that there will be 
2,000 fewer declaration submissions annually following full revision of 
the USML. This would result in a burden reduction of 1,000 hours 
annually.

List of Subjects in 22 CFR Parts 120, 121, and 123

    Arms and munitions, Exports.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 120, 121, and 123 are amended as follows:

PART 120--PURPOSE AND DEFINITIONS

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

    Authority: Sections 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; 22 U.S.C. 2651a; Pub. 
L. 105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L. 
112-239; E.O. 13637, 78 FR 16129.


0
2. Section 120.2 is revised to read as follows:


Sec.  120.2  Designation of defense articles and defense services.

    The Arms Export Control Act (22 U.S.C. 2778(a) and 2794(7)) 
provides that the President shall designate the articles and services 
deemed to be defense articles and defense services for purposes of 
import or export controls. The President has delegated to the Secretary 
of State the authority to control the export and temporary import of 
defense articles and services. The items designated by the Secretary of 
State for purposes of export and temporary import control constitute 
the U.S. Munitions List specified in part

[[Page 22753]]

121 of this subchapter. Defense articles on the U.S. Munitions List 
specified in part 121 of this subchapter that are also subject to 
permanent import control by the Attorney General on the U.S. Munitions 
Import List enumerated in 27 CFR part 447 are subject to temporary 
import controls administered by the Secretary of State. Designations of 
defense articles and defense services are made by the Department of 
State with the concurrence of the Department of Defense. The scope of 
the U.S. Munitions List shall be changed only by amendments made 
pursuant to section 38 of the Arms Export Control Act (22 U.S.C. 2778). 
For a designation or determination on whether a particular item is 
enumerated on the U.S. Munitions List, see Sec.  120.4 of this 
subchapter.

0
3. Section 120.3 is revised to read as follows:


Sec.  120.3  Policy on designating or determining defense articles and 
services on the U.S. Munitions List.

    (a) For purposes of this subchapter, a specific article or service 
may be designated a defense article (see Sec.  120.6 of this 
subchapter) or defense service (see Sec.  120.9 of this subchapter) if 
it:
    (1) Meets the criteria of a defense article or defense service on 
the U.S. Munitions List; or
    (2) Provides the equivalent performance capabilities of a defense 
article on the U.S. Munitions List.
    (b) For purposes of this subchapter, a specific article or service 
shall be determined in the future as a defense article or defense 
service if it provides a critical military or intelligence advantage 
such that it warrants control under this subchapter.

    Note to paragraphs (a) and (b): An article or service determined 
in the future pursuant to this subchapter as a defense article or 
defense service, but not currently on the U.S. Munitions List, will 
be placed in U.S. Munitions List Category XXI until the appropriate 
U.S. Munitions List category has been amended to provide the 
necessary entry.

    (c) A specific article or service is not a defense article or 
defense service for purposes of this subchapter if it:
    (1) Is determined to be under the jurisdiction of another 
department or agency of the U.S. Government (see Sec.  120.5 of this 
subchapter) pursuant to a commodity jurisdiction determination (see 
Sec.  120.4 of this subchapter) unless superseded by changes to the 
U.S. Munitions List or by a subsequent commodity jurisdiction 
determination; or
    (2) Meets one of the criteria of Sec.  120.41(b) of this subchapter 
when the article is used in or with a defense article and specially 
designed is used as a control criteria (see Sec.  120.41 of this 
subchapter).

    Note to Sec.  120.3: The intended use of the article or service 
after its export (i.e., for a military or civilian purpose), by 
itself, is not a factor in determining whether the article or 
service is subject to the controls of this subchapter.


0
4. Section 120.4 is amended by revising paragraph (d) to read as 
follows:


Sec.  120.4  Commodity jurisdiction.

* * * * *
    (d)(1) [Reserved]
    (2) A designation that an article or service meets the criteria of 
a defense article or defense service, or provides the equivalent 
performance capabilities of a defense article on the U.S. Munitions 
List set forth in this subchapter, is made on a case-by-case basis by 
the Department of State, taking into account:
    (i) The form and fit of the article; and
    (ii) The function and performance capability of the article.
    (3) A designation that an article or service has a critical 
military or intelligence advantage such that it warrants control under 
this subchapter is made, on a case-by-case basis, by the Department of 
State, taking into account:
    (i) The function and performance capability of the article; and
    (ii) The nature of controls imposed by other nations on such items 
(including the Wassenaar Arrangement and other multilateral controls).

    Note 1 to paragraph (d): The form of a commodity is defined by 
its configuration (including the geometrically measured 
configuration), material, and material properties that uniquely 
characterize it. The fit of a commodity is defined by its ability to 
physically interface or connect with or become an integral part of 
another commodity. The function of a commodity is the action or 
actions it is designed to perform. Performance capability is the 
measure of a commodity's effectiveness to perform a designated 
function in a given environment (e.g., measured in terms of speed, 
durability, reliability, pressure, accuracy, efficiency).


    Note 2 to paragraph (d): For software, the form means the 
design, logic flow, and algorithms. The fit is defined by its 
ability to interface or connect with a defense article. The function 
means the action or actions the software performs directly related 
to a defense article or as a standalone application.

    Performance capability means the measure of the software's 
effectiveness to perform a designated function.
* * * * *

0
5. Section 120.5 is revised to read as follows:


Sec.  120.5  Relation to regulations of other agencies.

    (a) If a defense article or service is covered by the U.S. 
Munitions List set forth in this subchapter, its export and temporary 
import is regulated by the Department of State (see also Sec.  120.2 of 
this subchapter). The President has delegated the authority to control 
defense articles and services for purposes of permanent import to the 
Attorney General. The defense articles and services controlled by the 
Secretary of State and the Attorney General collectively comprise the 
U.S. Munitions List under the Arms Export Control Act (AECA). As the 
Attorney General exercises independent delegated authority to designate 
defense articles and services for purposes of permanent import 
controls, the permanent import control list administered by the 
Department of Justice has been separately labeled the U.S. Munitions 
Import List (27 CFR part 447) to distinguish it from the list set out 
in this subchapter. In carrying out the functions delegated to the 
Attorney General pursuant to the AECA, the Attorney General shall be 
guided by the views of the Secretary of State on matters affecting 
world peace and the external security, and foreign policy of the United 
States. The Department of Commerce regulates the export, reexport, and 
in-country transfer of items on the Commerce Control List (CCL) and 
other items subject to its jurisdiction, as well as the provision of 
certain proliferation activities, under the Export Administration 
Regulations (EAR) (15 CFR parts 730 through 774). For the relationship 
of this subchapter to regulations of the Department of Energy and the 
Nuclear Regulatory Commission, see Sec.  123.20 of this subchapter.
    (b) A license or other approval from the Department of State 
granted in accordance with this subchapter may also authorize the 
export of items subject to the EAR (see Sec.  120.42 of this 
subchapter). Separate approval from the Department of Commerce is not 
required for these items when approved for export under a Department of 
State license or other approval. Those items subject to the EAR 
exported pursuant to a Department of State license or other approval 
would remain under the jurisdiction of the Department of Commerce for 
any subsequent transactions. The inclusion of items subject to the EAR 
on a Department of State license or approval does not change the 
jurisdiction of the items.

[[Page 22754]]

(See Sec.  123.1(b) of this subchapter for guidance on identifying 
items subject to the EAR in a license application to the Department of 
State.)

0
6. Section 120.10 is amended by revising paragraphs (a)(2) through (4) 
and re-designating paragraph (a)(5) as paragraph (b) and revising it to 
read as follows:


Sec.  120.10  Technical data.

    (a) * * *
* * * * *
    (2) Classified information relating to defense articles and defense 
services on the U.S. Munitions List and 600-series items controlled by 
the Commerce Control List;
    (3) Information covered by an invention secrecy order; or
    (4) Software as defined in Sec.  121.8(f) of this subchapter 
directly related to defense articles.
    (b) The definition in paragraph (a) of this section does not 
include information concerning general scientific, mathematical or 
engineering principles commonly taught in schools, colleges and 
universities or information in the public domain as defined in Sec.  
120.11. It also does not include basic marketing information on 
function or purpose or general system descriptions of defense articles.

0
7. Section 120.29 is revised to read as follows:


Sec.  120.29  Missile Technology Control Regime.

    (a) For purposes of this subchapter, Missile Technology Control 
Regime (MTCR) means the policy statement between the United States, the 
United Kingdom, the Federal Republic of Germany, France, Italy, Canada, 
and Japan, announced on April 16, 1987, to restrict sensitive missile-
relevant transfers based on the MTCR Annex, and any amendments thereto.
    (b) The term MTCR Annex means the MTCR Guidelines and the 
Equipment, Software and Technology Annex of the MTCR, and any 
amendments thereto.
    (c) List of all items on the MTCR Annex. Section 71(a) of the Arms 
Export Control Act (22 U.S.C. 2797) refers to the establishment as part 
of the U.S. Munitions List of a list of all items on the MTCR Annex, 
the export of which is not controlled under Section 6(1) of the Export 
Administration Act of 1979 (50 U.S.C. App. 2405(1)), as amended. MTCR 
Annex items specified in the U.S. Munitions List shall be identified in 
Sec.  121.16 of this subchapter or annotated by the parenthetical 
``(MT)'' at the end of each applicable paragraph.

0
8. Section 120.41 is added to read as follows:


Sec.  120.41  Specially designed.

    (a) Except for commodities or software described in paragraph (b) 
of this section, a commodity or software (see Sec.  121.8(f) of this 
subchapter) is ``specially designed'' if it:
    (1) As a result of development, has properties peculiarly 
responsible for achieving or exceeding the controlled performance 
levels, characteristics, or functions described in the relevant U.S. 
Munitions List paragraph; or
    (2) Is a part (see Sec.  121.8(d) of this subchapter), component 
(see Sec.  121.8(b) of this subchapter), accessory (see Sec.  121.8(c) 
of this subchapter), attachment (see Sec.  121.8(c) of this 
subchapter), or software for use in or with a defense article.
    (b) A part, component, accessory, attachment, or software is not 
controlled by a U.S. Munitions List ``catch-all'' or technical data 
control paragraph if it:
    (1) Is subject to the EAR pursuant to a commodity jurisdiction 
determination;
    (2) Is, regardless of form or fit, a fastener (e.g., screws, bolts, 
nuts, nut plates, studs, inserts, clips, rivets, pins), washer, spacer, 
insulator, grommet, bushing, spring, wire, or solder;
    (3) Has the same function, performance capabilities, and the same 
or ``equivalent'' form and fit as a commodity or software used in or 
with a commodity that:
    (i) Is or was in production (i.e., not in development); and
    (ii) Is not enumerated on the U.S. Munitions List;
    (4) Was or is being developed with knowledge that it is or would be 
for use in or with both defense articles enumerated on the U.S. 
Munitions List and also commodities not on the U.S. Munitions List; or
    (5) Was or is being developed as a general purpose commodity or 
software, i.e., with no knowledge for use in or with a particular 
commodity (e.g., a F/A-18 or HMMWV) or type of commodity (e.g., an 
aircraft or machine tool).

    Note 1 to paragraph (a): The term ``enumerated'' refers to any 
article on the U.S. Munitions List or the Commerce Control List and 
not in a ``catch-all'' paragraph.


    Note 2 to paragraph (a): The term ``commodity'' refers to any 
article, material, or supply, except technology/technical data or 
software.


    Note to paragraph (a)(1): An example of a commodity that as a 
result of development has properties peculiarly responsible for 
achieving or exceeding the controlled performance levels, functions, 
or characteristics in a U.S. Munitions List category would be a 
swimmer delivery vehicle specially designed to dock with a submarine 
to provide submerged transport for swimmers or divers from 
submarines.


    Note to paragraph (b): A ``catch-all'' paragraph is one that 
does not refer to specific types of parts, components, accessories, 
or attachments, but rather controls parts, components, accessories, 
or attachments if they were specially designed for an enumerated 
item. For the purposes of the U.S. Munitions List, a ``catch-all'' 
paragraph is delineated by the phrases ``and specially designed 
parts and components therefor,'' or ``parts, components, 
accessories, attachments, and associated equipment specially 
designed for.''


    Note 1 to paragraph (b)(3): For the purpose of this definition, 
``production'' means all production stages, such as product 
engineering, manufacture, integration, assembly (mounting), 
inspection, testing, and quality assurance. This includes ``serial 
production'' where commodities have passed production readiness 
testing (i.e., an approved, standardized design ready for large 
scale production) and have been or are being produced on an assembly 
line for multiple commodities using the approved, standardized 
design.


    Note 2 to paragraph (b)(3): For the purpose of this definition, 
``development'' is related to all stages prior to serial production, 
such as: design, design research, design analyses, design concepts, 
assembly and testing of prototypes, pilot production schemes, design 
data, process of transforming design data into a product, 
configuration design, integration design, layouts.


    Note 3 to paragraph (b)(3): Commodities in ``production'' that 
are subsequently subject to ``development'' activities, such as 
those that would result in enhancements or improvements only in the 
reliability or maintainability of the commodity (e.g., an increased 
mean time between failure (MTBF)), including those pertaining to 
quality improvements, cost reductions, or feature enhancements, 
remain in ``production.'' However, any new models or versions of 
such commodities developed from such efforts that change the basic 
performance or capability of the commodity are in ``development'' 
until and unless they enter into ``production.''


    Note 4 to paragraph (b)(3):  With respect to a commodity, 
``equivalent'' means its form has been modified solely for fit 
purposes.


    Note 1 to paragraphs (b)(4) and (5): For a defense article not 
to be specially designed on the basis of paragraph (b)(4) or (5) of 
this section, documents contemporaneous with its development, in 
their totality, must establish the elements of paragraph (b)(4) or 
(5). Such documents may include concept design information, 
marketing plans, declarations in patent applications, or contracts. 
Absent such documents, the commodity may not be excluded from being 
specially designed by either paragraph (b)(4) or (5).


    Note 2 to paragraphs (b)(4) and (5):  For the purpose of this 
definition, ``knowledge''

[[Page 22755]]

includes not only the positive knowledge a circumstance exists or is 
substantially certain to occur, but also an awareness of a high 
probability of its existence or future occurrence. Such awareness is 
inferred from evidence of the conscious disregard of facts known to 
a person and is also inferred from a person's willful avoidance of 
facts.


0
9. Section 120.42 is added to read as follows:


Sec.  120.42  Subject to the Export Administration Regulations (EAR).

    Items ``subject to the EAR'' are those items listed on the Commerce 
Control List in part 774 of the EAR and all other items that meet the 
definition of that term in accordance with Sec.  734.3 of the EAR. The 
EAR is found at 15 CFR parts 730 through 774.

PART 121--THE UNITED STATES MUNITIONS LIST

0
10. The authority citation for part 121 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. 2651a; Pub. L. 105-261, 112 
Stat. 1920; Section 1261, Pub. L. 112-239; E.O. 13637, 78 FR 16129.


0
11. Section 121.1 is amended by revising paragraphs (a) through (c), 
U.S. Munitions List Category VIII, Category XVII, Category XIX, and 
Category XXI, and adding paragraphs (d) and (e), to read as follows:


Sec.  121.1  General. The United States Munitions List.

    (a) The following articles, services, and related technical data 
are designated as defense articles and defense services pursuant to 
sections 38 and 47(7) of the Arms Export Control Act. Changes in 
designations will be published in the Federal Register. Information and 
clarifications on whether specific items are defense articles and 
services under this subchapter may appear periodically through the 
Internet Web site of the Directorate of Defense Trade Controls.
    (b)(1) Order of review. In order to classify your article on the 
U.S. Munitions List, you should begin with a review of the general 
characteristics of your item. This will usually guide you to the 
appropriate category on the U.S. Munitions List. Once the appropriate 
category is identified, you should match the particular characteristics 
and functions of your article to a specific entry within the 
appropriate category.
    (2) Composition of an entry. Within each U.S. Munitions List 
category, defense articles are enumerated by an alpha paragraph 
designation. These designations may include subparagraph(s) to further 
define the enumerated defense article. Each U.S. Munitions List 
category starts with end-platform designations followed by major 
systems and equipment, and parts, components, accessories, and 
attachments. Most U.S. Munitions List categories contain an entry on 
technical data (see Sec.  120.10 of this subchapter) and defense 
services (see Sec.  120.9 of this subchapter) related to the enumerated 
defense articles of that U.S. Munitions List category.
    (3) Significant Military Equipment. An asterisk may precede an 
entry in a U.S. Munitions List category. The asterisk means the 
enumerated defense article is deemed to be ``Significant Military 
Equipment'' to the extent specified in Sec.  120.7 of this subchapter. 
The asterisk is placed as a convenience to help identify such defense 
articles. Note that technical data directly related to the manufacture 
or production of any defense articles enumerated in any category 
designated as Significant Military Equipment (SME) is also designated 
as SME.
    (c) Missile Technology Control Regime (MTCR) Annex. Inclusion in 
Sec.  121.16 of this subchapter, or annotation with the parenthetical 
``(MT)'' at the end of a U.S. Munitions List paragraph, indicates those 
defense articles and defense services that are on the MTCR Annex. See 
Sec.  120.29 of this subchapter.
    (d) Specially Designed. When applying the definition of specially 
designed (see Sec.  120.41 of this subchapter), follow the sequential 
analysis set forth as follows:
    (1) if your commodity or software is controlled for reasons other 
than having a specially designed control parameter on the U.S. 
Munitions List, no further review of the definition of specially 
designed is required.
    (2) if your commodity or software is not enumerated on the U.S. 
Munitions List, it may be controlled because of a specially designed 
control parameter. If so, begin any analysis with Sec.  120.41(a) and 
proceed through each subsequent paragraph. If a commodity or software 
would not be controlled as a result of the application of the standards 
in Sec.  120.41(a), then it is not necessary to work through Sec.  
120.41(b).
    (3) if a commodity or software is controlled as a result of Sec.  
120.41(a), then it is necessary to continue the analysis and to work 
through each of the elements of Sec.  120.41(b).
    (4) commodities or software described in any Sec.  120.41(b) 
subparagraph are not specially designed commodities or software 
controlled on the U.S. Munitions List, but may be subject to the 
jurisdiction of another U.S. Government regulatory agency (see Sec.  
120.5 of this subchapter).
    (e) Classified. For the purpose of this subchapter, ``classified'' 
means classified pursuant to Executive Order 13526, or predecessor 
order, and a security classification guide developed pursuant thereto 
or equivalent, or to the corresponding classification rules of another 
government or international organization.
* * * * *

Category VIII--Aircraft and Related Articles

    (a) Aircraft (see Sec.  121.3 of this subchapter) as follows:
    *(1) Bombers;
    *(2) Fighters, fighter bombers, and fixed-wing attack aircraft;
    *(3) Turbofan- or turbojet-powered trainers used to train pilots 
for fighter, attack, or bomber aircraft;
    *(4) Attack helicopters;
    *(5) Unarmed military unmanned aerial vehicles (UAVs) (MT if the 
UAV has a ``range'' equal to or greater than 300km);
    *(6) Armed unmanned aerial vehicles (UAVs) (MT if the UAV has a 
``range'' equal to or greater than 300km);
    *(7) Military intelligence, surveillance, and reconnaissance 
aircraft;
    *(8) Electronic warfare, airborne warning and control aircraft;
    (9) Air refueling aircraft and strategic airlift aircraft;
    (10) Target drones (MT if the drone has a ``range'' equal to or 
greater than 300km);
    (11) Aircraft incorporating any mission system controlled under 
this subchapter;
    (12) Aircraft capable of being refueled in flight including hover-
in-flight refueling (HIFR); or
    *(13) Optionally Piloted Vehicles (OPV) (MT if the OPV has a 
``range'' equal to or greater than 300km).

    Note 1 to paragraph (a): ``Range'' is the maximum distance that 
the specified aircraft system is capable of traveling in the mode of 
stable flight as measured by the projection of its trajectory over 
the surface of the Earth. The maximum capability based on the design 
characteristics of the system, when fully loaded with fuel or 
propellant, will be taken into consideration in determining 
``range.'' The ``range'' for aircraft systems will be determined 
independently of any external factors such as operational 
restrictions, limitations imposed by telemetry, data links, or other 
external constraints. For aircraft systems, the ``range'' will be 
determined for a one-way distance using the most fuel-efficient 
flight profile (e.g., cruise speed and altitude), assuming 
International Civil Aviation Organization (ICAO) standard atmosphere 
with zero wind.


[[Page 22756]]


    (b) [Reserved]
    (c) [Reserved]
    (d) Ship-based launching and recovery equipment specially designed 
for defense articles described in paragraph (a) of this category and 
land-based variants thereof (MT if the ship-based launching and 
recovery equipment is for an unmanned aerial vehicle, drone, or missile 
that has a ``range'' equal to or greater than 300 km).

    Note to paragraph (d): Fixed land-based arresting gear is not 
included in this paragraph.

    *(e) Inertial navigation systems (INS), aided or hybrid inertial 
navigation systems, Inertial Measurement Units (IMUs), and Attitude and 
Heading Reference Systems (AHRS) specially designed for aircraft 
controlled in this category or controlled in ECCN 9A610 and all 
specially designed components, parts, and accessories therefor (MT if 
the INS, IMU, or AHRS is for an unmanned aerial vehicle, drone, or 
missile that has a ``range'' equal to or greater than 300 km). For 
other inertial reference systems and related components refer to USML 
Category XII(d).
    (f) Developmental aircraft and specially designed parts, 
components, accessories, and attachments therefor funded by the 
Department of Defense.

    Note 1 to paragraph VIII(f): Paragraph VIII(f) does not control 
developmental aircraft and specially designed parts, components, 
accessories, and attachments therefor (a) determined to be subject 
to the EAR via a commodity jurisdiction determination (see Sec.  
120.4 of this subchapter) or (b) identified in the relevant 
Department of Defense contract as being developed for both civil and 
military applications.


    Note 2 to paragraph VIII(f): Note 1 does not apply to defense 
articles enumerated on the U.S. Munitions List, whether in 
production or development.

    (g) [Reserved]
    (h) Aircraft parts, components, accessories, attachments, 
associated equipment and systems, as follows:
    (1) Parts, components, accessories, attachments, and equipment 
specially designed for the following U.S.-origin aircraft: the B-1B, B-
2, F-15SE, F/A-18 E/F/G, F-22, F-35 and future variants thereof; or the 
F-117 or U.S. Government technology demonstrators. Parts, components, 
accessories, attachments, and equipment of the F-15SE and F/A-18 E/F/G 
that are common to earlier models of these aircraft, unless listed in 
paragraph (h) of this category, are subject to the EAR;
    (2) Face gear gearboxes, split-torque gearboxes, variable speed 
gearboxes, synchronization shafts, interconnecting drive shafts, or 
rotorcraft gearboxes with internal pitch line velocities exceeding 
20,000 feet per minute and able to operate 30 minutes with loss of 
lubrication and specially designed parts and components therefor;
    (3) Tail boom, stabilator and automatic rotor blade folding systems 
and specially designed parts and components therefor;
    (4) Wing folding systems and specially designed parts and 
components therefor;
    (5) Tail hooks and arresting gear and specially designed parts and 
components therefor;
    (6) Bomb racks, missile launchers, missile rails, weapon pylons, 
pylon-to-launcher adapters, unmanned aerial vehicle (UAV) launching 
systems, external stores support systems for ordnance or weapons, and 
specially designed parts and components therefor (MT if the bomb rack, 
missile launcher, missile rail, weapon pylon, pylon-to-launcher 
adapter, UAV launching system, or external stores support system is for 
a UAV, drone, or missile that has a ``range'' equal to or greater than 
300 km);
    (7) Damage or failure-adaptive flight control systems specially 
designed for aircraft controlled in this category or controlled in ECCN 
9A610;
    (8) Threat-adaptive autonomous flight control systems;
    (9) Non-surface-based flight control systems and effectors (e.g., 
thrust vectoring from gas ports other than main engine thrust vector);
    (10) Radar altimeters with output power management or signal 
modulation (i.e., frequency hopping, chirping, direct sequence-spectrum 
spreading) LPI (low probability of intercept) capabilities (MT if for 
an unmanned aerial vehicle, drone, or missile that has a ``range'' 
equal to or greater than 300 km);
    (11) Air-to-air refueling systems and hover-in-flight refueling 
(HIFR) systems and specially designed parts and components therefor;
    (12) Unmanned aerial vehicle (UAV) flight control systems and 
vehicle management systems with swarming capability (i.e., UAVs 
interact with each other to avoid collisions and stay together, or, if 
weaponized, coordinate targeting) (MT if for a UAV, drone or missile 
that has a ``range'' equal to or greater than 300 km);
    (13) Lithium-ion batteries that provide greater than 28 VDC 
nominal;
    (14) Lift fans, clutches, and roll posts for short take-off, 
vertical landing (STOVL) aircraft and specially designed parts and 
components for such lift fans and roll posts;
    (15) Integrated helmets incorporating optical sights or slewing 
devices, which include the ability to aim, launch, track, or manage 
munitions (e.g., Helmet Mounted Cueing Systems, Joint Helmet Mounted 
Cueing Systems (JHMCS), Helmet Mounted Displays, Display and Sight 
Helmets (DASH));
    (16) Fire control computers, stores management systems, armaments 
control processors, aircraft-weapon interface units and computers 
(e.g., AGM-88 HARM Aircraft Launcher Interface Computer (ALIC));
    (17) Mission computers, vehicle management computers, and 
integrated core processers specially designed for aircraft controlled 
in this category or controlled in ECCN 9A610;
    (18) Drive systems and flight control systems specially designed to 
function after impact of a 7.62mm or larger projectile;
    (19) Thrust reversers specially designed to be deployed in flight 
for aircraft controlled in this category or controlled in ECCN 9A610;
    *(20) Any part, component, accessory, attachment, equipment, or 
system that:
    (i) is classified;
    (ii) contains classified software; or
    (iii) is being developed using classified information.
    ``Classified'' means classified pursuant to Executive Order 13526, 
or predecessor order, and a security classification guide developed 
pursuant thereto or equivalent, or to the corresponding classification 
rules of another government or international organization;
    (21) Printed circuit boards or patterned multichip modules for 
which the layout is specially designed for defense articles in this 
category;
    (22) Radomes or electromagnetic antenna windows specially designed 
for aircraft or UAVs that:
    (i) incorporate radio frequency selective surfaces;
    (ii) operate in multiple or more non-adjacent radar bands;
    (iii) incorporate a structure that is specially designed to provide 
ballistic protection from bullets, shrapnel, or blast;
    (iv) have a melting point greater than 1,300[deg]C and maintain a 
dielectric constant less than 6 at temperatures greater than 500 
[deg]C;
    (v) are manufactured from ceramic materials with a dielectric 
constant less than 6 at any frequency from 100 MHz to 100 GHz;
    (vi) maintain structural integrity at stagnation pressures greater 
than 6,000 pounds per square foot; or

[[Page 22757]]

    (vii) withstand a combined thermal shock greater than 4.184 x 10\6\ 
J/m\2\ accompanied by a peak overpressure of greater than 50 kPa (MT 
for radomes meeting this criteria);
    (23) Fuel cells specially designed for aircraft controlled in this 
category or controlled in ECCN 9A610;
    (24) Thermal engines specially designed for aircraft controlled in 
this category or controlled in ECCN 9A610;
    (25) Thermal batteries specially designed for aircraft controlled 
in this category or controlled in ECCN 9A610 (MT if the thermal battery 
is for an unmanned aerial vehicle, drone, or missile that has a 
``range'' equal to or greater than 300 km); or
    (26) Thermionic generators specially designed for aircraft 
controlled in this category or controlled in ECCN 9A610.
    (i) Technical data (see Sec.  120.10 of this subchapter) and 
defense services (see Sec.  120.9 of this subchapter) directly related 
to the defense articles enumerated in paragraphs (a) through (h) of 
this category and classified technical data directly related to items 
controlled in ECCNs 9A610, 9B610, 9C610, and 9D610 and defense services 
using classified technical data. (See Sec.  125.4 of this subchapter 
for exemptions.) (MT for technical data and defense services related to 
articles designated as such.)
    (j)-(w) [Reserved]
    (x) Commodities, software, and technical data subject to the EAR 
(see Sec.  120.42 of this subchapter) used in or with defense articles 
controlled in this category.

    Note to paragraph (x): Use of this paragraph is limited to 
license applications for defense articles controlled in this 
category where the purchase documentation includes commodities, 
software, or technical data subject to the EAR (see Sec.  123.1(b) 
of this subchapter).


    Note:  Inertial navigation systems, aided or hybrid inertial 
navigation systems, Inertial Measurement Units, and Attitude and 
Heading Reference Systems in paragraph (e) and parts, components, 
accessories, and attachments in paragraphs (h)(2)-(5), (7), (13), 
(14), (17)-(19), and (21)-(26) are licensed by the Department of 
Commerce when incorporated in a military aircraft subject to the EAR 
and classified under ECCN 9A610. Replacement systems, parts, 
components, accessories and attachments are subject to the controls 
of the ITAR.

* * * * *

Category XVII--Classified Articles, Technical Data, and Defense 
Services Not Otherwise Enumerated

    *(a) All articles, and technical data (see Sec.  120.10 of this 
subchapter) and defense services (see Sec.  120.9 of this subchapter) 
relating thereto, that are classified in the interests of national 
security and that are not otherwise enumerated on the U.S. Munitions 
List.
* * * * *

Category XIX--Gas Turbine Engines and Associated Equipment

    *(a) Turbofan and Turbojet engines (including technology 
demonstrators) capable of 15,000 lbf (66.7 kN) of thrust or greater 
that have any of the following:
    (1) with or specially designed for thrust augmentation 
(afterburner);
    (2) thrust or exhaust nozzle vectoring;
    (3) parts or components controlled in paragraph (f)(6) of this 
category;
    (4) specially designed for sustained 30 second inverted flight or 
negative g maneuver; or
    (5) specially designed for high power extraction (greater than 50 
percent of engine thrust at altitude) at altitudes greater than 50,000 
feet.
    *(b) Turboshaft and Turboprop engines (including technology 
demonstrators) capable of 1500 mechanical shp (1119 kW) or greater and 
are specially designed with oil sump sealing when the engine is in the 
vertical position.
    *(c) Engines (including technology demonstrators) specially 
designed for armed or military unmanned aerial vehicle systems, cruise 
missiles, or target drones (MT if for an engine used in an unmanned 
aerial vehicle, drone, or missile that has a ``range'' equal to or 
greater than 300 km).
    *(d) GE38, AGT1500, CTS800, TF40B, T55, TF60, and T700 engines.
    *(e) Digital engine control systems (e.g., Full Authority Digital 
Engine Controls (FADEC) and Digital Electronic Engine Controls (DEEC)) 
specially designed for gas turbine engines controlled in this category 
(MT if the digital engine control system is for an unmanned aerial 
vehicle, drone, or missile that has a ``range'' equal to or greater 
than 300 km).

    Note to paragraph (e): Digital electronic control systems 
autonomously control the engine throughout its whole operating range 
from demanded engine start until demanded engine shut-down, in both 
normal and fault conditions.

    (f) Parts, components, accessories, attachments, associated 
equipment, and systems as follows:
    (1) Parts, components, accessories, attachments, and equipment 
specially designed for the following U.S.-origin engines (and military 
variants thereof): AE1107C, F101, F107, F112, F118, F119, F120, F135, 
F136, F414, F415, J402, GE38, TF40B, and TF60;
    *(2) Hot section components (i.e., combustion chambers and liners; 
high pressure turbine blades, vanes, disks and related cooled 
structure; cooled low pressure turbine blades, vanes, disks and related 
cooled structure; cooled augmenters; and cooled nozzles) specially 
designed for gas turbine engines controlled in this category;
    (3) Uncooled turbine blades, vanes, disks, and tip shrouds 
specially designed for gas turbine engines controlled in this category;
    (4) Combustor cowls, diffusers, domes, and shells specially 
designed for gas turbine engines controlled in this category;
    (5) Engine monitoring systems (i.e., prognostics, diagnostics, and 
health) specially designed for gas turbine engines and components 
controlled in this category;
    *(6) Any part, component, accessory, attachment, equipment, or 
system that:
    (i) is classified;
    (ii) contains classified software; or
    (iii) is being developed using classified information.
    ``Classified'' means classified pursuant to Executive Order 13526, 
or predecessor order, and a security classification guide developed 
pursuant thereto or equivalent, or to the corresponding classification 
rules of another government or international organization; or
    (7) Printed circuit boards or patterned multichip modules for which 
the layout is specially designed for defense articles in this category.
    (g) Technical data (see Sec.  120.10 of this subchapter) and 
defense services (see Sec.  120.9 of this subchapter) directly related 
to the defense articles enumerated in paragraphs (a) through (f) of 
this category and classified technical data directly related to items 
controlled in ECCNs 9A619, 9B619, 9C619, and 9D619 and defense services 
using the classified technical data. (See Sec.  125.4 of this 
subchapter for exemptions.) (MT for technical data and defense services 
related to articles designated as such.)
    (h)-(w) [Reserved]
    (x) Commodities, software, and technical data subject to the EAR 
(see Sec.  120.42 of this subchapter) used in or with defense articles 
controlled in this category.

    Note to paragraph (x):  Use of this paragraph is limited to 
license applications for defense articles controlled in this 
category where the purchase documentation includes commodities, 
software, or technical data subject to the EAR (see Sec.  123.1(b) 
of this subchapter).

* * * * *

[[Page 22758]]

Category XXI--Articles, Technical Data, and Defense Services Not 
Otherwise Enumerated

    *(a) Any article not enumerated on the U.S. Munitions List may be 
included in this category until such time as the appropriate U.S. 
Munitions List category is amended. The decision on whether any article 
may be included in this category, and the designation of the defense 
article as not Significant Military Equipment (see Sec.  120.7 of this 
subchapter), shall be made by the Director, Office of Defense Trade 
Controls Policy.
    (b) Technical data (see Sec.  120.10 of this subchapter) and 
defense services (see Sec.  120.9 of this subchapter) directly related 
to the defense articles covered in paragraph (a) of this category.

0
12. Section 121.2 is revised to read as follows:


Sec.  121.2  Interpretations of the U.S. Munitions List

    The following interpretations explain and amplify the terms used in 
Sec.  121.1 of this subchapter. These interpretations have the same 
force as if they were a part of the U.S. Munitions List category to 
which they refer.

0
13. Section 121.3 is revised to read as follows:


Sec.  121.3  Aircraft.

    (a) In Category VIII, except as described in paragraph (b) below, 
``aircraft'' means aircraft that:
    (1) Are U.S.-origin aircraft that bear an original military 
designation of A, B, E, F, K, M, P, R, or S;
    (2) Are foreign-origin aircraft specially designed to provide 
functions equivalent to those of the aircraft listed in paragraph 
(a)(1) of this section;
    (3) Are armed or are specially designed to be used as a platform to 
deliver munitions or otherwise destroy targets (e.g., firing lasers, 
launching rockets, firing missiles, dropping bombs, or strafing);
    (4) Are strategic airlift aircraft with a roll-on/roll-off ramp and 
capable of airlifting payloads over 35,000 lbs to ranges over 2,000 nm 
without being refueled in-flight into short or unimproved airfields;
    (5) Are capable of being refueled in-flight;
    (6) Incorporate any ``mission system'' controlled under this 
subchapter. ``Mission system'' is defined as a ``system'' (see Sec.  
121.8(g) of this subchapter) that is a defense article that performs 
specific military functions beyond airworthiness, such as by providing 
military communication, radar, active missile counter measures, target 
designation, surveillance, or sensor capabilities; or
    (7) Are Optionally Piloted Vehicles (OPV) (i.e., aircraft specially 
designed to operate with and without a pilot physically located in the 
aircraft).
    (b) Aircraft specially designed for military applications that are 
not identified in paragraph (a) of this section are subject to the EAR 
and classified as ECCN 9A610, including any unarmed military aircraft, 
regardless of origin or designation, manufactured prior to 1956 and 
unmodified since manufacture. Modifications made to incorporate safety 
of flight features or other FAA or NTSB modifications such as 
transponders and air data recorders are considered ``unmodified'' for 
the purposes of this paragraph.

0
14. Section 121.8 is amended by revising the section heading and 
paragraph (g) to read as follows:


Sec.  121.8  End-items, components, accessories, attachments, parts, 
firmware, software, and systems.

* * * * *
    (g) A system is a combination of end-items, parts, components, 
accessories, attachments, firmware, or software that operate together 
to perform a specialized military function.

0
15. Section 121.10 is revised to read as follows:


Sec.  121.10  Forgings, castings, and machined bodies.

    The U.S. Munitions List controls as defense articles those 
forgings, castings, and other unfinished products, such as extrusions 
and machined bodies, that have reached a stage in manufacturing where 
they are clearly identifiable by mechanical properties, material 
composition, geometry, or function as defense articles.

PART 123--LICENSES FOR THE EXPORT AND TEMPORARY IMPORT OF DEFENSE 
ARTICLES

0
16. The authority citation for part 123 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. 2753; 22 U.S.C. 2651a; 22 
U.S.C. 2776; Pub. L. 105-261, 112 Stat. 1920; Sec. 1205(a), Pub. L. 
107-228; Section 1261, Pub. L. 112-239; E.O. 13637, 78 FR 16129.


0
17. The heading for part 123 is revised to read as set forth above.

0
18. Section 123.1 is amended by revising paragraphs (a), (b), and (c) 
to read as follows:


Sec.  123.1  Requirement for export or temporary import licenses.

    (a) Any person who intends to export or to import temporarily a 
defense article must obtain the approval of the Directorate of Defense 
Trade Controls prior to the export or temporary import, unless the 
export or temporary import qualifies for an exemption under the 
provisions of this subchapter. The applicant must be registered with 
the Directorate of Defense Trade Controls pursuant to part 122 of this 
subchapter prior to submitting an application. Applications for 
unclassified exports and temporary imports must be submitted 
electronically. Applications for classified exports and classified 
temporary imports must be submitted via paper. Further guidance is 
provided on the Internet Web site of the Directorate of Defense Trade 
Controls. The application forms for export or temporary import are as 
follows:
    (1) Unclassified permanent exports must be made on Form DSP-5;
    (2) Unclassified temporary exports must be made on Form DSP-73;
    (3) Unclassified temporary imports must be made on Form DSP-61; or
    (4) Classified exports or temporary imports must be made on Form 
DSP-85.
    (b) Applications for Department of State export or temporary import 
licenses for proposed exports or temporary imports of defense articles, 
including technical data, may include commodities, software, and 
technical data subject to the EAR (see Sec.  120.42 of this subchapter) 
if:
    (1) The purchase documentation (e.g., purchase order, contract, 
letter of intent, or other appropriate documentation) includes both 
defense articles enumerated on the U.S. Munitions List and items on the 
Commerce Control List;
    (2) The commodities, software, and technical data subject to the 
EAR are for end-use in or with the U.S. Munitions List defense 
article(s) proposed for export; and
    (3) The license application separately enumerates the commodities, 
software, and technical data subject to the EAR in a U.S. Munitions 
List ``(x)'' paragraph entry.
    (c) As a condition to the issuance of a license or other approval, 
the Directorate of Defense Trade Controls may require all pertinent 
documentation regarding the proposed transaction and proper completion 
of the application form as follows:
    (1) Form DSP-5, DSP-61, DSP-73, and DSP-85 applications must have 
an entry in each block where space is provided for an entry. All 
requested information must be provided. Stating

[[Page 22759]]

``Not Applicable'' or ``See Attached'' is not acceptable. See the 
Directorate of Defense Trade Controls Internet Web site for additional 
guidance on the completion of a license application form;
    (2) Attachments and supporting technical data or brochures should 
be submitted with the license application. All freight forwarders and 
U.S. consignors must be listed in the license application. See the 
Directorate of Defense Trade Controls Internet Web site for 
instructions and limitations on attaching documentation;
    (3) Certification by an empowered official must accompany all 
application submissions (see Sec.  126.13 of this subchapter);
    (4) An application for a license for the permanent export of 
defense articles sold commercially must be accompanied by purchase 
documentation (e.g., purchase order, contract, letter of intent, or 
other appropriate documentation). In cases involving the Foreign 
Military Sales program, a copy of the relevant Letter of Offer and 
Acceptance is required, unless the procedures of Sec.  126.4(c) or 
Sec.  126.6 of this subchapter are followed;
    (5) Form DSP-83, duly executed, must accompany all license 
applications for the permanent export of significant military 
equipment, including classified defense articles or classified 
technical data (see Sec. Sec.  123.10 and 125.3 of this subchapter); 
and
    (6) A statement concerning the payment of political contributions, 
fees, and commissions must accompany a permanent export application if 
the export involves defense articles or defense services valued in an 
amount of $500,000 or more and is being sold commercially to or for the 
use of the armed forces of a foreign country or international 
organization (see part 130 of this subchapter).
* * * * *
0
19. Section 123.9 is amended by revising paragraph (b) to read as 
follows:


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

* * * * *
    (b) The exporter, U.S. or foreign, must inform the end-user and all 
consignees that the defense articles being exported are subject to U.S. 
export laws and regulations as follows:
    (1) The exporter, U.S. or foreign, must incorporate the following 
statement as an integral part of the bill of lading, air waybill, or 
other shipping document, and the purchase documentation or invoice 
whenever defense articles are to be exported, retransferred, or 
reexported pursuant to a license or other approval under this 
subchapter: ``These commodities are authorized by the U.S. Government 
for export only to [country of ultimate destination] for use by [end-
user] under [license or other approval number or exemption citation]. 
They may not be resold, diverted, transferred, or otherwise be disposed 
of, to any other country or to any person other than the authorized 
end-user or consignee(s), either in their original form or after being 
incorporated into other end-items, without first obtaining approval 
from the U.S. Department of State or use of an applicable exemption.''; 
and
    (2) When exporting items subject to the EAR (see Sec. Sec.  120.42 
and 123.1(b)) on a Department of State license or other approval, the 
U.S. exporter must provide to the end-user and consignees in the 
purchase documentation or other support documentation the appropriate 
EAR classification information for each item exported pursuant to a 
U.S. Munitions List ``(x)'' paragraph. This includes the appropriate 
ECCN or EAR99 designation.
* * * * *

Rose E. Gottemoeller,
Acting Under Secretary, Arms Control and International Security, 
Department of State.
[FR Doc. 2013-08351 Filed 4-15-13; 8:45 am]
BILLING CODE 4710-25-P