International Traffic in Arms Regulations: Transfers Made by or for a Department or Agency of the U.S. Government, 16398-16402 [2019-07696]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 84, Number 76 (Friday, April 19, 2019)]
[Rules and Regulations]
[Pages 16398-16402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07696]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF STATE

22 CFR Part 126

[Public Notice: 10363]
RIN 1400-AE24


International Traffic in Arms Regulations: Transfers Made by or 
for a Department or Agency of the U.S. Government

AGENCY: Department of State.

ACTION: Final rule.

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

SUMMARY: The Department of State is amending the International Traffic 
in Arms Regulations (ITAR) to revise the licensing exemption for 
transfers made by or for an agency of the U.S. Government.

DATES: This rule is effective on April 19, 2019.

FOR FURTHER INFORMATION CONTACT: Robert Monjay, Office of Defense Trade 
Controls Policy, Department of State, telephone (202) 663-2817; email 
[email protected]. ATTN: ITAR Amendment--By or For.

SUPPLEMENTARY INFORMATION: The Department published a proposed rule on 
May 22, 2015 (RIN 1400-AC88, 80 FR 29565) (Proposed Rule) and received 
17 public comments. The Department published a final rule on August 17, 
2016 (81 FR 54732) covering those elements of the Proposed Rule not 
related to the exemption for exports and temporary imports made to or 
on behalf of a department or agency of the U.S. Government in ITAR 
Sec.  126.4, and addressed the relevant public comments. This final 
rule addresses only the proposed revision of that exemption, and 
addresses only the public comments related to that proposal. The 
changes to Sec.  126.4 relevant to the existing text are described 
below.
    This final rule revises ITAR Sec.  126.4 to clarify when exports, 
reexports, retransfers, temporary imports, and performance of a defense 
service (collectively described as ``transfers'' for the remainder of 
this rule) may be made by or for an agency of the U.S. Government 
without a license, including by employees of the U.S. Government in the 
performance of their official duties. This rule expands the scope of 
this exemption to allow for permanent exports, reexports, and 
retransfers, in addition to temporary exports and imports, and to allow 
transfers by third parties acting for the U.S. Government. In addition, 
this rule revises the section heading from shipments to transfers to 
reflect the scope of the exemption.
    The authorization to transfer defense articles and defense services 
by or for the U.S. Government is divided between paragraphs (a) and (b) 
in the revised Sec.  126.4. Paragraph (a) applies to transfers made by 
the U.S. Government and paragraph (b) applies to transfers made for, or 
on behalf of, the U.S. Government. Paragraphs (c), (d), (e) and (f) set 
out additional requirements applicable to transfers made under either 
paragraph (a) or (b).
    Paragraph (a) is revised to authorize those transfers made by a 
department or agency of the U.S. Government (1) for official use by the 
U.S. Government, (2) for carrying out certain international agreements 
or arrangements, (3) for carrying out foreign assistance, or sales 
programs authorized by statute, or (4) for carrying out certain 
Department of Defense (DOD) ``security cooperation

[[Page 16399]]

programs and activities,'' as that term is defined in paragraph 
(a)(4)(i). Certain agreements or arrangements entered into with 
international partners authorized by Title 10, Title 22, or a National 
Defense Authorization Act are included in paragraph (a)(2), and may be 
for cooperative research, development, testing, evaluation, or 
production; reciprocal use of test facilities; loan of equipment and 
material; personnel exchange; cooperative logistics support, 
acquisition, and cross-servicing; security of supply; or reciprocal 
defense procurement activities, among others. The exemption continues 
to authorize the transfer of technical data, although the Department 
has deleted the term as redundant because the definition of ``defense 
article'' in Sec.  120.6 includes technical data.
    Paragraph (a)(1) also provides that use by U.S. Government 
contractors can be within the scope of the official use of the U.S. 
Government, when the U.S. Government contractor is either operating 
within a U.S. Government-controlled facility or a U.S. Government 
employee is empowered and responsible to exercise control over the 
defense article. Additionally, the Deputy Assistant Secretary of State 
for Defense Trade Controls may approve the use of this exemption for 
other activities by U.S. Government contractors if requested by a 
department or agency of the U.S. Government. Paragraph (a)(1)(ii)(D) is 
added to clarify that the provision does not authorize the release of 
technical data to persons or entities of a country identified in Sec.  
126.1, even if they are in a contractual relationship with the U.S. 
Government.
    The existing note is deleted, as the special definition of an item 
considered to be permanently exported is no longer necessary because 
the exemption is expanded to allow for permanent and temporary 
transactions. Paragraph (a)(5) is added to explain that authorization 
of a transfer under Sec.  126.4 is for purposes of the ITAR only, and 
that it does not constitute any other form of U.S. Government approval 
that may be required, including but not limited to requirements imposed 
by statutes, contracts, or agreements, such as a third party transfer 
requirement under a Memorandum of Understanding or foreign assistance 
program. Additionally, authorization to export does not absolve parties 
of the requirement to comply with any applicable U.S. Government 
processes, procedures, or practices, including the need for exports of 
items on the MTCR Annex to receive the case-by-case review called for 
by the MTCR Guidelines.
    Paragraph (a)(6) is added to retain the existing provision that 
this exemption cannot be used when the U.S. Government is acting as a 
transmittal agent on behalf of a private individual or firm, even when 
it does so in satisfaction of security requirements. The Department 
removed the requirement that the U.S. Government must conduct all 
aspects of the transaction and the special definition of permanent 
export. The Department also eliminated language limiting the scope of 
the rule to temporary imports and temporary exports, and added a new 
paragraph (f) to clarify that a Directorate of Defense Trade Controls 
(DDTC) authorization is required for any change in end-use or end-user 
not authorized by the section.
    Paragraph (a)(7) is added to clarify that exports made in 
compliance with section 38(b)(2) of the Arms Export Control Act (AECA) 
(22 U.S.C. 2778(b)(2)) are excluded from the licensing requirements of 
the AECA and do not require export authorization from DDTC. Any defense 
article or defense service exported in compliance with section 38(b)(2) 
is excluded from ITAR control provided it is either: (1) For official 
use by a department or agency of the United States Government, as 
implemented in Sec.  126.4(a)(1) and (b), or (2) for carrying out any 
foreign assistance or sales program authorized by law and subject to 
the control of the President by other means, as stated in Sec.  
126.4(a)(3) and (b). Unless otherwise authorized pursuant to U.S. law 
or regulation, reexport or retransfer of defense articles and services 
exported pursuant to section 38(b)(2) but which no longer are subject 
to independent controls require authorization from the Department of 
State. Nothing in ITAR Sec.  126.4 relieves exporters from any other 
obligation imposed by U.S. law or regulation outside of the ITAR, 
including any applicable United Nations or U.S. embargo or sanction.
    Paragraph (a)(4)(ii) is added to clarify that the U.S. Government 
agency or entity exporting pursuant to the exemption is required to 
obtain appropriate end-use assurances from the recipient, including 
verification that the recipient has knowledge of and intent to comply 
with paragraph (f).
    A new paragraph (b) is added to authorize transfers performed by 
another entity for a department or agency of the U.S. Government. Third 
parties may only perform a transfer for a department or agency of the 
U.S. Government under this exemption when that department or agency 
would have been authorized to perform the transfer itself under 
paragraph (a). Transfers by third parties directly to the U.S. 
Government overseas may be conducted at the request of the U.S. 
Government. Transfers by third parties to anyone other than the U.S. 
Government, including directly to any U.S. Government contractors, must 
be conducted pursuant to written direction from the U.S. Government 
department or agency, such as through contractual documents, or 
pursuant to an international agreement or arrangement. For example, 
transfers by a company to itself may be authorized by written direction 
from the U.S. Government department or agency requiring the transfer. 
Under no circumstances shall a transfer to any non-U.S. Government 
entity be authorized under paragraph (b)(1). Each department or agency 
will determine for itself who is authorized to issue such written 
directions.
    A new paragraph (c) is added to clarify that the ITAR does not 
require an authorization for the return to the United States of a 
defense article exported under this section provided the defense 
articles have not been subsequently transferred without authorization 
or by license or other approval pursuant to another provision of the 
ITAR. The defense article must be returned to the U.S. Government or to 
the person who exported it pursuant to paragraph (b).
    The Department redesignated the existing paragraph (b) as new 
paragraph (d) and existing paragraph (d) as new paragraph (e). The 
Department also removed the text of the existing paragraph (c), as 
permanent exports are now included in the authorizations in paragraphs 
(a) and (b). The Department revised new paragraph (d) for clarity and 
to specifically state that this exemption does not authorize exports 
that would violate a U.S. or United Nations Security Council arms 
embargo. The Department revised new paragraph (e) (former paragraph 
(d)) to clarify that exporters no longer need to provide U.S. Customs 
and Border Protection with a written certification of compliance with 
this section and to clarify that the ITAR does not impose an Electronic 
Export Information (EEI) filing requirement on exports via U.S. 
Government vehicles, aircraft and vessels. To the extent that other 
U.S. Government statutes and regulations do impose an EEI filing 
requirement, this provision is not intended to serve as an exemption 
from that requirement.
    The Department added a new paragraph (f) which provides that 
authorization from DDTC in the form of a license or other approval, 
including through Sec.  126.4, is required for any change in the end-
use or end-user.

[[Page 16400]]

    The Department also revised Sec.  126.1(a) to add Sec.  126.4(a)(1) 
and (3) and (b)(1) to the list of exemptions provided for in the ITAR 
that apply with respect to defense articles or defense services 
originating in or for export to any proscribed countries, areas, or 
persons. Exports may not be made under any other provision of this 
exemption to the countries that are subject to restrictions identified 
in Sec.  126.1.

Public Comments and Responses

    Several commenters noted the removal of the reference to technical 
data and assumed that this indicated that the exemption would no longer 
authorize exports of technical data. As noted above, the Department 
removed the reference to technical data because it was redundant and 
confusing. Technical data is a form of defense article and is 
authorized by the language authorizing the export (now export, 
reexport, retransfer, and temporary import) of defense articles. By 
including a reference to technical data, the provision implied that 
other references to defense articles may not include technical data, 
which is not accurate. This could leave readers with an incorrect 
understanding of the ITAR. When the Department wishes to refer only to 
hardware defense articles or otherwise exclude technical data, it does 
so explicitly. When the Department refers to defense articles, without 
modification, the reference includes technical data.
    Several commenters requested clarification regarding the scope of 
official use. Several commenters requested that the Department allow 
use by contractors who are not U.S. persons. One commenter requested 
that the Department reevaluate the scope of allowed use by contractors 
under the exemption. One commenter specifically asked the Department to 
state that any use by a U.S. Government contractor in the course of 
contract is within the scope of official use by the U.S. Government. As 
noted above and in response to these comments, the Department has 
revised the provisions regarding use by a U.S. Government contractor, 
and provided that use by U.S. Government contractors is within the 
scope of the exemption when: (1) The contractor is operating within a 
U.S. Government-owned facility; (2) a U.S. Government employee is 
responsible for control of the defense articles; or (3) otherwise 
approved by DDTC. The Department also removed the requirement from the 
proposed rule that the contractors be U.S. persons in response to 
comments, but maintained a restriction on using contractors from Sec.  
126.1 countries.
    Two commenters requested clarification with respect to exports to 
U.S. Government contractors for the purpose of carrying out any foreign 
assistance, cooperative project, or sales program authorized by law. 
The Department declines to provide a general rule on who can be the 
recipient of such transfers, but notes that the transfers should be 
guided by their authorizing language, such as in an international 
agreement or statute. If you have questions regarding the scope of a 
specific international agreement or statutory program, please first 
contact the department or agency responsible for its implementation. If 
questions still exist as to the applicability of this provision to a 
transfer, please submit a request for an advisory opinion to DDTC.
    One commenter objected to the prohibition on using the exemption to 
export an item subject to the Export Administration Regulations (EAR) 
that is on the MTCR Annex, as the exemption may be used to export a 
defense article that is on the MTCR Annex. The commenter noted that it 
does not make sense to require a separate individual authorization for 
items subject to the EAR, which have been determined to be less 
sensitive. The Department agrees with this comment. Any MTCR Annex item 
subject to the EAR may be authorized under this exemption when used in 
or with a defense article and transferred with a defense article, as 
set forth in Sec.  120.5(b), and where consistent with paragraph 
(a)(5).
    One commenter requested that the Department revise the provision 
requiring the U.S. Government to perform or direct all aspects of the 
transaction. The Department has removed this provision, and replaced it 
with provisions providing specific guidance that most exports by third 
parties require written direction from the relevant department or 
agency, but that exports directly to the U.S. Government may be 
performed on request.
    Several commenters requested that the Department remove the 
requirement to include a certification on the airway bill. The 
Department agrees.
    Several commenters requested that the Department remove the 
requirement to provide a certification to the Port Director. The 
Department agrees.

Regulatory Analysis and Notices

Administrative Procedure Act

    This rulemaking is exempt from section[thinsp]553 (Rulemaking) and 
section[thinsp]554 (Adjudications) of the Administrative Procedure Act 
(APA) pursuant to 5 U.S.C. 553(a)(1) as a military or foreign affairs 
function of the United States Government. Although the Department is of 
the opinion that this rule is exempt from the rulemaking provisions of 
the APA, the Department published a proposed rule with a 45-day 
provision for public comment.

Regulatory Flexibility Act

    Since the Department of State is of the opinion that this rule is 
exempt from the provisions of 5 U.S.C. 553, and there is no other 
statute that requires that the Regulatory Flexibility Act apply, 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

    The Department does not believe this rulemaking is a major rule as 
defined in 5 U.S.C. 804.

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 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

[[Page 16401]]

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 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 
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 preempt 
tribal law. Accordingly, the provisions of Executive Order 13175 do not 
apply to this rulemaking.

Paperwork Reduction Act

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

List of Subjects in 22 CFR Part 126

    Arms and munitions, Exports.

    Accordingly, for the reasons set forth above, title 22, chapter I, 
subchapter M, part 126, of the Code of Federal Regulations is amended 
as follows:

PART 126--GENERAL POLICIES AND PROVISIONS

0
1. The authority citation for part 126 continues to read as follows:

    Authority: Secs. 2, 38, 40, 42, and 71, Pub. L. 90-629, 90 Stat. 
744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); 22 U.S.C. 2651a; 
22 U.S.C. 287c; E.O. 12918, 59 FR 28205; 3 CFR, 1994 Comp., p. 899; 
Sec. 1225, Pub. L. 108-375; Sec. 7089, Pub. L. 111-117; Pub. L. 111-
266; Section 7045, Pub. L. 112-74; Section 7046, Pub. L. 112-74; 
E.O. 13637, 78 FR 16129.


0
2. Section 126.1 is amended by revising paragraph (a) to read as 
follows:


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

    (a) General. It is the policy of the United States to deny licenses 
and other approvals for exports and imports of defense articles and 
defense services, destined for or originating in certain countries. The 
exemptions provided in this subchapter, except Sec.  123.17 of this 
subchapter and Sec. Sec.  126.4(a)(1) or (3) and (b)(1) and 126.6, or 
when the recipient is a U.S. Government department or agency, do not 
apply with respect to defense articles or defense services originating 
in or for export to any proscribed countries, areas, or persons. (See 
Sec.  129.7 of this subchapter, which imposes restrictions on brokering 
activities similar to those in this section).
* * * * *

0
3. Section 126.4 is revised to read as follows:


Sec.  126.4   Transfers by or for the United States Government.

    (a) By a department or agency. A license is not required for the 
export, reexport, retransfer, or temporary import of a defense article 
or the performance of a defense service, when made by a department or 
agency of the U.S. Government:
    (1) For official use by a department or agency of the U.S. 
Government, including:
    (i) By employees of the U.S. Government acting within their 
official capacity; or
    (ii) By persons or entities in a contractual relationship with the 
U.S. Government using the defense article or performing the defense 
service to conduct the contracted-for activities within the scope of 
the contractual relationship and:
    (A) Within a U.S. Government-controlled facility;
    (B) When an employee of the U.S. Government is empowered and 
responsible to ensure that the defense article is not diverted and is 
only used within the scope of the contractual relationship; or
    (C) Use of the exemption in paragraph (a)(1)(ii) is authorized by 
the Deputy Assistant Secretary of State for Defense Trade Controls at 
the request of a department or agency of the U.S. Government.
    (D) The provision in this paragraph (a)(1)(ii) may not be used to 
release technical data to a person or entity of a country identified in 
Sec.  126.1.
    (2) For carrying out a cooperative project, program, or other 
activity in furtherance of an agreement or arrangement that provides 
for the export, reexport, retransfer, or temporary import of the 
defense article, or the performance of activities that constitute the 
defense service, and is one of the following:
    (i) A binding international agreement to which the United States or 
any agency thereof is a party; or
    (ii) An arrangement with international partners authorized by Title 
10 or 22 of the United States Code or pertinent National Defense 
Authorization Act provisions.
    (3) For carrying out any foreign assistance or sales program 
authorized by law and subject to control by the President by other 
means.
    (4) For any other security cooperation programs and activities of 
the Department of Defense authorized by law and subject to control by 
the President by other means.
    (i) For purposes of this paragraph (a)(4), ``security cooperation 
programs and activities of the Department of Defense'' means any 
program, activity, or interaction of the Department of Defense with the 
security establishment of a foreign country to:
    (A) Build and develop allied and friendly security capabilities for 
self-defense and multinational operations;
    (B) Provide the armed forces with access to the foreign country 
during peacetime or a contingency operation; or
    (C) Build relationships that promote specific United States 
security interests.
    (ii) The U.S. Government must obtain appropriate end-use and 
retransfer assurances from the foreign party and to ensure that the 
recipient is aware of and will comply with paragraph (f) of this 
section.
    (5) Authorization under this section is for compliance with the 
ITAR only and does not constitute any other U.S. Government approval 
that may be required prior to the transfer of a defense article, and 
does not satisfy other obligations of U.S. law or regulation, or 
applicable Government process, procedure, or practice, including the 
requirement that any export of an item listed on the MTCR Annex receive 
the case-by-case review called for in the MTCR Guidelines.
    (6) The exemption in this paragraph (a) does not apply when a U.S. 
Government department or agency acts as a transmittal agent on behalf 
of a private individual or firm, either as a convenience or in 
satisfaction of security requirements.
    (7) The authorization requirement expressed in paragraph (f) of 
this section does not apply to defense articles and services exported 
from the United States pursuant to paragraphs (a)(1) and (3) of this 
section, provided the defense articles and services are subject to the 
terms thereof.
    (b) By a person on behalf of a department or agency. A license is 
not

[[Page 16402]]

required for the export, reexport, retransfer, or temporary import of a 
defense article or the performance of a defense service, when made by 
another person for a department or agency of the U.S. Government:
    (1) To a department or agency of the U.S. Government at its 
request; or
    (2) To an entity other than the U.S. Government at the written 
direction of a department or agency of the U.S. Government or pursuant 
to an international agreement or arrangement, for an activity 
authorized for that department or agency in paragraphs (a)(1) through 
(4) of this section.
    (c) Return to the United States. No license is required under this 
subchapter for the return to the United States of a defense article 
exported pursuant to this section and not subsequently reexported or 
retransferred other than pursuant to this section, to:
    (1) A department or agency of the U.S. Government; or
    (2) The person who exported the item.
    (d) Prohibited activities and arms embargoes. This section does not 
authorize any department or agency of the U.S. Government to make or 
authorize any export that is otherwise prohibited by any other 
administrative provisions or by any statute or that is inconsistent 
with U.S. arms embargoes or United Nations Security Council Resolutions 
(see Sec.  126.1).
    (e) Export clearance. For exports shipped other than by a U.S. 
diplomatic pouch or a U.S. Government aircraft, vehicle, or vessel, an 
Electronic Export Information (EEI) filing must be submitted to U.S. 
Customs and Border Protection using its electronic system(s) at the 
time of export, unless electronic submission of such information is 
unavailable, in which case U.S. Customs and Border Protection or the 
Department of Defense transmittal authority will issue instructions.
    (f) Change in end-use or end-user. Any change in end-use or end-
user of a defense article, to any party or use not authorized by this 
section, requires approval of the Directorate of Defense Trade Controls 
through a license or other approval.

Andrea Thompson,
Under Secretary for Arms Control and International Security, U.S. 
Department of State.
[FR Doc. 2019-07696 Filed 4-18-19; 8:45 am]
BILLING CODE 4710-25-P