International Traffic in Arms Regulations: Corrections and Clarifications for Export and Reexport; Canadian Exemptions; Exemptions Regarding Intra-Company, Intra-Organization, and Intra-Governmental Transfers to Employees Who Are Dual Nationals or Third-Country Nationals; and Voluntary Disclosures, 5759-5761 [2022-01889]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Proposed Rules]
[Pages 5759-5761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01889]


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DEPARTMENT OF STATE

22 CFR Parts 120, 126, and 127

[Public Notice: 11532]
RIN 1400-AF39


International Traffic in Arms Regulations: Corrections and 
Clarifications for Export and Reexport; Canadian Exemptions; Exemptions 
Regarding Intra-Company, Intra-Organization, and Intra-Governmental 
Transfers to Employees Who Are Dual Nationals or Third-Country 
Nationals; and Voluntary Disclosures

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State (DOS) proposes to amend the 
International Traffic in Arms Regulations (ITAR) to clarify the 
definitions of export and reexport. Further, the Department proposes to 
replace the term ``national'' with ``person'' in the Canadian 
exemptions; revise the exemption for intra-company, intra-organization, 
and intra-governmental transfers to dual nationals or third-country 
nationals; and correct administrative errors in the section on 
voluntary disclosures.

DATES: The Department of State will accept comments on this proposed 
rule until April 4, 2022.

ADDRESSES: Interested parties may submit comments by one of the 
following methods:
     Email: [email protected] with the subject line: 
``Regulatory Change: ITAR Sections 120, 126 and 127''
     Internet: At www.regulations.gov, search for this notice, 
Docket DOS-2021-0031. Comments received after that date may be 
considered if feasible, but consideration cannot be assured. Those 
submitting comments should not include any personally identifying 
information they do not desire to be made public or information for 
which a claim of confidentiality is asserted, because comments and/or 
transmittal emails will be made available for public inspection and 
copying after the close of the comment period via the Directorate of 
Defense Trade Controls website at www.pmddtc.state.gov. Parties who 
wish to comment anonymously may do so by submitting their comments via 
www.regulations.gov, leaving the fields that would identify the 
commenter blank and including no identifying information in the comment 
itself.

FOR FURTHER INFORMATION CONTACT: Ms. Engda Wubneh, Foreign Affairs 
Officer, Office of Defense Trade Controls Policy, U.S. Department of 
State, telephone (202) 663-1809; email [email protected]. 
ATTN: Regulatory Change, ITAR parts 120, 126, and 127.

SUPPLEMENTARY INFORMATION: The Department of State proposes to amend 
the International Traffic in Arms Regulations (ITAR) to revise the 
definitions of export (ITAR Sec.  120.17) and reexport (ITAR Sec.  
120.19) to clarify that any release of technical data to a foreign 
person described within the respective definitions is a release only to 
any countries in which that foreign person currently holds citizenship 
or permanent residency. Since the Department published ``International 
Traffic in Arms Regulations: Revisions to Definition of Export and 
Related Definitions'' (81 FR 35611) in 2016, the Department has changed 
its assessment that inclusion of prior citizenship or permanent 
residency in ITAR Sec. Sec.  120.17(b) and 120.19(b) is necessary based 
on its experience with this provision. The Department assesses that a 
foreign person's former citizenship or permanent residency status in a 
country should not be deemed to automatically result in an export or 
reexport to that country. The Department proposes this change to better 
align with our policy and requirements in Section 126.18 and to provide 
greater opportunities for foreign persons who are no longer citizens or 
permanent residents of certain countries to participate in ITAR-
regulated activities.
    Further, the Department proposes to replace the term ``national'' 
with the ITAR-defined term ``person'' in ITAR Sec.  126.5(b) of the 
Canadian exemption to be consistent with how foreign persons are 
defined in the ITAR. The Department also proposes to remove the phrase 
``although nationality does not, in and of itself, prohibit access to 
defense articles'' from ITAR Sec.  126.18(c)(2) as the definitions of 
export and reexport provide that a release to a foreign person 
constitutes an export or reexport, as applicable, to all countries in 
which the foreign person holds citizenship or permanent residency. This 
proposed change is not intended to convey any change to the 
Department's long-standing position that the purpose of vetting 
employees from countries listed in ITAR Sec.  126.1 is to mitigate 
diversion. Further, simply identifying nationalities with no 
substantive contacts with ITAR Sec.  126.1 countries is not a 
precondition to rely on to use the exemption for intra-company, intra-
organization, and intra-governmental transfers to dual or third-country 
nationals. The Department also proposes to clarify ITAR Sec.  
126.18(c)(2) by stating that the screened employee, not the end-user or 
consignee, must execute a nondisclosure agreement to provide assurances 
that said employee will not transfer any unclassified defense articles 
to unauthorized persons.
    Lastly, the Department proposes to correct administrative errors in 
the voluntary disclosures section of the ITAR by providing the correct 
references to exemptions pursuant to the Defense Trade Cooperation 
Treaties between the United States and Australia and the United States 
and the United Kingdom in ITAR Sec. Sec.  126.16 and 126.17, 
respectively. Additionally, the Department proposes to streamline the 
section on voluntary disclosures by simply referencing the relevant 
ITAR sections, Sec. Sec.  126.1(e), 126.16(h)(8), and 126.17(h)(8), 
that describe the duties of persons to notify the Directorate of

[[Page 5760]]

Defense Trade Controls of particular activities.

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), pursuant to 
5 U.S.C. 553(a)(1). Since the Department is of the opinion that this 
rule is exempt from 5 U.S.C. 553, it is the view of the Department that 
the provisions of Section 553(d) do not apply to this rulemaking.

Regulatory Flexibility Act

    Notwithstanding the Department's publication of this rulemaking as 
a proposed rule, this rule is exempt from the notice-and-comment 
rulemaking provisions of 5 U.S.C. 553 as a foreign affairs function. 
Therefore, it does not require 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 are deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

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 proposed amendment does not 
have sufficient federalism implications to require consultations or 
warrant the preparation of a federalism summary impact statement. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this rulemaking.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
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). This 
rule's scope does not impose additional regulatory requirements or 
obligations; therefore, the Department believes costs associated with 
this rule will be minimal. Although the Department cannot determine 
based on available data how many fewer licenses will be submitted as a 
result of this rule, the amendments to the definitions of export and 
reexport will inherently relieve the licensing burden for some 
exporters. Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility. This rule has been designated as a 
``nonsignificant regulatory action'' by the Office and Information and 
Regulatory Affairs under Executive Order 12866.

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, Executive Order 13175 does not apply to this 
rulemaking.

Paperwork Reduction Act

    This rulemaking does not impose or revise any information 
collections subject to 44 U.S.C. Chapter 35.

List of Subjects in 22 CFR Parts 120, 126, and 127

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

    For the reasons set forth above, the Department of State proposes 
to amend 22 CFR parts 120, 126, and 127 as follows:

PART 120--PURPOSE and DEFINITIONS

0
1. The authority citation for part 120 continues to read as follows:

    Authority:  Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 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. Amend Sec.  120.17 by revising paragraph (b) to read as follows:


Sec.  120.17   Export.

* * * * *
    (b) Any release in the United States of technical data to a foreign 
person is deemed to be an export to all countries in which the foreign 
person holds citizenship or permanent residency.
* * * * *
0
3. Amend Sec.  120.19 by revising paragraph (b) to read as follows:


Sec.  120.19   Reexport.

* * * * *
    (b) Any release outside the United States of technical data to a 
foreign person is deemed to be a reexport to all countries in which the 
foreign person holds citizenship or permanent residency.
* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

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

    Authority:  22 U.S.C. 2752, 2778, 2780, 2791, and 2797; 22 
U.S.C. 2651a; 22 U.S.C. 287c; Sec. 1225, Pub. L. 108-375; Sec. 7089, 
Pub. L. 111-117; Pub. L. 111-266; Sections 7045 and 7046, Pub. L. 
112-74; E.O. 13637, 78 FR 16129.

0
5. Amend Sec.  126.5 by revising paragraph (b) to read as follows:


Sec.  126.5  Canadian exemptions.

* * * * *
    (b) Permanent and temporary export of defense articles. Except as 
provided in Supplement No. 1 to part 126 of this subchapter and for 
exports that transit third countries, Port Directors of U.S. Customs 
and Border Protection and postmasters shall permit, when for end-use in 
Canada by Canadian Federal or Provincial governmental authorities 
acting in an official capacity or by a Canadian-registered person, or 
for return to the United States, the permanent and temporary export to 
Canada without a license of unclassified defense articles and defense 
services identified on the U.S. Munitions List (22 CFR 121.1). The 
exceptions are subject to meeting the requirements of this subchapter, 
to include 22 CFR 120.1(c) and (d), parts 122 and 123 (except insofar 
as exemption from licensing requirements is herein authorized) and 
Sec.  126.1, and the requirement to obtain non-transfer and use 
assurances for all significant military equipment. For purposes of this 
section, ``Canadian-registered person'' is any Canadian person 
(including Canadian business entities organized under the laws of

[[Page 5761]]

Canada), dual citizen of Canada and a third country other than a 
country listed in Sec.  126.1 of this subchapter unless the conditions 
of Sec.  126.18(c) are satisfied, or permanent resident registered in 
Canada in accordance with the Canadian Defense Production Act, and such 
other Canadian Crown Corporations identified by the Department of State 
in a list of such persons publicly available through the website of the 
Directorate of Defense Trade Controls and by other means.
* * * * *
0
6. Amend Sec.  126.18 by revising paragraph (c)(2) to read as follows:


Sec.  126.18  Exemptions regarding intra-company, intra-organization, 
and intra-governmental transfers to employees who are dual nationals or 
third-country nationals.

* * * * *
    (c) * * *
    (2) The end-user or consignee to have in place a process to screen 
its employees and for the employees to have executed a nondisclosure 
agreement that provides assurances that the employee will not transfer 
any defense articles to persons unless specifically authorized. The 
end-user or consignee must screen its employees for substantive 
contacts with restricted or prohibited countries listed in Sec.  126.1. 
Substantive contacts include regular travel to such countries, recent 
or continuing contact with agents, brokers, and nationals of such 
countries, continued demonstrated allegiance to such countries, 
maintenance of business relationships with persons from such countries, 
maintenance of a residence in such countries, receiving salary or other 
continuing monetary compensation from such countries, or acts otherwise 
indicating a risk of diversion. An employee who has substantive 
contacts with persons from countries listed in Sec.  126.1(d)(1) shall 
be presumed to raise a risk of diversion, unless DDTC determines 
otherwise. End-users and consignees must maintain a technology 
security/clearance plan that includes procedures for screening 
employees for such substantive contacts and maintain records of such 
screening for five years. The technology security/clearance plan and 
screening records shall be made available to DDTC or its agents for 
civil and criminal law enforcement purposes upon request.
* * * * *

PART 127--VIOLATIONS AND PENALTIES

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

    Authority: Sections 2, 38, and 42, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2791); 22 U.S.C. 401; 22 U.S.C. 2651a; 22 
U.S.C. 2779a; 22 U.S.C. 2780; E.O. 13637, 78 FR 16129; Pub. L. 114-
74, 129 Stat. 584.

0
8. Amend Sec.  127.12 by revising paragraph (b)(5) to read as follows:


Sec.  127.12   Voluntary disclosures.

* * * * *
    (b) * * *
    (5) Nothing in this section shall be interpreted to negate or 
lessen the obligations imposed pursuant to Sec. Sec.  126.1(e), 
126.16(h)(8), and 126.17(h)(8) of this subchapter.
* * * * *

Bonnie Jenkins,
Under Secretary, Arms Controls and International Security, Department 
of State.
[FR Doc. 2022-01889 Filed 2-1-22; 8:45 am]
BILLING CODE 4710-25-P