International Traffic in Arms Regulations: Registration Fees, 31119-31125 [2024-08627]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 89, Number 80 (Wednesday, April 24, 2024)]
[Proposed Rules]
[Pages 31119-31125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08627]


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DEPARTMENT OF STATE

22 CFR Parts 122 and 129

[Public Notice: 12236]
RIN 1400-AF78


International Traffic in Arms Regulations: Registration Fees

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State proposes to amend the International 
Traffic in Arms Regulations (ITAR) by increasing and specifying the 
fees required for registration with the Directorate of Defense Trade 
Controls (DDTC).

DATES: Send comments on or before June 10, 2024.

ADDRESSES: Interested parties may submit comments by one of the 
following methods:
     Email: [email protected]. Include the subject 
line: ``Registration Fees--RIN 1400-AF78''
     Federal eRulemaking Portal: https://www.regulations.gov. 
Identify by the Department docket number DOS-2023-0034 or RIN 1400-
AF78. Follow the instructions for sending comments.
    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 any such claim will be deemed waived and comments 
and/or transmittal emails may be made publicly available. 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. Per 5 U.S.C. 553(b)(4), a concise summary of this proposed rule 
may be found at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Allison Smith, PM/DDTC Director of 
Management, Bureau of Political-Military Affairs, U.S. Department of 
State, telephone 202-647-1282; email: [email protected]. 
Subject: Registration Fee Change.

SUPPLEMENTARY INFORMATION:

Overview

    For the first time in fifteen years, the State Department proposes 
to revise and increase the registration fees (also referred to as 
``fees'') charged to those required to register with DDTC. In 
accordance with section 38(b) of the Arms Export Control Act (AECA) (22 
U.S.C. 2778(b)), every person who engages in the business of 
manufacturing, exporting, temporarily importing, or brokering any 
defense articles or defense services is required to register with DDTC, 
the agency charged with administering the relevant sections of the 
AECA. Section 38(b) of the AECA also requires that every person 
required to register pay a registration fee. As the ITAR implements 
section 38 of the AECA, and as its parts 122 and 129 (22

[[Page 31120]]

CFR parts 122 and 129) address registration, the Department proposes to 
revise those provisions to restate registration requirements without 
substantive change, to revise the Department's methodology for 
determining the fees paid by certain registrants, to increase 
registration fees, and to reinsert the actual amount of fees within the 
ITAR itself.

Uses of Registration Fees

    Registration fees required under section 38 of the AECA are, by a 
separate statute (22 U.S.C. 2717), used to fund a large share of DDTC 
and the many functions it provides to exporters, importers, brokers, 
manufacturers, and the general public. The Department briefly outlines 
some of these functions here so that registrants can have more context 
for how their fees help DDTC's mission. Services like the DDTC Response 
Team, Help Desk, commodity jurisdiction determinations, advisory 
opinions, guidance on brokering, and support for registration all offer 
assistance for the approximately 14,500 current DDTC registrants and 
the general public. Moreover, DDTC often conducts outreach, visits, 
webinars, speaking engagements and other educational services to help 
people understand the ITAR and its requirements and exemptions. For 
fiscal year 2022, for example, DDTC experts attended over 60 outreach 
events and engaged with over 6,000 industry attendees in online 
webinars.
    Issuing licenses or other authorizations under the ITAR is also a 
core and large part of DDTC's work. In fiscal year 2022, DDTC received 
approximately 22,500 license applications and issued authorizations 
that were valued at just over $153.7 billion. Although licensing 
officials currently are some of the only DDTC officials paid through 
congressional appropriations, contractor support and other technologies 
impacting the processing, adjudication. and monitoring of licenses are 
funded by fees.
    DDTC also provides crucial public services in investigating 
possible ITAR violations to maintain U.S. foreign policy and national 
security imperatives. Again, using the last fiscal year as an 
illustrative example, DDTC received over 600 disclosures, either 
voluntary or directed, and conducted over 300 end-use monitoring 
checks. Because investigations and compliance actions can be complex 
and span several months or years, the monetary value that DDTC's 
Compliance office secured is best viewed as a three-year rolling 
average for FY 2020-2023, where an average of over $7.6M per year in 
settlement funds were obtained for alleged ITAR violations, all of 
which was deposited into the Treasury Department's General Fund and 
does not go to DDTC. DDTC also assists Department of Justice (DOJ) 
officials in certain criminal proceedings related to the ITAR, 
including by providing testimony.
    These services provide broad protection to industry and the public 
alike, ensuring that a uniform set of rules are enforced for all, that 
one business or exporter does not have an unfair advantage over the 
other, and that exports, temporary imports, or brokering of defense 
articles and defense services are consistent with the national security 
and foreign policy of the United States.
    Apart from these ongoing crucial services, DDTC has also recently 
made significant advancements in processes for registration statements 
and license applications, and for those members of the public seeking 
advisory opinions or commodity jurisdiction determinations. One of 
those is the creation, maintenance, and enhancement of the Defense 
Export Control and Compliance System (DECCS). Launched in February 
2020, DECCS simplifies the submission processes for applicants and 
allows applicants to track electronic forms submitted to DDTC. DDTC's 
Information Technology Modernization Team also supports enhanced 
security and operations features and regularly connects with DECCS 
users through the DECCS Users Group where industry users can provide 
direct feedback and suggest enhancements to DECCS. In the area of 
improved customer service and response, since February 2020, DDTC has 
used DECCS to implement a fully electronic case-management system, 
receiving and resolving 81,604 Help Desk tickets and 29,653 Response 
Team tickets. DECCS users can engage directly with DDTC Help Desk and 
Response Team customer service experts to resolve their issue. DDTC 
also implemented a customer satisfaction survey to engage with 
industry, and DDTC's average survey rating is 4.6 out of 5.
    Other enhancements and improvements have also been made 
specifically to the registration processes. Since 2022, registration 
processing times have dropped from an average of around 45 days to 30 
days. DDTC implemented automated email reminders and status updates for 
industry to track registration applications. The DECCS application also 
automatically calculates the registration fee for all registrants, and 
now registrants can download their renewal fees calculation letter. 
Additionally, there is enhanced communication between industry and DDTC 
through DECCS. DDTC has instituted additional improvements, including 
providing a list of approved licenses and other authorizations and 
registration guides for DECCS and FAQs.

How DDTC Calculated the New Proposed Registration Fees

    The Department assessed that after fifteen years of inflation, 
increasing technological improvements, and improved services (which are 
described in further detail below), that an increase in the amount of 
registration fees is necessary for the continued and modernized 
operations of DDTC. DDTC has engaged in some public engagement on this 
issue, previewing that it was considering increasing its registration 
fees in multiple industry engagement events over the last twelve 
months. No questions or comments on the topic were raised by the public 
at those events. Separately, different industry representatives have 
suggested to DDTC that increased fees would be worthwhile to continue 
receiving improved services.
    To compute the new fees proposed here, the Department looked at 
DDTC's past and projected fee collections projected against future 
operating costs. It found that although DDTC's operating budget has 
remained mostly the same over the past few years, apart from inflation, 
increasing expenses are resulting in operating costs that currently 
exceed the amount of revenue generated by fees. While DDTC has been 
able to draw from its collections over the past few years to meet its 
costs, these funds and the current registration fee amounts will not 
cover DDTC's increased operational expenses. The need to increase fees 
to keep up with inflation and increased costs related to enhanced 
services has therefore become particularly pressing and DDTC would have 
to cut back on certain services if registration fees are not adjusted 
in the near future. Similarly, obtaining more funds from other sources 
may not be feasible. DDTC operates with only limited congressionally 
appropriated funds, comprising under 17% of its total operating costs, 
and the congressional sense and presidential national security 
directive is that DDTC be mostly fee funded.
    Since 2008, the time of the last registration fee increase, DDTC 
has structured registration fees into three basic tiers, based on 
groupings of registrants that approximate their potential interactions 
with DDTC. The tier groupings also turn on whether

[[Page 31121]]

persons have submitted a license application or other request for 
authorization and have received any favorable determinations in 
response during a look-back period prescribed in the regulations. 
Although the DDTC website's section on registration fees and tier 
groups currently makes reference to ``favorable authorizations,'' DDTC 
aims to use the term ``favorable determinations'' in the future to more 
accurately reflect that its licensing officials adjudicate and make 
determinations on license applications and other authorization types 
described in Sec.  120.57. There is no practical change intended in 
using the updated term. Favorable determinations include an approval, 
an approval with provisos (sometimes also referred to as an approval 
with conditions), or written authorization from DDTC to conduct an 
activity regulated by the ITAR. An application that is returned without 
action or denied, on the other hand, is not a type of favorable 
determination. Persons who do not submit a license application or other 
request for authorization during the look-back period are included in 
the first tier at the lowest amount.
    Tier 1 registrants are currently comprised of persons in the 
business of manufacturing who either do not export, or who rely on ITAR 
exemptions for export authorizations. Persons who have submitted a 
license application or other request for an authorization, but who did 
not receive any favorable determination qualify for this tier. 
Additionally, persons engaged in the business of brokering activities 
also register under Tier 1, regardless of the number of brokering 
authorizations sought or obtained; however, if these persons have 
already registered with DDTC and obtained an M-code as a manufacturer, 
exporter, or temporary importer, and if these persons are identified as 
a broker within that registration, a separate registration fee for 
brokering activities is not currently required. In contrast, if brokers 
register separately (sometimes referred to as ``stand-alone brokers''), 
then they are required to pay the Tier 1 fee.
    Tier 2 registrants currently include those who have submitted and 
received a favorable determination on ten or fewer license applications 
or requests for authorization during the twelve-month period ending 90 
days prior to the expiration of their current registration.
    Tier 3 registrants have more frequent interactions with DDTC and 
thus require more DDTC services. These are registrants who have 
submitted and received a favorable determination on more than ten 
license applications or requests for authorization during the twelve-
month period ending 90 days prior to the expiration of their current 
registration.
    The Department now proposes to increase the existing fees of Tier 1 
and Tier 2 roughly in line with inflation over the last fifteen years. 
This represents the Department's goal of not asking these registrants 
to pay an increased amount relative to 2008 costs adjusted to today's 
dollars. As detailed more below, the Tier 1 annual flat fee would 
increase from $2,250 to $3,000. This would be a 33% increase over 
current amounts, but just below the amount of inflation over that same 
period, which was approximately 40.1%, as calculated by the Department 
of Labor's Consumer Price Index (CPI). Using the CPI calculator on the 
Department of Labor's Bureau of Labor Statistics website (https://www.bls.gov/data/inflation_calculator.htm), $2,250 in August 2008 would 
have the same buying power today as around $3,153.40.
    Similarly, the Tier 2 annual flat fee would increase from $2,750 to 
$4,000. This would be about a 45% increase over current amounts, just 
over the roughly 40% inflation since the amount was last adjusted. The 
CPI calculator shows that $2,750 in August 2008 would be about 
$3,854.15 today. Tier 2 registrants are proposed to have a slightly 
higher percentage increase than Tier 1 registrants because Tier 2 
registrants receive additional services and benefits, and because they 
actually submit license applications or requests for authorization that 
require review. Whereas Tier 1 registrants do not interact as often 
with DDTC, and generally require less direct services, and may not 
engage in as much exporting or temporarily importing of defense 
articles or defense services.
    The conditions for Tier 2, however, are proposed to be adjusted. 
Whereas currently, this tier is for registrants who have submitted and 
received a favorable determination on ten or fewer license applications 
or requests for authorization, the Department now proposes that the 
number of favorable determinations decreases from ten to five. This 
change was based in part on an analysis of DDTC data over the last five 
years, which found that the average Tier 2 registrant received three 
favorable determinations on license applications or requests for 
authorization. Consequently, the majority of registrants previously in 
Tier 2 would remain in this tier under the newly proposed conditions. 
However, those registrants who have received more than five favorable 
determinations in the look-back period would become Tier 3 registrants 
under this proposal.
    Tier 3 registrants, in contrast to the other tiers, would see an 
increase beyond the adjusted amount of inflation. Both the calculated 
fee and the baseline for that fee would increase. The baseline would 
rise from $2,750 to $4,000, and the additional fee multiplier for 
favorable determinations, proposed to now be over five instead of over 
ten, would rise from $250 to $1,100 for each. Thus, as an example, if 
an exporter has applied for and obtained seven licenses or other 
authorizations within the look-back period, this exporter would pay the 
registration fee prescribed in Tier 3, which would be a baseline of 
$4,000, plus $2,200 (because there were two favorable determinations 
obtained above the baseline of five), for a total fee of $6,200.
    The Department has concluded that Tier 3 registrants have benefited 
the most from DDTC's improvements, specifically DECCS and customer 
service improvements, they are best positioned to contribute from their 
export-derived revenue to continue and improve DDTC's services.
    Because these improvements would primarily benefit Tier 3 
registrants, it is those registrants that will be asked to contribute 
more.
    DDTC currently has discounts available for exporters and temporary 
importers of low-value items who fall under Tier 3. This low-value 
discount formula is currently available on the DDTC website. Under this 
proposed change, this discount would remain as currently structured and 
would be referenced in a new paragraph (b) in Sec.  122.3, directing 
the public to the DDTC website for the conditions and formula. 
Similarly, registrants who fall under Tier 2 and Tier 3, but who are 
wholly exempt from income taxation pursuant to 26 U.S.C. 501(c)(3) may 
be eligible for a discount to the Tier 1 fee. The DDTC website has and 
will continue to have information relevant to this non-profit discount 
as well. The new paragraph (b) would include mention of the non-profit 
discount alongside the Tier 3 low-value discount and direct the public 
to the DDTC website for more information on both. Once on the DDTC 
website at https://www.pmddtc.state.gov, relevant information can be 
found by clicking on the ``Conduct Business'' link on the top menu bar, 
and then by clicking ``Registration'' on the next page's left-hand 
menu.

[[Page 31122]]

New Proposed Registration Fees

    Accordingly, the Department proposes amendments to the three 
registrant tiers as follows:
    1. Tier 1: The first tier is a set fee of $3,000 per year. This 
applies to new registrants. It also applies to those who are renewing 
their registration and for whom the Department did not issue a 
favorable determination on a license application or other request for 
authorization, or who did not submit a license application or other 
request for authorization, during the twelve-month period ending 90 
days prior to the expiration of the current registration.
    2. Tier 2: The second tier is a set fee of $4,000 for those who are 
renewing their registration and have submitted license applications or 
other requests for authorization and received five or fewer favorable 
determinations during the twelve-month period ending 90 days prior to 
the expiration of their current registration.
    3. Tier 3: The third tier is a calculated fee for those who are 
renewing their registration and have submitted license applications or 
other requests for authorization and received more than five favorable 
determinations during the twelve-month period ending 90 days prior to 
the expiration of their current registration. For these registrants, 
the fee calculation is $4,000 plus $1,110 times the total number of 
favorable authorizations above five.
    Registration fees for persons who engage in brokering activities 
would remain tied to Tier 1, regardless of authorizations submitted or 
determinations received. If a person has already registered with DDTC 
as a manufacturer or exporter, and if that person is listed and 
identified as a broker within their manufacturer or exporter 
registration, then no additional fee is currently required to also 
register as a broker. But if a broker registers separately (i.e., as a 
``stand-alone broker''), then they are required to pay the Tier 1 fee, 
as is the case for the current registration fee structure.
    DDTC has also maintained a discount for registrants who would 
otherwise fall in Tiers 2 or 3, but who are wholly exempt from income 
taxation pursuant to 26 U.S.C. 501(c)(3). The discount is proposed to 
still be available; however, guidance on how to apply for the discount 
will remain on the DDTC website. Currently, and with no proposed 
change, the qualifying registrant must attach proof of such status 
(i.e., IRS certification form) for their fee to be reduced to the Tier 
1 amount. Importantly, for this discount, the IRS certification must 
apply to all entities/subsidiaries/affiliates listed in the 
registration submission.
    DDTC will be prepared to assist registrants with the proposed 
change to registration fees. If adopted in a final rule, the DECCS 
application will be updated to auto-calculate the revised fees once 
they go into effect. The DDTC public website will also have up-to-date 
information, and the Help Desk and the Response Team will be available 
to field questions. As is the case now, approximately 90 days prior to 
the expiration of a registration, DECCS will calculate the 
registration's renewal fee and post it to the DECCS Registration 
Dashboard. DDTC will also continue to send registration renewal 
notification emails 90 days and 30 days prior to a registration 
expiration date. And registrants will still be able to view a ``Renewal 
Fee Details'' button on their Registration Dashboard, which will 
display the total number of favorable determinations in the look-back 
period used to calculate the registrant's upcoming tier and total 
registration fee. Finally, as always, if a registrant feels the amount 
calculated is incorrect, they may submit a written request to DDTC 
explaining the basis for their request. Other frequently asked 
questions (FAQs) about registration fees and the registration process 
are available on the DDTC website, including by searching for 
``registration fee'' and will be updated after any changes to the 
registration fees occur.

Returning the Registration Fee Amounts to the ITAR

    Prior to October 2013, registration fees were outlined within the 
regulations themselves. Effective October 25, 2013 (78 FR 52680), the 
amounts of the registration fees and the tier groupings were removed 
from the ITAR and placed on the DDTC website. To ensure that the 
registration fees amounts are easily available, the Department proposes 
to return them to the text of the regulations in Sec.  122.3, entitled 
``Registration fees.'' Similarly, with respect to registration fees for 
stand-alone brokering registrations (i.e., brokers who are not 
otherwise registered as a manufacturer or exporter, see Sec.  
129.3(d)), the Department proposes to amend Sec.  129.8 to specify the 
fee amount for stand-alone broker registrations by specific reference 
to the Tier 1 amount prescribed in Sec.  122.3(a)(1). Registration fee 
amounts and related guidance would still also remain available on the 
DDTC website.

ITAR Reorganization

    In addition to the registration-fee-specific proposals discussed 
above, the Department takes this opportunity to propose additional 
revisions in keeping with the Department's ITAR reorganization efforts 
initiated by 87 FR 16396, Mar. 23, 2022. That rule restructured part 
120 of the ITAR to better organize the definitions previously found in 
that part and other locations throughout the ITAR and consolidated 
provisions that provide background information or otherwise apply 
throughout the regulations. In keeping with those aims, the Department 
further proposes to remove those parts of Sec.  122.3 that are not 
specific to fees, but are more generally related to registration (i.e., 
paragraphs (b) and (c) regarding frequency and lapse of registration, 
respectively), and relocate them to Sec.  122.2, which more generally 
describes registration. The changes proposed would not substantively 
alter registration requirements, but rather would reword existing 
provisions for clarity and relocate them from one adjoining section of 
the ITAR to another. The Department proposes to make related, non-
substantive, changes to Sec.  122.1 through Sec.  122.3. The ITAR 
Reorganization proposed changes are as follows:
    In Sec.  122.1:

--Revising the section heading to better describe the content from 
``Registration requirements'' to ``Registration: requirements, 
exemptions, and purpose.''
--Adding a paragraph heading to paragraph (a) to read: ``Requirement to 
register.''

    In Sec.  122.2:

--Revising the section heading to better describe the content from 
``Submission of registration statement.'' to ``Registration: submission 
of registration statement, certification, frequency, renewal, and 
lapse.''
--In paragraph (a), revising the introductory heading to read 
``Submission of registration statement.'' and streamlining the 
remaining text by breaking out of the introductory text, and placing 
into level 2 paragraphs, the two required elements of the statement: 
that it be signed by a U.S. person officer, and that it include 
documentation of incorporation or authorization.
--Adding new paragraph (c) to provide greater clarity regarding 
incomplete submissions, by removing and relocating text from the 
general requirement in paragraph (a).
--Adding new paragraph (d) by relocating text from Sec.  122.3 
regarding frequency of registration.

[[Page 31123]]

--Adding new paragraph (e) by relocating and revising text from Sec.  
122.3 regarding renewal of registration.
--Adding new paragraph (f) by relocating and revising text from Sec.  
122.3 regarding lapses in registration.

    Because the Department proposes to remove all non-fee related text 
from Sec.  122.3 by revising and relocating the text of current 
paragraphs Sec.  122.3(b) and (c), it proposes to limit registration 
fee related text to paragraph (a) of Sec.  122.3 and to revise 
paragraph (b) to direct readers to the DDTC website for certain 
discounts and for further guidance on the process of registration.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department has historically determined that rulemakings 
implementing the Arms Export Control Act or amending the ITAR involve a 
military or foreign affairs function of the United States under 5 
U.S.C. 553(a). However, due to Department's interest in seeking public 
comment on this rule, the Department is soliciting comments during a 
45-day comment period, to which it will respond in a final rule, should 
the Department choose to finalize all or part of this proposal.

Regulatory Flexibility Act

    Since this rule is exempt from the notice-and-comment rulemaking 
provisions of 5 U.S.C. 553, 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 were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

Executive Orders 12372 and 13132

    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, 14094, and 13563

    Executive Orders 12866 (as amended by Executive Order 14094) 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). 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 significant regulatory action by the Office of 
Information and Regulatory Affairs under Executive Order 12866, as 
amended.
    In FY 2023, roughly 14,500 registrants contributed registration 
fees to DDTC's FY23 collections amounting to $33.8 million. Based on 
projections made from registrant data from recent years, the new 
registration structure, which presumes roughly the same number of 
registrants, is expected to bring in an overall total of roughly $67.2 
million per year, which would be an overall increase of $33.4 million 
per year. Although this is a 99% projected increase in collections 
overall from current registration fees, the largest increase, on a per-
registrant basis, would fall on Tier 3 registrants. On average, Tier 3 
registrants would see their individual fee amounts increase by over 
250%. The Department believes this increase is justified for the 
reasons discussed previously in the preamble, but specifically due to 
the fact that more than fifteen years have passed since DDTC last 
adjusted fees, and Tier 3 registrants derive greater benefits from 
engaging in regulated activities while also consuming a 
disproportionate amount of DDTC support services. Because we project 
registrants in Tier 3 to account for over 22,000 of the roughly 26,000 
applications expected to be favorably determined by DDTC, the 
Department believes that this would be a more equitable distribution of 
financial costs. Tier 1 and Tier 2 registrants, on the other hand, will 
see a 33% and 45% increase, respectively, not far from the near 40% 
inflation rate in the over fifteen years since the registration fees 
were last adjusted. For FY 2025, DDTC's projected operational budget 
will be nearly $60 million, and that amount is expected to increase 
based on inflation and other increases in expenses. Setting a 
registration fee structure that aims to offer a stable price for a 
number of years is also expected to be a benefit to registrants, so 
that they may better know what fees to expect for future years. 
Additionally, the proposed registration fee structure benefits DDTC by 
meeting its budget demands in a way that also reasonably accounts for 
unknown variables such as changes in the number of registrants, or 
potential exemptions that would not require specific license 
applications or approvals and would therefore decrease the expected 
collections from Tiers 2 and 3. It also allows for DDTC to address 
unexpected contingencies as it did in 2020, when it temporarily lowered 
registration fee amounts as a relief measure during the pandemic. DDTC 
welcomes public comment on the impact of this proposed rule.

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 requirements of Executive Order 13175 do 
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

22 CFR Part 122

    Arms and munitions, Exports, Reporting and recordkeeping 
requirements.

22 CFR Part 129

    Arms and munitions, Brokers, Exports, Technical assistance.

Amendatory Instructions

    For the reasons discussed in the preamble and under the authority 
of 22 U.S.C. 2778, the Department of State proposes to revise title 22, 
chapter I, subchapter M, parts 122 and 129 to read as follows:

PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS

0
1. The authority citation for part 122 continues to read as follows:

    Authority:  Sections 2 and 38, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778); 22 U.S.C. 2651a; E.O. 13637, 78 FR 16129.


[[Page 31124]]


0
2. Amend Sec.  122.1 by revising the section heading and adding a 
heading to paragraph (a) to read as follows:


Sec.  122.1   Registration: requirements, exemptions, and purpose.

    (a) Requirement to register. * * *
* * * * *
0
3. Revise Sec.  122.2 to read as follows:


Sec.  122.2   Registration: submission of registration statement, 
certification, frequency, renewal, and lapse.

    (a) Submission of registration statement. An intended registrant 
must submit a Statement of Registration (Department of State form DS-
2032) to the Office of Defense Trade Controls Compliance by following 
the electronic filing instructions available on the Directorate of 
Defense Trade Controls website at www.pmddtc.state.gov. The Statement 
of Registration may include subsidiaries and affiliates when more than 
50 percent of the voting securities are owned by the registrant or the 
subsidiaries and affiliates are otherwise controlled by the registrant 
(see Sec.  120.66 of this subchapter). Registrants may not establish 
new entities for the purpose of reducing registration fees. The 
Statement of Registration must:
    (1) Be signed by a U.S. person senior officer (e.g., chief 
executive officer, president, secretary, partner, member, treasurer, 
general counsel) who has been empowered by the intended registrant to 
sign such documents; and
    (2) Include documentation that demonstrates the registrant is 
incorporated or otherwise authorized to do business in the United 
States.
    (b) Statement of Registration Certification. The Statement of 
Registration of the intended registrant shall include a certification 
by an authorized senior officer of the following:
    (1) Whether the intended registrant or its parent, subsidiary, or 
other affiliate listed in the Statement of Registration, or any of its 
chief executive officers, presidents, vice presidents, secretaries, 
partners, members, other senior officers or officials (e.g., 
comptroller, treasurer, general counsel), or any member of the board of 
directors of the intended registrant, or of any parent, subsidiary, or 
other affiliate listed in the Statement of Registration:
    (i) Has ever been indicted or otherwise charged (e.g., charged by 
criminal information in lieu of indictment) for or has been convicted 
of violating any U.S. criminal statutes enumerated in Sec.  120.6 of 
this subchapter or violating a foreign criminal law on exportation of 
defense articles where conviction of such law carries a minimum term of 
imprisonment of greater than 1 year; or
    (ii) Is ineligible to contract with, or to receive a license or 
other approval to import defense articles or defense services from, or 
to receive an export license or other approval from, any agency of the 
U.S. Government; and
    (2) Whether the intended registrant is foreign owned or foreign 
controlled (see Sec.  120.65 of this subchapter). If the intended 
registrant is foreign owned or foreign controlled, the certification 
shall include an explanation of such ownership or control, including 
the identities of the foreign person or persons who ultimately own or 
control the registrant. This requirement applies to a registrant who is 
a U.S. person and is owned or controlled by a foreign person. It also 
applies to a registrant who is a foreign person and is owned or 
controlled by a foreign person from the same country or a foreign 
person from another country.
    (c) Incomplete registration submission. The Directorate of Defense 
Trade Controls will notify the registrant if the Statement of 
Registration is incomplete either by notifying the registrant of what 
information is required or through the return of the entire 
registration package.
    (d) Frequency. A person who is required to register and pay a 
registration fee must renew the registration and pay a registration fee 
on an annual basis after initial registration.
    (e) Renewal of registration. A registrant must submit its request 
for registration renewal at least 30 days but no earlier than 60 days 
prior to the expiration date. Notice of the fee due for the next year's 
registration will be sent to the registrant of record at least 60 days 
prior to its expiration date.
    (f) Lapse in registration. A registrant who fails to renew a 
registration and, after an intervening period, seeks to register again 
must pay registration fees for any part of such intervening period 
during which the registrant engaged in the business of manufacturing or 
exporting defense articles or defense services.
0
4. Revise Sec.  122.3 to read as follows:


Sec.  122.3   Registration fees.

    (a) Registration fee. A person who is required to register must 
submit payment of a fee following the payment guidelines available on 
the Directorate of Defense Trade Controls website at 
www.pmddtc.state.gov. The fee to be paid shall be one of the following:
    (1) Tier 1: The first tier is a set fee of $3,000 per year. This 
applies to new registrants. It also applies to those who are renewing 
their registrations and for whom the Department did not issue a 
favorable determination on a license application or other request for 
authorization during the twelve-month period ending 90 days prior to 
the expiration of the current registration.
    (2) Tier 2: The second tier is a set fee of $4,000 for registrants 
renewing their registrations who have submitted license applications or 
other requests for authorization and received five or fewer favorable 
determination during the twelve-month period ending 90 days prior to 
the expiration of their current registration.
    (3) Tier 3: The third tier is a calculated fee for registrants who 
have submitted license applications or other requests for authorization 
and received more than five favorable determinations during the twelve-
month period ending 90 days prior to the expiration of their current 
registration. For these registrants, the fee calculation is $4,000 plus 
$1,110 times the total number of favorable authorizations over five.
    (b) Website, discounts, and further guidance. Information on 
certain discounts for registrants who are wholly exempt from income tax 
pursuant to 26 U.S.C. 501(c)(3), and for Tier 3 registrants who are 
low-value exporters or temporary importers are available on the 
Directorate of Defense Trade Controls website at www.pmddtc.state.gov 
by selecting ``Conduct Business'' on the top heading bar, then 
selecting ``Registration'' from the left menu bar, and finally 
selecting ``Payment of Registration'' from the subsequent left menu 
bar. Other guidance and information relevant to the payment of 
registration fees is also available on the website.

PART 129--REGISTRATION AND LICENSING OF BROKERS

0
5. The authority citation for part 129 continues to read as follows:

    Authority:  Section 38, Pub. L. 104-164, 110 Stat. 1437, (22 
U.S.C. 2778); E.O. 13637, 78 FR 16129.


Sec.  129.8   [Amended]

0
6. Amend Sec.  129.8(b)(1), in the first sentence, by removing the 
phrase ``and a fee following the fee guidelines available on the 
Directorate of Defense Trade Controls website at 
www.pmddtc.state.gov.'' and adding in its place ``and the Tier 1 fee 
specified in Sec.  122.3(a)(1) of this subchapter, regardless of how 
many favorable determinations the person received during the twelve-
month period ending 90 days prior to the expiration of their current 
registration.''


[[Page 31125]]


    The Under Secretary, Arms Control and International Security, 
Bonnie D. Jenkins, having reviewed and approved this document, has 
delegated the authority to electronically sign this document to Jessica 
Lewis, Assistant Secretary, Bureau of Political-Military Affairs, for 
purposes of publication in the Federal Register.

Jessica A. Lewis,
Assistant Secretary, Bureau of Political-Military Affairs, Department 
of State.
[FR Doc. 2024-08627 Filed 4-23-24; 8:45 am]
BILLING CODE 4710-25-P