**TITLE 22\--FOREIGN RELATIONS**

CHAPTER I\--DEPARTMENT OF STATE

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

**Section Contents**\
§ 124.1   Manufacturing license agreements and technical assistance
agreements.\
§ 124.2   Exemptions for training and military service.\
§ 124.3   Exports of technical data in furtherance of an agreement.\
§ 124.4   Deposit of signed agreements with the Directorate of Defense
Trade Controls.\
§ 124.5   Proposed agreements that are not concluded.\
§ 124.6   Termination of manufacturing license agreements and technical
assistance agreements.\
§ 124.7   Information required in all manufacturing license agreements
and technical assistance agreements.\
§ 124.8   Clauses required both in manufacturing license agreements and
technical assistance agreements.\
§ 124.9   Additional clauses required only in manufacturing license
agreements.\
§ 124.10   Nontransfer and use assurances.\
§ 124.11   Congressional certification pursuant to Section 36(d) of the
Arms Export Control Act.\
§ 124.12   Required information in letters of transmittal.\
§ 124.13   Procurement by United States persons in foreign countries
(offshore procurement).\
§ 124.14   Exports to warehouses or distribution points outside the
United States.\
§ 124.15   Special Export Controls for Defense Articles and Defense
Services Controlled under Category XV: Space Systems and Space Launches.

§ 124.16   Special retransfer authorizations for unclassified technical
data and defense services to member states of NATO and the European
Union, Australia, Japan, New Zealand, and Switzerland.

**Authority:**   Sec. 2, 38, and 71, Pub. L. 90--629, 90 Stat. 744 (22
U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311; 3 CFR 1977 Comp. p.
79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub. L. 105--261.

**Source:**   58 FR 39305, July 22, 1993, unless otherwise noted.

##### § 124.1   Manufacturing license agreements and technical assistance agreements.

\(a\) *Approval.* The approval of the Directorate of Defense Trade
Controls must be obtained before the defense services described in
§120.9(a) of this subchapter may be furnished. In order to obtain such
approval, the U.S. person must submit a proposed agreement to the
Directorate of Defense Trade Controls. Such agreements are generally
characterized as manufacturing license agreements, technical assistance
agreements, distribution agreements, or off-shore procurement
agreements, and may not enter into force without the prior written
approval of the Directorate of Defense Trade Controls. Once approved,
the defense services described in the agreements may generally be
provided without further licensing in accordance with §§124.3 and
125.4(b)(2) of this subchapter. The requirements of this section apply
whether or not technical data is to be disclosed or used in the
performance of the defense services described in §120.9(a) of this
subchapter (e.g., all the information relied upon by the U.S. person in
performing the defense service is in the public domain or is otherwise
exempt from the licensing requirements of this subchapter pursuant to
§125.4 of this subchapter). This requirement also applies to the
training of any foreign military forces, regular and irregular, in the
use of defense articles. Technical assistance agreements must be
submitted in such cases. In exceptional cases, the Directorate of
Defense Trade Controls, upon written request, will consider approving
the provision of defense services described in §120.9(a) of this
subchapter by granting a license under part 125 of this subchapter.
Also, see §126.8 of this subchapter for the requirements for prior
approval of proposals relating to significant military equipment.

\(b\) *Classified articles.* Copies of approved agreements involving the
release of classified defense articles will be forwarded by the
Directorate of Defense Trade Controls to the Defense Security Service of
the Department of Defense.

\(c\) *Amendments.* Changes to the scope of approved agreements,
including modifications, upgrades, or extensions must be submitted for
approval. The amendments may not enter into force until approved by the
Directorate of Defense Trade Controls.

\(d\) *Minor amendments.* Amendments which only alter delivery or
performance schedules, or other minor administrative amendments which do
not affect in any manner the duration of the agreement or the clauses or
information which must be included in such agreements because of the
requirements of this part, do not have to be submitted for approval. One
copy of all such minor amendments must be submitted to the Directorate
of Defense Trade Controls within thirty days after they are concluded.

\[71 FR 20542, Apr. 21, 2006\]

##### § 124.2   Exemptions for training and military service.

(a) Technical assistance agreements are not required for the provision
of training in the basic operation and maintenance of defense articles
lawfully exported or authorized for export to the same recipient. This
does not include training in intermediate and depot level maintenance.

\(b\) Services performed as a member of the regular military forces of a
foreign nation by U.S. persons who have been drafted into such forces
are not deemed to be defense services for purposes of §120.9 of this
subchapter.

\(c\) NATO countries, Australia, Japan, and Sweden, in addition to the
basic maintenance training exemption provided in §124.2(a) and basic
maintenance information exemption in §125.4(b)(5) of this subchapter, no
technical assistance agreement is required for maintenance training or
the performance of maintenance, including the export of supporting
technical data, when the following criteria can be met:

\(1\) Defense services are for unclassified U.S.-origin defense articles
lawfully exported or authorized for export and owned or operated by and
in the inventory of NATO or the Federal Governments of NATO countries,
Australia, Japan or Sweden.

\(2\) This defense service exemption does not apply to any transaction
involving defense services for which congressional notification is
required in accordance with §123.15 and §124.11 of this subchapter.

\(3\) Maintenance training or the performance of maintenance must be
limited to inspection, testing, calibration or repair, including
overhaul, reconditioning and one-to-one replacement of any defective
items, parts or components; and excluding any modification, enhancement,
upgrade or other form of alteration or improvement that enhances the
performance or capability of the defense article. This does not preclude
maintenance training or the performance of maintenance that would result
in enhancements or improvements only in the reliability or
maintainability of the defense article, such as an increased mean time
between failure (MTBF).

\(4\) Supporting technical data must be unclassified and must not
include software documentation on the design or details of the computer
software, software source code, design methodology, engineering analysis
or manufacturing know-how such as that described in paragraphs (c)4)(i)
through (c)(4)(iii) as follows:

\(i\) *Design Methodology,* such as: The underlying engineering methods
and design philosophy utilized ( *i.e.,* the "why" or information that
explains the rationale for particular design decision, engineering
feature, or performance requirement); engineering experience (e.g.,
lessons learned); and the rationale and associated databases (e.g.,
design allowables, factors of safety, component life predictions,
failure analysis criteria) that establish the operational requirements
(e.g., performance, mechanical, electrical, electronic, reliability and
maintainability) of a defense article.

\(ii\) *Engineering Analysis,* such as: Analytical methods and tools
used to design or evaluate a defense article\'s performance against the
operational requirements. Analytical methods and tools include the
development and/or use of mockups, computer models and simulations, and
test facilities.

\(iii\) *Manufacturing Know-how,* such as: Information that provides
detailed manufacturing processes and techniques needed to translate a
detailed design into a qualified, finished defense article.

\(5\) This defense service exemption does not apply to maintenance
training or the performance of maintenance and service or the transfer
of supporting technical data for the following defense articles:

\(i\) All Missile Technology Control Regime Annex Items;

\(ii\) Firearms listed in Category I; and ammunition listed in Category
III for the firearms in Category I;

\(iii\) Nuclear weapons strategic delivery systems and all components,
parts, accessories and attachments specifically designed for such
systems and associated equipment;

\(iv\) Naval nuclear propulsion equipment listed in Category VI(e);

\(v\) Gas turbine engine hot sections covered by Categories VI(f) and
VIII(b);

\(vi\) Category VIII(f);

\(vii\) Category XII(c);

\(viii\) Chemical agents listed in Category XIV (a), biological agents
in Category XIV (b), and equipment listed in Category XIV (c) for
dissemination of the chemical agents and biological agents listed in
Categories XIV (a) and (b);

\(ix\) Nuclear radiation measuring devices manufactured to military
specifications listed in Category XVI(c);

\(x\) Category XV;

\(xi\) Nuclear weapons design and test equipment listed in Category XVI;

\(xii\) Submersible and oceanographic vessels and related articles
listed in Category XX(a) through (d);

\(xiii\) Miscellaneous articles covered by Category XXI.

\(6\) *Eligibility criteria for foreign persons.* Foreign persons
eligible to receive technical data or maintenance training under this
exemption are limited to nationals of the NATO countries, Australia,
Japan, or Sweden.

\[58 FR 39305, July 22, 1993, as amended at 65 FR 45283, July 21, 2000;
66 FR 35899, July 10, 2001; 71 FR 20543, Apr. 21, 2006\]

##### § 124.3   Exports of technical data in furtherance of an agreement.

(a) *Unclassified technical data.* The U.S. Customs and Border
Protection or U.S. Postal authorities shall permit the export without a
license of unclassified technical data if the export is in furtherance
of a manufacturing license or technical assistance agreement which has
been approved in writing by the Directorate of Defense Trade Controls
(DDTC) and the technical data does not exceed the scope or limitations
of the relevant agreement. The approval of the DDTC must be obtained for
the export of any unclassified technical data that may exceed the terms
of the agreement.

\(b\) *Classified technical data.* The export of classified information
in furtherance of an approved manufacturing license or technical
assistance agreement which provides for the transmittal of classified
information does not require further approval from the Directorate of
Defense Trade Controls when:

\(1\) The United States party certifies to the Department of Defense
transmittal authority that the classified information does not exceed
the technical or product limitations in the agreement; and

\(2\) The U.S. party complies with the requirements of the Department of
Defense National Industrial Security Program Operating Manual concerning
the transmission of classified information (unless such requirements are
in direct conflict with guidance provided by the Directorate of Defense
Trade Controls, in which case the latter guidance must be followed) and
any other requirements of cognizant U.S. departments or agencies.

\[58 FR 39305, July 22, 1993, as amended at 68 FR 61102, Oct. 27, 2003;
70 FR 50963, Aug. 29, 2005; 71 FR 20543, Apr. 21, 2006\]

##### § 124.4   Deposit of signed agreements with the Directorate of Defense Trade Controls.

(a) The United States party to a manufacturing license or a technical
assistance agreement must file one copy of the concluded agreement with
the Directorate of Defense Trade Controls not later than 30 days after
it enters into force. If the agreement is not concluded within one year
of the date of approval, the Directorate of Defense Trade Controls must
be notified in writing and be kept informed of the status of the
agreement until the requirements of this paragraph or the requirements
of §124.5 are satisfied.

\(b\) In the case of concluded agreements involving coproduction or
licensed production outside of the United States of defense articles of
United States origin, a written statement must accompany filing of the
concluded agreement with the Directorate of Defense Trade Controls,
which shall include:

\(1\) The identity of the foreign countries, international organization,
or foreign firms involved;

\(2\) A description and the estimated value of the articles authorized
to be produced, and an estimate of the quantity of the articles
authorized to be produced:

\(3\) A description of any restrictions on third-party transfers of the
foreign-manufactured articles; and

\(4\) If any such agreement does not provide for United States access to
and verification of quantities of articles produced overseas and their
disposition in the foreign country, a description of alternative
measures and controls to ensure compliance with restrictions in the
agreement on production quantities and third-party transfers.

\[62 FR 67276, Dec. 24, 1997, as amended at 71 FR 20543, Apr. 21, 2006\]

##### 

##### § 124.5   Proposed agreements that are not concluded.

The United States party to any proposed manufacturing license agreement
or technical assistance agreement must inform the Directorate of Defense
Trade Controls if a decision is made not to conclude the agreement. The
information must be provided within 60 days of the date of the decision.
These requirements apply only if the approval of the Directorate of
Defense Trade Controls was obtained for the agreement to be concluded
(with or without any provisos).

\[71 FR 20543, Apr. 21, 2006\]

##### § 124.6   Termination of manufacturing license agreements and technical assistance agreements.

The U.S. party to a manufacturing license or a technical assistance
agreement must inform the Directorate of Defense Trade Controls in
writing of the impending termination of the agreement not less than 30
days prior to the expiration date of such agreement.

\[71 FR 20543, Apr. 21, 2006\]

##### § 124.7   Information required in all manufacturing license agreements and technical assistance agreements.

The following information must be included in all proposed manufacturing
license agreements and technical assistance agreements. The information
should be provided in terms which are as precise as possible. If the
applicant believes that a clause or that required information is not
relevant or necessary, the applicant may request the omission of the
clause or information. The transmittal letter accompanying the agreement
must state the reasons for any proposed variation in the clauses or
required information.

\(1\) The agreement must describe the defense article to be manufactured
and all defense articles to be exported, including any test and support
equipment or advanced materials. They should be described by military
nomenclature, contract number, National Stock Number, nameplate data, or
other specific information. Supporting technical data or brochures
should be submitted in seven copies. Only defense articles listed in the
agreement will be eligible for export under the exemption in
§123.16(b)(1) of this subchapter.

\(2\) The agreement must specifically describe the assistance and
technical data, including the design and manufacturing know-how
involved, to be furnished and any manufacturing rights to be granted;

\(3\) The agreement must specify its duration; and

\(4\) The agreement must specifically identify the countries or areas in
which manufacturing, production, processing, sale or other form of
transfer is to be licensed.

##### § 124.8   Clauses required both in manufacturing license agreements and technical assistance agreements.

The following statements must be included both in manufacturing license
agreements and in technical assistance agreements:

\(1\) "This agreement shall not enter into force, and shall not be
amended or extended, without the prior written approval of the
Department of State of the U.S. Government."

\(2\) "This agreement is subject to all United States laws and
regulations relating to exports and to all administrative acts of the
U.S. Government pursuant to such laws and regulations."

\(3\) "The parties to this agreement agree that the obligations
contained in this agreement shall not affect the performance of any
obligations created by prior contracts or subcontracts which the parties
may have individually or collectively with the U.S. Government."

\(4\) "No liability will be incurred by or attributed to the U.S.
Government in connection with any possible infringement of privately
owned patent or proprietary rights, either domestic or foreign, by
reason of the U.S. Government\'s approval of this agreement."

\(5\) "The technical data or defense service exported from the United
States in furtherance of this agreement and any defense article which
may be produced or manufactured from such technical data or defense
service may not be transferred to a person in a third country or to a
national of a third country except as specifically authorized in this
agreement unless the prior written approval of the Department of State
has been obtained."

\(6\) "All provisions in this agreement which refer to the United States
Government and the Department of State will remain binding on the
parties after the termination of the agreement."

##### § 124.9   Additional clauses required only in manufacturing license agreements.

(a) *Clauses for all manufacturing license agreements.* The following
clauses must be included only in manufacturing license agreements:

\(1\) "No export, sale, transfer, or other disposition of the licensed
article is authorized to any country outside the territory wherein
manufacture or sale is herein licensed without the prior written
approval of the U.S. Government unless otherwise exempted by the U.S.
Government. Sales or other transfers of the licensed article shall be
limited to governments of countries wherein manufacture or sale is
hereby licensed and to private entities seeking to procure the licensed
article pursuant to a contract with any such government unless the prior
written approval of the U.S. Government is obtained."

\(2\) "It is agreed that sales by licensee or its sub-licensees under
contracts made through the U.S. Government will not include either
charges for patent rights in which the U.S. Government holds a
royalty-free license, or charges for data which the U.S. Government has
a right to use and disclose to others, which are in the public domain,
or which the U.S. Government has acquired or is entitled to acquire
without restrictions upon their use and disclosure to others."

\(3\) "If the U.S. Government is obligated or becomes obligated to pay
to the licensor royalties, fees, or other charges for the use of
technical data or patents which are involved in the manufacture, use, or
sale of any licensed article, any royalties, fees or other charges in
connection with purchases of such licensed article from licensee or its
sub-licensees with funds derived through the U.S. Government may not
exceed the total amount the U.S. Government would have been obligated to
pay the licensor directly."

\(4\) "If the U.S. Government has made financial or other contributions
to the design and development of any licensed article, any charges for
technical assistance or know-how relating to the item in connection with
purchases of such articles from licensee or sub-licensees with funds
derived through the U.S. Government must be proportionately reduced to
reflect the U.S. Government contributions, and subject to the provisions
of paragraphs (a) (2) and (3) of this section, no other royalties, or
fees or other charges may be assessed against U.S. Government funded
purchases of such articles. However, charges may be made for reasonable
reproduction, handling, mailing, or similar administrative costs
incident to the furnishing of such data."

\(5\) "The parties to this agreement agree that an annual report of
sales or other transfers pursuant to this agreement of the licensed
articles, by quantity, type, U.S. dollar value, and purchaser or
recipient, shall be provided by (applicant or licensee) to the
Department of State." This clause must specify which party is obligated
to provide the annual report. Such reports may be submitted either
directly by the licensee or indirectly through the licensor, and may
cover calendar or fiscal years. Reports shall be deemed proprietary
information by the Department of State and will not be disclosed to
unauthorized persons. See §126.10(b) of this subchapter.

\(6\) (Licensee) agrees to incorporate the following statement as an
integral provision of a contract, invoice or other appropriate document
whenever the licensed articles are sold or otherwise transferred:

These commodities are authorized for export by the U.S. Government only
to (country of ultimate destination or approved sales territory). They
may not be resold, diverted, transferred, transshipped, or otherwise be
disposed of in any other country, either in their original form or after
being incorporated through an intermediate process into other end-items,
without the prior written approval of the U.S. Department of State.

\(b\) *Special clause for agreements relating to significant military
equipment.* With respect to an agreement for the production of
significant military equipment, the following additional provisions must
be included in the agreement:

\(1\) "A completed nontransfer and use certificate (DSP--83) must be
executed by the foreign end-user and submitted to the Department of
State of the United States before any transfer may take place."

\(2\) "The prior written approval of the U.S. Government must be
obtained before entering into a commitment for the transfer of the
licensed article by sale or otherwise to any person or government
outside of the approved sales territory."

##### § 124.10   Nontransfer and use assurances.

(a) Types of agreements requiring assurances. With respect to any
manufacturing license agreement or technical assistance agreement which
relates to significant military equipment or classified defense
articles, including classified technical data, a Nontransfer and Use
Certificate (Form DSP--83) (see §123.10 of this subchapter) signed by
the applicant and the foreign party must be submitted to the Directorate
of Defense Trade Controls. With respect to all agreements involving
classified articles, including classified technical data, an authorized
representative of the foreign government must sign the DSP--83 (or
provide the same assurances in the form of a diplomatic note), unless
the Directorate of Defense Trade Controls has granted an exception to
this requirement. The Directorate of Defense Trade Controls may require
that a DSP--83 be provided in conjunction with an agreement that does
not relate to significant military equipment or classified defense
articles. The Directorate of Defense Trade Controls may also require
with respect to any agreement that an appropriate authority of the
foreign party\'s government also sign the DSP--83 (or provide the same
assurances in the form of a diplomatic note).

\(b\) *Timing of submission of assurances.* Submission of a Form DSP--83
and/or diplomatic note must occur as follows:

\(1\) Agreements which have been signed by all parties before being
submitted to the Directorate of Defense Trade Controls may only be
submitted along with any required DSP--83 and/or diplomatic note.

\(2\) If an agreement has not been signed by all parties before being
submitted, the required DSP--83 and/or diplomatic note must be submitted
along with the signed agreement.

Note to paragraph(b): In no case may a transfer occur before a required
DSP--83 and/or diplomatic note has been submitted to the Directorate of
Defense Trade Controls.

\[59 FR 29951, June 10, 1994, as amended at 71 FR 20543, Apr. 21, 2006\]

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

(a) The Arms Export Control Act requires that a certification be
provided to the Congress prior to the granting of any approval of a
manufacturing license agreement or technical assistance agreement as
defined in Sections 120.21 and 120.22 respectively for the manufacturing
abroad of any item of significant military equipment (see §120.7 of this
subchapter) that is entered into with any country regardless of dollar
value. Additionally, any manufacturing license agreement or technical
assistance agreement providing for the export of major defense
equipment, as defined in §120.8 of this subchapter shall also require a
certification when meeting the requirements of §123.15 of this
subchapter.

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

\(c\) Persons who intend to export defense articles and defense services
pursuant to any exemption in this subchapter under the circumstances
described in this section and section 123.15 must provide written
notification to the Directorate of Defense Trade Controls and include a
signed contract and a DSP--83 signed by the applicant, the foreign
consignee and the end-user.

\[70 FR 34654, June 15, 2005\]

##### § 124.12   Required information in letters of transmittal.

(a) An application for the approval of a manufacturing license or
technical assistance agreement with a foreign person must be accompanied
by an explanatory letter. The original letter and seven copies of the
letter and eight copies of the proposed agreement shall be submitted to
the Directorate of Defense Trade Controls. The explanatory letter shall
contain:

\(1\) A statement giving the applicant\'s Directorate of Defense Trade
Controls registration number.

\(2\) A statement identifying the licensee and the scope of the
agreement.

\(3\) A statement identifying the U.S. Government contract under which
the equipment or technical data was generated, improved, or developed
and supplied to the U.S. Government, and whether the equipment or
technical data was derived from any bid or other proposal to the U.S.
Government.

\(4\) A statement giving the military security classification of the
equipment or technical data.

\(5\) A statement identifying any patent application which discloses any
of the subject matter of the equipment or technical data covered by an
invention secrecy order issued by the U.S. Patent and Trademark Office.

\(6\) A statement of the actual or estimated value of the agreement,
including the estimated value of all defense articles to be exported in
furtherance of the agreement or amendments thereto. If the value is
\$500,000 or more, an additional statement must be made regarding the
payment of political contributions, fees or commissions, pursuant to
part 130 of this subchapter.

\(7\) A statement indicating whether any foreign military sales credits
or loan guarantees are or will be involved in financing the agreement.

\(8\) The agreement must describe any classified information involved
and identify, from Department of Defense form DD254, the address and
telephone number of the U.S. Government office that classified the
information.

\(9\) For agreements that may require the export of classified
information, the Defense Investigative Service cognizant security
offices that have responsibility for the facilities of the U.S. parties
to the agreement shall be identified. The facility security clearance
codes of the U.S. parties shall also be provided.

10\) A statement specifying whether the applicant is requesting
retransfer of defense articles and defense services pursuant to §124.16
of this subchapter.

\(b\) The following statements must be made in the letter of
transmittal:

\(1\) "If the agreement is approved by the Department of State, such
approval will not be construed by (the applicant) as passing on the
legality of the agreement from the standpoint of antitrust laws or other
applicable statutes, nor will (the applicant) construe the Department\'s
approval as constituting either approval or disapproval of any of the
business terms or conditions between the parties to the agreement."

\(2\) "The (applicant) will not permit the proposed agreement to enter
into force until it has been approved by the Department of State."

\(3\) "The (applicant) will furnish the Department of State with one
copy of the signed agreement (or amendment) within 30 days from the date
that the agreement is concluded and will inform the Department of its
termination not less than 30 days prior to expiration and provide
information on the continuation of any foreign rights or the flow of
technical data to the foreign party. If a decision is made not to
conclude the proposed agreement, the applicant will so inform the
Department within 60 days."

\(4\) "If this agreement grants any rights to sub-license, it will be
amended to require that all sub-licensing arrangements incorporate all
the provisions of the basic agreement that refer to the U.S. Government
and the Department of State ( *i.e.* , 22 CFR 124.9 and 124.10)."

\[58 FR 39305, July 22, 1993, as amended at 71 FR 20543, Apr. 21, 2006;
72 FR 71786, Dec. 19, 2007\]

##### § 124.13   Procurement by United States persons in foreign countries (offshore procurement).

Notwithstanding the other provisions in part 124 of this subchapter, the
Directorate of Defense Trade Controls may authorize by means of a
license (DSP--5) the export of unclassified technical data to foreign
persons for offshore procurement of defense articles, provided that:

\(a\) The contract or purchase order for offshore procurement limits
delivery of the defense articles to be produced only to the person in
the United States or to an agency of the U.S. Government; and

\(b\) The technical data of U.S.-origin to be used in the foreign
manufacture of defense articles does not exceed that required for bid
purposes on a build-to-print basis (build-to-print means producing an
end-item ( *i.e.* , system, subsystem or component) from technical
drawings and specifications (which contain no process or know-how
information) without the need for additional technical assistance).
Release of supporting documentation (e.g., acceptance criteria, object
code software for numerically controlled machines) is permissible.
Build-to-print does not include the release of any information which
discloses design methodology, engineering analysis, detailed process
information or manufacturing know-how); and

\(c\) The contract or purchase order between the person in the United
States and the foreign person:

\(1\) Limits the use of the technical data to the manufacture of the
defense articles required by the contract or purchase order only; and

\(2\) Prohibits the disclosure of the data to any other person except
subcontractors within the same country; and

\(3\) Prohibits the acquisition of any rights in the data by any foreign
person; and

\(4\) Provides that any subcontracts between foreign persons in the
approved country for manufacture of equipment for delivery pursuant to
the contract or purchase order contain all the limitations of this
paragraph (c); and

\(5\) Requires the foreign person, including subcontractors, to destroy
or return to the person in the United States all of the technical data
exported pursuant to the contract or purchase order upon fulfillment of
their terms; and

\(6\) Requires delivery of the defense articles manufactured abroad only
to the person in the United States or to an agency of the U.S.
Government; and

\(d\) The person in the United States provides the Directorate of
Defense Trade Controls with a copy of each contract, purchase order or
subcontract for offshore procurement at the time it is accepted. Each
such contract, purchase order or subcontract must clearly identify the
article to be produced and must identify the license number or exemption
under which the technical data was exported; and

\(e\) Licenses issued pursuant to this section must be renewed prior to
their expiration if offshore procurement is to be extended beyond the
period of validity of the original approved license. In all instances a
license for offshore procurement must state as the purpose "Offshore
procurement in accordance with the conditions established in the ITAR,
including §124.13. No other use will be made of the technical data." If
the technical data involved in an offshore procurement arrangement is
otherwise exempt from the licensing requirements of this subchapter
(e.g., §126.4), the DSP--5 referred to in the first sentence of this
section is not required. However, the exporter must comply with the
other requirements of this section and provide a written certification
to the Directorate of Defense Trade Controls annually of the offshore
procurement activity and cite the exemption under which the technical
data was exported. The exemptions under §125.4 of this subchapter may
not be used to establish offshore procurement arrangements.

\[58 FR 39305, July 22, 1993, as amended at 64 FR 17534, Apr. 12, 1999;
71 FR 20543, Apr. 21, 2006\]

##### § 124.14   Exports to warehouses or distribution points outside the United States.

(a) *Agreements.* Agreements (e.g., contracts) between U.S. persons and
foreign persons for the warehousing and distribution of defense articles
must be approved by the Directorate of Defense Trade Controls before
they enter into force. Such agreements will be limited to unclassified
defense articles and must contain conditions for special distribution,
end-use and reporting. Licenses for exports pursuant to such agreements
must be obtained prior to exports of the defense articles unless an
exemption under §123.16(b)(1) of this subchapter is applicable.

\(b\) *Required information.* Proposed warehousing and distribution
agreements (and amendments thereto) shall be submitted to the
Directorate of Defense Trade Controls for approval. The following
information must be included in all such agreements:

\(1\) A description of the defense articles involved including test and
support equipment covered by the U.S. Munitions List. This shall include
when applicable the military nomenclature, the Federal stock number,
nameplate data, and any control numbers under which the defense articles
were developed or procured by the U.S. Government. Only those defense
articles specifically listed in the agreement will be eligible for
export under the exemption in §123.16(b)(1) of this subchapter.

\(2\) A detailed statement of the terms and conditions under which the
defense articles will be exported and distributed;

\(3\) The duration of the proposed agreement;

\(4\) Specific identification of the country or countries that comprise
the distribution territory. Distribution must be specifically limited to
the governments of such countries or to private entities seeking to
procure defense articles pursuant to a contract with a government within
the distribution territory or to other eligible entities as specified by
the Directorate of Defense Trade Controls. Consequently, any deviation
from this condition must be fully explained and justified. A nontransfer
and use certificate (DSP--83) will be required to the same extent
required in licensing agreements under §124.9(b).

\(c\) *Required statements.* The following statements must be included
in all warehousing and distribution agreements:

\(1\) "This agreement shall not enter into force, and may not be amended
or extended, without the prior written approval of the Department of
State of U.S. Government."

\(2\) "This agreement is subject to all United States laws and
regulations related to exports and to all administrative acts of the
United States Government pursuant to such laws and regulations.

\(3\) "The parties to this agreement agree that the obligations
contained in this agreement shall not affect the performance of any
obligations created by prior contracts or subcontracts which the parties
may have individually or collectively with the U.S. Government."

\(4\) "No liability will be incurred by or attributed to the U.S.
Government in connection with any possible infringement of privately
owned patent or proprietary rights, either domestic or foreign by reason
of the U.S. Government\'s approval of this agreement."

\(5\) "No export, sale, transfer, or other disposition of the defense
articles covered by this agreement is authorized to any country outside
the distribution territory without the prior written approval of the
Directorate of Defense Trade Controls of the U.S. Department of State."

\(6\) "The parties to this agreement agree that an annual report of
sales or other transfers pursuant to this agreement of the licensed
articles, by quantity, type, U.S. dollar value, and purchaser or
recipient shall be provided by (applicant or licensee) to the Department
of State." This clause must specify which party is obligated to provide
the annual report. Such reports may be submitted either directly by the
licensee or indirectly through the licensor, and may cover calendar or
fiscal years. Reports shall be deemed proprietary information by the
Department of State and will not be disclosed to unauthorized persons.
(See §126.10(b) of this subchapter.)

\(7\) (Licensee) agrees to incorporate the following statement as an
integral provision of a contract, invoice or other appropriate document
whenever the articles covered by this agreement are sold or otherwise
transferred:

These commodities are authorized for export by the U.S. Government only
to (country of ultimate destination or approved sales territory). They
may not be resold, diverted, transferred, transshipped, or otherwise be
disposed of in any other country, either in their original form or after
being incorporated through an intermediate process into other end-items,
without the prior written approval of the U.S. Department of State.

\(8\) "All provisions in this agreement which refer to the United States
Government and the Department of State will remain binding on the
parties after the termination of the agreement."

\(9\) Additional clause. Unless the articles covered by the agreement
are in fact intended to be distributed to private persons or entities
(e.g., sporting firearms for commercial resale, cryptographic devices
and software for financial and business applications), the following
clause must be included in all warehousing and distribution agreements:
"Sales or other transfers of the licensed article shall be limited to
governments of the countries in the distribution territory and to
private entities seeking to procure the licensed article pursuant to a
contract with a government within the distribution territory, unless the
prior written approval of the U.S. Department of State is obtained."

\(d\) *Special clauses for agreements relating to significant military
equipment.* With respect to agreements for the warehousing and
distribution of significant military equipment, the following additional
provisions must be included in the agreement:

\(1\) A completed nontransfer and use certificate (DSP--83) must be
executed by the foreign end-user and submitted to the U.S. Department of
State before any transfer may take place.

\(2\) The prior written approval of the U.S. Department of State must be
obtained before entering into a commitment for the transfer of the
licensed article by sale or otherwise to any person or government
outside the approved distribution territory.

\(e\) *Transmittal letters.* Requests for approval of warehousing and
distribution agreements with foreign persons must be made by letter. The
original letter and seven copies of the letter and seven copies of the
proposed agreement shall be submitted to the Directorate of Defense
Trade Controls. The letter shall contain:

\(1\) A statement giving the applicant\'s Directorate of Defense Trade
Controls registration number.

\(2\) A statement identifying the foreign party to the agreement.

\(3\) A statement identifying the defense articles to be distributed
under the agreement.

\(4\) A statement identifying any U.S. Government contract under which
the equipment may have been generated, improved, developed or supplied
to the U.S. Government, and whether the equipment was derived from any
bid or other proposal to the U.S. Government.

\(5\) A statement that no classified defense articles or classified
technical data are involved.

\(6\) A statement identifying any patent application which discloses any
of the subject matter of the equipment or related technical data covered
by an invention secrecy order issued by the U.S. Patent and Trademark
Office.

\(f\) *Required clauses.* The following statements must be made in the
letter of transmittal:

\(1\) "If the agreement is approved by the Department of State, such
approval will not be construed by (applicant) as passing on the legality
of the agreement from the standpoint of antitrust laws or other
applicable statutes, nor will (the applicant) construe the Department\'s
approval as constituting either approval or disapproval of any of the
business terms or conditions between the parties to the agreement."

\(2\) "The (applicant) will not permit the proposed agreement to enter
into force until it has been approved by the Department of State."

\(3\) "(Applicant) will furnish the Department of State with one copy of
the signed agreement (or amendment thereto) within 30 days from the date
that the agreement is concluded, and will inform the Department of its
termination not less than 30 days prior to expiration. If a decision is
made not to conclude the proposed agreement, (applicant) will so inform
the Department within 60 days."

\[58 FR 39305, July 22, 1993, as amended at 71 FR 20544, Apr. 21, 2006\]

##### § 124.15   Special Export Controls for Defense Articles and Defense Services Controlled under Category XV: Space Systems and Space Launches.

(a) The export of any satellite or related item (see §121.1, Category
XV(a) and (e)) or any defense service controlled by this subchapter
associated with the launch in, or by nationals of, a country that is not
a member of the North Atlantic Treaty Organization or a major non-NATO
ally of the United States always requires special exports controls, in
addition to other export controls required by this subchapter, as
follows:

\(1\) All licenses and other requests for approval require a technology
transfer control plan (TTCP) approved by the Department of Defense and
an encryption technology control plan approved by the National Security
Agency. Drafts reflecting advance discussions with both agencies must
accompany submission of the license application or proposed technical
assistance agreement, and the letter of transmittal required in §124.12
must identify the U.S. Government officials familiar with the
preparation of the draft TTCPs. The TTCP must require any U.S. person or
entity involved in the export to notify the Department of Defense in
advance of all meetings and interactions with any foreign person or
entity that is a party to the export and require such U.S. person or
entity to certify that it has complied with this notification
requirement within 30 days after launch.

\(2\) The U.S. person must make arrangements with the Department of
Defense for monitoring. The costs of such monitoring services must be
fully reimbursed to the Department of Defense by the U.S. person
receiving such services. The letter of transmittal required under
§124.12 must also state that such reimbursement arrangements have been
made with the Department of Defense and identify the specific Department
of Defense official with whom these arrangements have been made. As
required by Public Law 105--261, such monitoring will cover, but not be
limited to---

\(i\) Technical discussions and activities, including the design,
development, operation, maintenance, modification, and repair of
satellites, satellite components, missiles, other equipment, launch
facilities, and launch vehicles;

\(ii\) Satellite processing and launch activities, including launch
preparation, satellite transportation, integration of the satellite with
the launch vehicle, testing and checkout prior to launch, satellite
launch, and return of equipment to the United States;

\(iii\) Activities relating to launch failure, delay, or cancellation,
including post-launch failure investigations or analyses with regard to
either the launcher or the satellite; and

\(iv\) All other aspects of the launch.

\(b\) Mandatory licenses for launch failure (crash) investigations or
analyses: In the event of a failure of a launch from a foreign country
(including a post liftoff failure to reach proper orbit)---

\(1\) The activities of U.S. persons or entities in connection with any
subsequent investigation or analysis of the failure continue to be
subject to the controls established under section 38 of the Arms Export
Control Act, including the requirements under this subchapter for
express approval prior to participation in such investigations or
analyses, regardless of whether a license was issued under this
subchapter for the initial export of the satellite or satellite
component;

\(2\) Officials of the Department of Defense must monitor all activities
associated with the investigation or analyses to insure against
unauthorized transfer of technical data or services and U.S. persons
must follow the procedures set forth in paragraphs (a)(1) and (a)(2) of
this Category.

\(c\) Although Public Law 105--261 does not require the application of
special export controls for the launch of U.S.-origin satellites and
components from or by nationals of countries that are members of NATO or
major non-NATO allies, such export controls may nonetheless be applied,
in addition to any other export controls required under this subchapter,
as appropriate in furtherance of the security and foreign policy of the
United States. Further, the export of any article or defense service
controlled under this subchapter to any destination may also require
that the special export controls identified in paragraphs (a)(1) and
(a)(2) of this category be applied in furtherance of the security and
foreign policy of the United States.

\(d\) Mandatory licenses for exports to insurance providers and
underwriters: None of the exemptions or sub-licensing provisions
available in this subchapter may be used for the export of technical
data in order to obtain or satisfy insurance requirements. Such exports
are always subject to the prior approval and re-transfer requirements of
sections 3 and 38 of the Arms Export Control Act, as applied by relevant
provisions of this subchapter.

\[64 FR 13681, Mar. 22, 1999\]

##### § 124.16   Special retransfer authorizations for unclassified technical data and defense services to member states of NATO and the European Union, Australia, Japan, New Zealand, and Switzerland.

The provisions of §124.8(5) of this subchapter notwithstanding, pursuant
to this subsection the Department may approve access to unclassified
defense articles exported in furtherance of or produced as a result of a
TAA/MLA, and retransfer of technical data and defense services to
individuals who are third country/dual national employees of the foreign
signatory or its approved sub-licensees provided they are nationals
exclusively of countries that are members of NATO the European Union,
Australia, Japan, New Zealand, and Switzerland and their employer is a
signatory to the agreement or has executed a Non Disclosure Agreement.
The retransfer must take place completely within the physical
territories of these countries or the United States. Permanent
retransfer of hardware is not authorized.

\[72 FR 71786, Dec. 19, 2007\]