**TITLE 22\--FOREIGN RELATIONS**

**CHAPTER I\--DEPARTMENT OF STATE**

**PART 127 \-- VIOLATIONS AND PENALTIES**

**Section Contents**\
§ 127.1   Violations.\
§ 127.2   Misrepresentation and omission of facts.\
§ 127.3   Penalties for violations.\
§ 127.4   Authority of U.S. Immigration and Customs Enforcement and U.S.
Customs and Border Protection officers.\
§ 127.5   Authority of the Defense Investigative Service.\
§ 127.6   Seizure and forfeiture in attempts at illegal exports.\
§ 127.7   Debarment.\
§ 127.8   Interim suspension.\
§ 127.9   Applicability of orders.\
§ 127.10   Civil penalty.\
§ 127.11   Past violations.\
§ 127.12   Voluntary disclosures.

**Authority:**   Secs. 2, 38, and 42, Public Law 90--629, 90 Stat. 744
(22 U.S.C. 2752, 2778, 2791); E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp.,
p. 79; 22 U.S.C. 401; 22 U.S.C. 2651a; 22 U.S.C. 2779a; 22 U.S.C. 2780.

**Source:**   58 FR 39316, July 22, 1993, unless otherwise noted.

##### § 127.1   Violations.

\(a\) It is unlawful:

\(1\) To export or attempt to export from the United States, or to
reexport or retransfer or attempt to reexport or retransfer from one
foreign destination to another foreign destination by a U.S. person of
any defense article or technical data or by anyone of any U.S. origin
defense article or technical data or to furnish any defense service for
which a license or written approval is required by this subchapter
without first obtaining the required license or written approval from
the Directorate of Defense Trade Controls;

\(2\) To import or attempt to import any defense article whenever a
license is required by this subchapter without first obtaining the
required license or written approval from the Directorate of Defense
Trade Controls;

\(3\) To conspire to export, import, reexport or cause to be exported,
imported or reexported, any defense article or to furnish any defense
service for which a license or written approval is required by this
subchapter without first obtaining the required license or written
approval from the Directorate of Defense Trade Controls;

\(4\) To violate any of the terms or conditions of licenses or approvals
granted pursuant to this subchapter.

\(5\) To engage in the United States in the business of either
manufacturing or exporting defense article or furnishing defense
services without complying with the registration requirements. For the
purposes of this subchapter, engaging in the business of manufacturing
or exporting defense articles or furnishing defense services requires
only one occasion of manufacturing or exporting a defense article or
furnishing a defense service; or

\(6\) To engage in the business of brokering activities for which
registration, a license or written approval is required by this
subchapter without first registering or obtaining the required license
or written approval from the Directorate of Defense Trade Controls. For
the purposes of this subchapter, engaging in the business of brokering
activities requires only one occasion of engaging in an activity as
reflected in §129.2(b).

\(b\) Any person who is granted a license or other approval under this
subchapter is responsible for the acts of employees, agents, and all
authorized persons to whom possession of the licensed defense article or
technical data has been entrusted regarding the operation, use,
possession, transportation, and handling of such defense article or
technical data abroad. All persons abroad subject to U.S. jurisdiction
who obtain temporary custody of a defense article exported from the
United States or produced under an agreement described in part 124 of
this subchapter, and irrespective of the number of intermediate
transfers, are bound by the regulations of this subchapter in the same
manner and to the same extent as the original owner or transferer.

\(c\) A person with knowledge that another person is then ineligible
pursuant to §§120.1(c) or 126.7 of this subchapter or subject to an
order of debarment or interim suspension, may not, directly or
indirectly, in any manner or capacity, without prior disclosure of the
facts to, and written authorization from, the Directorate of Defense
Trade Controls:

\(1\) Apply for, obtain, or use any export control document as defined
in §127.2(b) for such debarred, suspended, or ineligible person; or

\(2\) Order, buy, receive, use, sell, deliver, store, dispose of,
forward, transport, finance, or otherwise service or participate in any
transaction which may involve any defense article or the furnishing of
any defense service for which a license or approval is required by this
subchapter for export, where such debarred, suspended, or ineligible
person may obtain any benefit therefrom or have any direct or indirect
interest therein.

\(d\) No person may knowingly or willfully cause, or aid, abet, counsel,
demand, induce, procure or permit the commission of any act prohibited
by, or the omission of any act prohibited by, or the omission of any act
required by 22 U.S.C. 2778, 22 U.S.C. 2779, or any regulation, license,
approval, or order issued thereunder.

\[58 FR 39316, July 22, 1993, as amended at 71 FR 20548, Apr. 21, 2006\]

##### § 127.2   Misrepresentation and omission of facts.

(a) It is unlawful to use any export or temporary import control
document containing a false statement or misrepresenting or omitting a
material fact for the purpose of exporting any defense article or
technical data or the furnishing of any defense service for which a
license or approval is required by this subchapter. Any false statement,
misrepresentation, or omission of material fact in an export or
temporary import control document will be considered as made in a matter
within the jurisdiction of a department or agency of the United States
for the purposes of 18 U.S.C. 1001, 22 U.S.C. 2778 and 22 U.S.C. 2779.

\(b\) For the purpose of this section, *export or temporary import
control documents* include the following:

\(1\) An application for a permanent export or a temporary import
license and supporting documents.

\(2\) Shipper\'s Export Declaration.

\(3\) Invoice.

\(4\) Declaration of destination.

\(5\) Delivery verification.

\(6\) Application for temporary export.

\(7\) Application for registration.

\(8\) Purchase order.

\(9\) Foreign import certificate.

\(10\) Bill-of-lading.

\(11\) Airway bill.

\(12\) Nontransfer and use certificate.

\(13\) Any other document used in the regulation or control of a defense
article, defense service or technical data for which a license or
approval is required by this subchapter.

##### § 127.3   Penalties for violations.

Any person who willfully:

\(a\) Violates any provision of section 38 or section 39 of the Arms
Export Control Act (22 U.S.C. 2778 and 2779), or any undertaking
specifically required by part 124 of this subchapter; or

\(b\) In a registration, license application or report required by §38
or §39 of the Arms Export Control Act (22 U.S.C. 2778 and 2779) or by
any rule or regulation issued under either section, makes any untrue
statement of a material fact or omits a material fact required to be
stated therein or necessary to make the statements therein not
misleading, shall upon conviction be subject to a fine or imprisonment,
or both, as prescribed by 22 U.S.C. 2778(c).

\[58 FR 39316, July 22, 1993, as amended at 71 FR 20549, Apr. 21, 2006\]

##### § 127.4   Authority of U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection officers.

(a) U.S. Immigration and Customs Enforcement and U.S. Customs and Border
Protection officers may take appropriate action to ensure observance of
this subchapter as to the export or the attempted export of any defense
article or technical data, including the inspection of loading or
unloading of any vessel, vehicle, or aircraft. This applies whether the
export is authorized by license or by written approval issued under this
subchapter.

\(b\) U.S. Immigration and Customs Enforcement and U.S. Customs and
Border Protection officers have the authority to investigate, detain or
seize any export or attempted export of defense articles or technical
data contrary to this subchapter.

\(c\) Upon the presentation to a U.S. Customs and Border Protection
Officer of a license or written approval authorizing the export of any
defense article, the customs officer may require the production of other
relevant documents and information relating to the proposed export. This
includes an invoice, order, packing list, shipping document,
correspondence, instructions, and the documents otherwise required by
the U.S. Customs and Border Protection or U.S. Immigration and Customs
Enforcement.

\[70 FR 50965, Aug. 29, 2005\]

##### § 127.5   Authority of the Defense Investigative Service.

In the case of exports involving classified technical data or defense
articles, the Defense Security Service may take appropriate action to
ensure compliance with the Department of Defense National Industrial
Security Program Operating Manual (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).
Upon a request to the Defense Security Service regarding the export of
any classified defense article or technical data, the Defense Security
Service official or a designated government transmittal authority may
require the production of other relevant documents and information
relating to the proposed export.

\[71 FR 20549, Apr. 21, 2006\]

##### § 127.6   Seizure and forfeiture in attempts at illegal exports.

(a) An attempt to export from the United States any defense articles in
violation of the provisions of this subchapter constitutes an offense
punishable under section 401 of title 22 of the United States Code.
Whenever it is known or there is probable cause to believe that any
defense article is intended to be or is being or has been exported or
removed from the United States in violation of law, such article and any
vessel, vehicle or aircraft involved in such attempt is subject to
seizure, forfeiture and disposition as provided in section 401 of title
22 of the United States Code.

\(b\) Similarly, an attempt to violate any of the conditions under which
a temporary export or temporary import license was issued pursuant to
this subchapter or to violate the requirements of §123.2 of this
subchapter also constitutes an offense punishable under section 401 of
title 22 of the United States Code, and such article, together with any
vessel, vehicle or aircraft involved in any such attempt is subject to
seizure, forfeiture, and disposition as provided in section 401 of title
22 of the United States Code.

##### § 127.7   Debarment.

(a) *Debarment.* In implementing §38 of the Arms Export Control Act, the
Assistant Secretary of State for Political-Military Affairs may prohibit
any person from participating directly or indirectly in the export of
defense articles, including technical data, or in the furnishing of
defense services for which a license or approval is required by this
subchapter for any of the reasons listed below. Any such prohibition is
referred to as a debarment for purposes of this subchapter. The
Assistant Secretary of State for Political-Military Affairs shall
determine the appropriate period of time for debarment, which shall
generally be for a period of three years. However, reinstatement is not
automatic and in all cases the debarred person must submit a request for
reinstatement and be approved for reinstatement before engaging in any
export or brokering activities subject to the Arms Export Control Act or
this subchapter.

\(b\) *Grounds.* (1) The basis for a statutory debarment, as described
in paragraph (c) of this section, is any conviction for violating the
Arms Export Control Act (see §127.3 of this subchapter) or any
conspiracy to violate the Arms Export Control Act.

\(2\) The basis for administrative debarment, described in part 128 of
this subchapter, is any violation of 22 U.S.C. 2778 or any rule or
regulation issued thereunder when such a violation is of such a
character as to provide a reasonable basis for the Directorate of
Defense Trade Controls to believe that the violator cannot be relied
upon to comply with the statute or these rules or regulations in the
future, and when such violation is established in accordance with part
128 of this subchapter.

\(c\) *Statutory Debarment.* Section 38(g)(4) of the Arms Export Control
Act prohibits the issuance of licenses to persons who have been
convicted of violating the U.S. criminal statutes enumerated in §120.27
of this subchapter. Discretionary authority to issue licenses is
provided, but only if certain statutory requirements are met. It is the
policy of the Department of State not to consider applications for
licenses or requests for approvals involving any person who has been
convicted of violating the Arms Export Control Act or convicted of
conspiracy to violate that Act for a three year period following
conviction. Such individuals shall be notified in writing that they are
debarred pursuant to this policy. A list of persons who have been
convicted of such offenses and debarred for this reason shall be
published periodically in the Federal Register. Debarment in such cases
is based solely upon the outcome of a criminal proceeding, conducted by
a court of the United States, that established guilt beyond a reasonable
doubt in accordance with due process. The procedures of part 128 of this
subchapter are not applicable in such cases.

\(d\) *Appeals.* Any person who is ineligible pursuant to paragraph (c)
of this section may appeal to the Under Secretary of State for Arms
Control and International Security for reconsideration of the
ineligibility determination. The procedures specified in §128.13 of this
subchapter will be used in submitting a reconsideration appeal.

\[58 FR 39316, July 22, 1993, as amended at 71 FR 20549, Apr. 21, 2006\]

##### § 127.8   Interim suspension.

(a) The Managing Director of the Directorate of Defense Trade Controls
or the Director of the Office of Defense Trade Controls Compliance is
authorized to order the interim suspension of any person when the
Managing Director or Director of Compliance believes that grounds for
debarment (as defined in §127.7 of this part) exist and where and to the
extent the Managing Director or Director of Compliance, as applicable,
finds that interim suspension is reasonably necessary to protect world
peace or the security or foreign policy of the United States. The
interim suspension orders prohibit that person from participating
directly or indirectly in the export of any defense article or defense
service for which a license or approval is required by this subchapter.
The suspended person shall be notified in writing as provided in
§127.7(c) of this part (statutory debarment) or §128.3 of this
subchapter (administrative debarment), whichever is appropriate. In both
cases, a copy of the interim suspension order will be served upon that
person in the same manner as provided in §128.3 of this subchapter. The
interim suspension order may be made immediately effective, without
prior notice. The order will state the relevant facts, the grounds for
issuance of the order, and describe the nature and duration of the
interim suspension. No person may be suspended for a period exceeding 60
days, absent extraordinary circumstances, (e.g., unless proceedings
under §127.7(c) of this part or under part 128 of this subchapter, or
criminal proceedings, are initiated).

\(b\) A motion or petition to vacate or modify an interim suspension
order may be filed at any time with the Under Secretary of State for
Arms Control and International Security. After a final decision is
reached, the Managing Director of the Directorate of Defense Trade
Controls will issue an appropriate order disposing of the motion or
petition and will promptly inform the respondent accordingly.

\[71 FR 20549, Apr. 21, 2006\]

##### 

##### 

##### § 127.9   Applicability of orders.

For the purpose of preventing evasion, orders of the Assistant Secretary
of State for Political-Military Affairs debarring a person under §127.7,
and orders of the Managing Director, Directorate of Defense Trade
Controls or Director of the Office of Defense Trade Controls Compliance
suspending a person under §127.8, may be made applicable to any other
person who may then or thereafter (during the term of the order) be
related to the debarred person by affiliation, ownership, control,
position of responsibility, or other commercial connection. Appropriate
notice and opportunity to respond to the basis for the suspension will
be given.

\[71 FR 20550, Apr. 21, 2006\]

##### § 127.10   Civil penalty.

(a) The Assistant Secretary of State for Political-Military Affairs is
authorized to impose a civil penalty in an amount not to exceed that
authorized by 22 U.S.C. 2778, 2779a and 2780 for each violation of 22
U.S.C. 2778, 2779a and 2780, or any regulation, order, license or
approval issued thereunder. This civil penalty may be either in addition
to, or in lieu of, any other liability or penalty which may be imposed.

\(b\) The Directorate of Defense Trade Controls may make:

\(1\) The payment of a civil penalty under this section or

\(2\) The completion of any administrative action pursuant to this part
127 or 128 of this subchapter a prior condition for the issuance,
restoration, or continuing validity of any export license or other
approval.

\[58 FR 39316, July 22, 1993, as amended at 62 FR 67276, Dec. 24, 1997;
71 FR 20550, Apr. 21, 2006\]

##### § 127.11   Past violations.

(a) *Presumption of denial.* Pursuant to section 38 of the Arms Export
Control Act, licenses or other approvals may not be granted to persons
who have been convicted of violating any of the U.S. criminal statutes
enumerated in §120.27 of this subchapter or who are ineligible to
receive any export licenses from any agency of the U.S. Government,
subject to a narrowly defined statutory exception. This provision
establishes a presumption of denial for licenses or other approvals
involving such persons. This presumption is applied by the Directorate
of Defense Trade Controls to all persons convicted or deemed ineligible
in this manner since the effective date of the Arms Export Control Act
(Public Law 94--329; 90 Stat. 729) (June 30, 1976).

\(b\) *Policy.* An exception to the policy of the Department of State to
deny applications for licenses or other approvals that involve persons
described in paragraph (a) of this section shall not be considered
unless there are extraordinary circumstances surrounding the conviction
or ineligibility to export, and only if the applicant demonstrates, to
the satisfaction of the Assistant Secretary of State for
Political-Military Affairs, that the applicant has taken appropriate
steps to mitigate any law enforcement and other legitimate concerns, and
to deal with the causes that resulted in the conviction, ineligibility,
or debarment. Any person described in paragraph (a) of this section who
wishes to request consideration of any application must explain, in a
letter to the Managing Director, Directorate of Defense Trade Controls,
the reasons why the application should be considered. If the Assistant
Secretary of State for Political-Military Affairs concludes that the
application and written explanation have sufficient merit, the Assistant
Secretary shall consult with the Office of the Legal Adviser and the
Department of the Treasury regarding law enforcement concerns, and may
also request the views of other departments, including the Department of
Justice. If the Directorate of Defense Trade Controls does grant the
license or other approval, subsequent applications from the same person
need not repeat the information previously provided but should instead
refer to the favorable decision.

\(c\) *Debarred persons.* Persons debarred pursuant to §127.7(c)
(statutory debarment) may not utilize the procedures provided by this
section while the debarment is in force. Such persons may utilize only
the procedures provided by §127.7(d) of this part.

\[71 FR 20550, Apr. 21, 2006\]

##### § 127.12   Voluntary disclosures.

\(a\) *General policy.* The Department strongly encourages the
disclosure of information to the Directorate of Defense Trade Controls
by persons (see §120.14 of this subchapter) that believe they may have
violated any export control provision of the Arms Export Control Act, or
any regulation, order, license, or other authorization issued under the
authority of the Arms Export Control Act. The Department may consider a
voluntary disclosure as a mitigating factor in determining the
administrative penalties, if any, that should be imposed. Failure to
report a violation may result in circumstances detrimental to U.S.
national security and foreign policy interests, and will be an adverse
factor in determining the appropriate disposition of such violations.

\(b\) *Limitations.* (1) The provisions of this section apply only when
information is provided to the Directorate of Defense Trade Controls for
its review in determining whether to take administrative action under
part 128 of this subchapter concerning a violation of the export control
provisions of the Arms Export Control Act and these regulations.

\(2\) The provisions of this section apply only when information is
received by the Directorate of Defense Trade Controls for review prior
to such time that either the Department of State or any other agency,
bureau, or department of the United States Government obtains knowledge
of either the same or substantially similar information from another
source and commences an investigation or inquiry that involves that
information, and that is intended to determine whether the Arms Export
Control Act or these regulations, or any other license, order, or other
authorization issued under the Arms Export Control Act has been
violated.

\(3\) The violation(s) in question, despite the voluntary nature of the
disclosure, may merit penalties, administrative actions, sanctions, or
referrals to the Department of Justice to consider criminal prosecution.
In the latter case, the Directorate of Defense Trade Controls will
notify the Department of Justice of the voluntary nature of the
disclosure, although the Department of Justice is not required to give
that fact any weight. The Directorate of Defense Trade Controls has the
sole discretion to consider whether "voluntary disclosure," in context
with other relevant information in a particular case, should be a
mitigating factor in determining what, if any, administrative action
will be imposed. Some of the mitigating factors the Directorate of
Defense Trade Controls may consider are:

\(i\) Whether the transaction would have been authorized, and under what
conditions, had a proper license request been made;

\(ii\) Why the violation occurred;

\(iii\) The degree of cooperation with the ensuing investigation;

\(iv\) Whether the person has instituted or improved an internal
compliance program to reduce the likelihood of future violation;

\(v\) Whether the person making the disclosure did so with the full
knowledge and authorization of the person\'s senior management. (If not,
then the Directorate will not deem the disclosure voluntary as covered
in this section.)

\(4\) The provisions of this section do not, nor should they be relied
on to, create, confer, or grant any rights, benefits, privileges, or
protection enforceable at law or in equity by any person in any civil,
criminal, administrative, or other matter.

\(c\) *Notification.* (1) Any person wanting to disclose information
that constitutes a voluntary disclosure should, in the manner outlined
below, initially notify the Directorate of Defense Trade Controls
immediately after a violation is discovered and then conduct a thorough
review of all defense trade transactions where a violation is suspected.

\(i\) If the notification does not contain all the information required
by 127.12(c)(2) of this section, a full disclosure must be submitted
within 60 calendar days of the notification, or the Directorate of
Defense Trade Controls will not deem the notification to qualify as a
voluntary disclosure.

\(ii\) If the person is unable to provide a full disclosure within the
60 calendar day deadline, an empowered official (see §120.25 of this
subchapter) or a senior officer may request an extension of time in
writing. A request for an extension must specify what information
required by §127.12(c)(2) of this section could not be immediately
provided and the reasons why.

\(iii\) Before approving an extension of time to provide the full
disclosure, the Directorate of Defense Trade Controls may require the
requester to certify in writing that they will provide the full
disclosure within a specific time period.

\(iv\) Failure to provide a full disclosure within a reasonable time may
result in a decision by the Directorate of Defense Trade Controls not to
consider the notification as a mitigating factor in determining the
appropriate disposition of the violation. In addition, the Directorate
of Defense Trade Controls may direct the requester to furnish all
relevant information surrounding the violation.

\(2\) Notification of a violation must be in writing and should include
the following information:

\(i\) A precise description of the nature and extent of the violation
(e.g., an unauthorized shipment, doing business with a party denied U.S.
export privileges, etc.);

\(ii\) The exact circumstances surrounding the violation (a thorough
explanation of why, when, where, and how the violation occurred);

\(iii\) The complete identities and addresses of all persons known or
suspected to be involved in the activities giving rise to the violation
(including mailing, shipping, and e-mail addresses; telephone and
fax/facsimile numbers; and any other known identifying information);

\(iv\) Department of State license numbers, exemption citation, or
description of any other authorization, if applicable;

\(v\) U.S. Munitions List category and subcategory, product description,
quantity, and characteristics or technological capability of the
hardware, technical data or defense service involved;

\(vi\) A description of corrective actions already undertaken that
clearly identifies the new compliance initiatives implemented to address
the causes of the violations set forth in the voluntary disclosure and
any internal disciplinary action taken; and how these corrective actions
are designed to deter those particular violations from occurring again;

\(vii\) The name and address of the person making the disclosure and a
point of contact, if different, should further information be needed.

\(3\) Factors to be addressed in the voluntary disclosure include, for
example, whether the violation was intentional or inadvertent; the
degree to which the person responsible for the violation was familiar
with the laws and regulations, and whether the person was the subject of
prior administrative or criminal action under the AECA; whether the
violations are systemic; and the details of compliance measures,
processes and programs, including training, that were in place to
prevent such violations, if any. In addition to immediately providing
written notification, persons are strongly urged to conduct a thorough
review of all export-related transactions where a possible violation is
suspected.

\(d\) *Documentation.* (1) The written disclosure should be accompanied
by copies of substantiating documents. Where appropriate, the
documentation should include, but not be limited to:

\(i\) Licensing documents (e.g., license applications, export licenses
and end-user statements), exemption citation, or other authorization
description, if any;

\(ii\) Shipping documents (e.g., shipper\'s export declarations, airway
bills and bills of lading);

\(iii\) Any other relevant documents must be retained by the person
making the disclosure until the Directorate of Defense Trade Controls
requests them or until a final decision on the disclosed information has
been made.

\(e\) *Certification.* A certification must be submitted stating that
all of the representations made in connection with the voluntary
disclosure are true and correct to the best of that person\'s knowledge
and belief. Certifications should be executed by an empowered official
(See §120.25 of this subchapter), or by a senior officer (e.g. chief
executive officer, president, vice-president, comptroller, treasurer,
general counsel, or member of the board of directors). If the violation
is a major violation, reveals a systemic pattern of violations, or
reflects the absence of an effective compliance program, the Directorate
of Defense Trade Controls may require that such certification be made by
a senior officer of the company.

\(f\) *Oral presentations.* Oral presentation is generally not necessary
to augment the written presentation. However, if the person making the
disclosure believes a meeting is desirable, a request should be included
with the written presentation.

\(g\) Send voluntary disclosures to the Office of Defense Trade Controls
Compliance, Directorate of Defense Trade Controls. Consult the
Directorate of Defense Trade Controls Web site at
*http://www.pmddtc.state.gov* for the appropriate street address.

\[58 FR 39316, July 22, 1993, as amended at 70 FR 34655, June 15, 2005;
71 FR 20550, Apr. 21, 2006; 72 FR 70778, Dec. 13, 2007\]

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