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[Federal Register Volume 79, Number 28 (Tuesday, February 11, 2014)]
[Rules and Regulations]
[Pages 8082-8089]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02293]

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DEPARTMENT OF STATE

22 CFR Parts 120, 122, 126, 127, 128, and 130

RINs 1400-AD49, 1400-AC37, and 1400-AC81
[Public Notice: 8620]

Amendment to the International Traffic in Arms Regulations: 
Changes to Authorized Officials and the UK Defense Trade Treaty 
Exemption; Correction of Errors in Lebanon Policy and Violations; and 
Adoption of Recent Amendments as Final

AGENCY: Department of State.

ACTION: Final rule.

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SUMMARY: The Department of State is amending the International Traffic 
in Arms Regulations (ITAR) to remove the managing director as an 
authorized official, update the marking and reporting requirements for 
the UK defense treaty exemption, correct a typographical error in the 
paragraph on export policy regarding Lebanon, and correct an error of 
syntactical arrangement in a section of the regulations regarding 
violations. The Department is also adopting as a final rule certain 
sections of the ITAR that were published in an interim final rule.

DATES: Effective Date: This rule is effective February 11, 2014.

FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, 
Office of Defense Trade Controls Policy, U.S. Department of State, 
telephone (202) 663-2792, or email DDTCResponseTeam@state.gov. ATTN: 
Regulatory Change, Removing Managing Director, Other Changes.

SUPPLEMENTARY INFORMATION: The Department is removing ``Managing 
Director of Defense Trade Controls'' as an authorized official from 
ITAR Sec.  120.1(b)(1) because it is no longer a position within the 
Department. Various sections of the ITAR are amended as a result. In 
each of these instances, another authorized official as identified in 
ITAR Sec.  120.1(b) replaces the managing director.
    The Department is updating the text of the licensing exemption 
created pursuant to the Treaty Between the Government of the United 
States of America and the Government of the United Kingdom Concerning 
Defense Trade Cooperation (the ``UK defense trade treaty exemption''), 
at ITAR Sec.  126.17, so that it is a clearer representation of treaty 
requirements and is also consistent with ITAR Sec.  126.16 (the 
Australia defense trade treaty exemption). Most of the updates

[[Page 8083]]

are formatting and textual edits. However, the Department notes in 
particular changes to: 1) The text for marking requirements (paragraph 
(j)) to make it clear that items should be marked ``prior to'' export, 
and to bring the classification level reading in line with treaty 
requirements; and 2) the indicated method of notification (paragraph 
(o)) to remove inclusion of Form DS-4048 from the process.
    The Department is correcting a typographical error in ITAR Sec.  
126.1(t), regarding the export policy on Lebanon. In the preamble to 
the rule providing that policy (see 76 FR 47990, RIN 1400-AC81), the 
exceptions to the arms embargo were correctly identified as ``not 
apply[ing] to arms and related materiel for the United Nations Interim 
Force in Lebanon or as authorized by the Government of Lebanon.'' In 
the regulation itself, ``or'' was mistakenly replaced with ``and.'' 
This error is corrected in this rule.
    Finally, the Department is correcting an error of syntactical 
arrangement in ITAR Sec.  127.1(d)(2). This rule clarifies that 
ineligible parties may not engage in transactions subject to the ITAR; 
the current construction specifies that such parties may not engage in 
any transactions regarding defense articles. This section was 
previously published as an interim final rule at 78 FR 52680 on August 
26, 2013 (RIN 1400-AC37); with the identified changes, the Department 
is adopting it as a final rule.
    The Department is also adopting as a final rule other portions of 
RIN 1400-AC37, as follows: (1) ITAR Sec.  120.1(a) and (b), with 
changes regarding authorized officials, as described earlier in this 
section; (2) ITAR Sec.  120.1(c) and (d), without any changes: (3) ITAR 
Sec.  120.20, with changes regarding authorized officials, as described 
earlier in this section; (4) ITAR Sec.  126.1(a), (b), (e)(1), (e)(2), 
and note to paragraph (e), without any changes; (5) all sections of 
parts 127 and 128, except for ITAR Sec.  127.1(d)(2), which is changed 
regarding syntactical arrangement, as described earlier in this 
section, and for ITAR Sec.  128.15(a), which is changed regarding 
authorized officials, as described earlier in this section. The 
Department did not receive public comments on these sections of the 
ITAR during the comment period of the interim final rule.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense articles and services is a foreign affairs 
function of the United States Government and that rules implementing 
this function are exempt from sections 553 (rulemaking) and 554 
(adjudications) of the Administrative Procedure Act. Although the 
Department is of the opinion that this rule is exempt from the 
rulemaking provisions of the APA, the Department published portions of 
this rule as proposed and interim final rules identified as 1400-AC37, 
with 60- and 45-day provisions for public comment, respectively, and 
without prejudice to its determination that controlling the import and 
export of defense articles and services is a foreign affairs function.

Regulatory Flexibility Act

    Since the Department is of the opinion that this rule is exempt 
from the provisions of 5 U.S.C. 553, there is no requirement for an 
analysis under the Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

    This rulemaking does not involve a mandate that will result in the 
expenditure by state, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any year and it 
will not significantly or uniquely affect small governments. Therefore, 
no actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    The Department does not believe this rulemaking is a major rule 
within the definition of 5 U.S.C. Sec.  804. It will not have an annual 
effect on the economy of $100,000,000 or more, nor will it result in a 
major increase in costs or prices for consumers, individual industries, 
federal, state, or local government agencies, or geographic regions, or 
have significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic and foreign markets.

Executive Orders 12372 and 13132

    This rulemaking will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this rulemaking does not have 
sufficient federalism implications to require consultations or warrant 
the preparation of a federalism summary impact statement. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this rulemaking.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributed impacts, and equity). These executive orders 
stress the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has not been designated a ``significant regulatory action'' 
under section 3(f) of Executive Order 12866.

Executive Order 12988

    The Department of State reviewed this rulemaking in light of 
sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate 
ambiguity, minimize litigation, establish clear legal standards, and 
reduce burden.

Executive Order 13175

    The Department of State 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 rule does not impose any new reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 
35.

List of Subjects

22 CFR Part 120

    Arms and munitions, Classified information, Exports.

22 CFR Part 122

    Arms and munitions, Exports, Reporting and recordkeeping 
requirements.

22 CFR Part 126

    Arms and munitions, Exports.

22 CFR Part 127

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

[[Page 8084]]

22 CFR Part 128

    Administrative practice and procedure, Arms and munitions, Exports.

22 CFR Part 130

    Arms and munitions, Campaign funds, Confidential business 
information, Exports, Reporting and recordkeeping requirements.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 120, 122, 126, 127, 128, and 130 are amended; and 
the amendments to 22 CFR 120.1(a) and (b), 120.20, and all amendments 
to 22 CFR parts 127 and 128 except for Sec. Sec.  127.1(d)(2) and 
128.15(a), in the interim rule published at 78 FR 52680 on August 26, 
2013, are adopted as final with changes, as follows:

PART 120--PURPOSE AND DEFINITIONS

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

    Authority:  Sections 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; 22 U.S.C. 2651a; Pub. 
L. 105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L. 
112-239; E.O. 13637, 78 FR 16129.

0
2. Section 120.1 is amended by revising paragraphs (a) and (b) to read 
as follows:

Sec.  120.1  General authorities, receipt of licenses, and 
ineligibility.

    (a) Section 38 of the Arms Export Control Act (22 U.S.C. 2778), as 
amended, authorizes the President to control the export and import of 
defense articles and defense services. The statutory authority of the 
President to promulgate regulations with respect to exports of defense 
articles and defense services is delegated to the Secretary of State by 
Executive Order 13637. This subchapter implements that authority, as 
well as other relevant authorities in the Arms Export Control Act (22 
U.S.C. 2751 et seq.). By virtue of delegations of authority by the 
Secretary of State, these regulations are primarily administered by the 
Deputy Assistant Secretary of State for Defense Trade Controls, Bureau 
of Political-Military Affairs.
    (b)(1) Authorized officials. All authorities administered by the 
Deputy Assistant Secretary of State for Defense Trade Controls pursuant 
to this subchapter may be exercised at any time by the Under Secretary 
of State for Arms Control and International Security or the Assistant 
Secretary of State for Political-Military Affairs.
    (2) The Deputy Assistant Secretary of State for Defense Trade 
Controls supervises the Directorate of Defense Trade Controls, which is 
comprised of the following offices:
    (i) The Office of Defense Trade Controls Licensing and the 
Director, Office of Defense Trade Controls Licensing, which have 
responsibilities related to licensing or other approvals of defense 
trade, including references under parts 120, 123, 124, 125, 126, 129, 
and 130 of this subchapter.
    (ii) The Office of Defense Trade Controls Compliance and the 
Director, Office of Defense Trade Controls Compliance, which have 
responsibilities related to violations of law or regulation and 
compliance therewith, including references contained in parts 122, 126, 
127, 128, and 130 of this subchapter, and that portion under part 129 
of this subchapter pertaining to registration.
    (iii) The Office of Defense Trade Controls Policy and the Director, 
Office of Defense Trade Controls Policy, which have responsibilities 
related to the general policies of defense trade, including references 
under parts 120 and 126 of this subchapter, and the commodity 
jurisdiction procedure under part 120 of this subchapter.
* * * * *

0
3. Section 120.4 is amended by revising paragraph (g), to read as 
follows:

Sec.  120.4  Commodity jurisdiction.

* * * * *
    (g) A person may appeal a commodity jurisdiction determination by 
submitting a written request for reconsideration to the Deputy 
Assistant Secretary of State for Defense Trade Controls. The Deputy 
Assistant Secretary's determination of the appeal will be provided, in 
writing, within 30 days of receipt of the appeal. If desired, an appeal 
of the Deputy Assistant Secretary's decision can then be made to the 
Assistant Secretary for Political-Military Affairs.

0
4. Section 120.20 is revised to read as follows:

Sec.  120.20  License or other approval.

    License means a document bearing the word ``license'' issued by the 
Deputy Assistant Secretary of State for Defense Trade Controls, or his 
authorized designee, that permits the export, temporary import, or 
brokering of a specific defense article or defense service controlled 
by this subchapter.
    Other approval means a document issued by the Deputy Assistant 
Secretary of State for Defense Trade Controls, or his authorized 
designee, that approves an activity regulated by this subchapter (e.g., 
approvals for brokering activities or retransfer authorizations), or 
the use of an exemption to the license requirements as described in 
this subchapter.

PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS

0
5. 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.

0
6. Section 122.5 is amended by revising paragraph (a), to read as 
follows:

Sec.  122.5  Maintenance of records by registrants.

    (a) A person who is required to register must maintain records 
concerning the manufacture, acquisition and disposition (to include 
copies of all documentation on exports using exemptions and 
applications and licenses and their related documentation), of defense 
articles; of technical data; the provision of defense services; 
brokering activities; and information on political contributions, fees, 
or commissions furnished or obtained, as required by part 130 of this 
subchapter. Records in an electronic format must be maintained using a 
process or system capable of reproducing all records on paper. Such 
records when displayed on a viewer, monitor, or reproduced on paper, 
must exhibit a high degree of legibility and readability. (For the 
purpose of this section, ``legible'' and ``legibility'' mean the 
quality of a letter or numeral that enables the observer to identify it 
positively and quickly to the exclusion of all other letters or 
numerals. ``Readable'' and ``readability'' means the quality of a group 
of letters or numerals being recognized as complete words or numbers.) 
This information must be stored in such a manner that none of it may be 
altered once it is initially recorded without recording all changes, 
who made them, and when they were made. For processes or systems based 
on the storage of digital images, the process or system must afford 
accessibility to all digital images in the records being maintained. 
All records subject to this section must be maintained for a period of 
five years from the expiration of the license or other approval, to 
include exports using an exemption (see Sec.  123.26 of this 
subchapter); or, from the date of the transaction (e.g., expired 
licenses or other approvals relevant to the export transaction using an 
exemption). The Deputy Assistant Secretary of State for

[[Page 8085]]

Defense Trade Controls and the Director of the Office of Defense Trade 
Controls Licensing may prescribe a longer or shorter period in 
individual cases.
* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

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

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

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

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

* * * * *
    (t) Lebanon. It is the policy of the United States to deny licenses 
or other approvals for exports or imports of defense articles and 
defense services destined for or originating in Lebanon, except that a 
license or other approval may be issued, on a case-by-case basis, for 
the United Nations Interim Force in Lebanon (UNIFIL) or as authorized 
by the Government of Lebanon.
* * * * *

0
9. Section 126.2 is revised to read as follows:

Sec.  126.2  Temporary suspension or modification of this subchapter.

    The Deputy Assistant Secretary for Defense Trade Controls may order 
the temporary suspension or modification of any or all of the 
regulations of this subchapter in the interest of the security and 
foreign policy of the United States.

0
10. Section 126.3 is revised to read as follows:

Sec.  126.3  Exceptions.

    In a case of exceptional or undue hardship, or when it is otherwise 
in the interest of the United States Government, the Deputy Assistant 
Secretary of State for Defense Trade Controls may make an exception to 
the provisions of this subchapter.

0
11. Section 126.14 is amended by revising paragraph (b) introductory 
text, to read as follows:

Sec.  126.14  Special comprehensive export authorizations for NATO, 
Australia, Japan, and Sweden.

* * * * *
    (b) Provisions and requirements for comprehensive authorizations. 
Requests for the special comprehensive authorizations set forth in 
paragraph (a) of this section should be by letter addressed to the 
Directorate of Defense Trade Controls. With regard to a commercial 
major program or project authorization, or technical data supporting a 
teaming arrangement, merger, joint venture or acquisition, registered 
U.S. exporters may consult the Deputy Assistant Secretary of State for 
Defense Trade Controls about eligibility for and obtaining available 
comprehensive authorizations set forth in paragraph (a) of this section 
or pursuant to Sec.  126.9(b) of this subchapter.
* * * * *

0
12. Section 126.17 is amended by revising paragraphs (a)(1)(iv), 
(a)(2), (a)(3)(i), (a)(4) introductory text, (a)(4)(iii), (b)(2), 
(d)(1), (d)(2), paragraph (e) introductory text, (f)(1), (f)(2), 
(g)(1), (g)(2), (g)(4), (g)(5), (h)(2) through (h)(4), (h)(6) through 
(h)(8), (i)(1) through (i)(4), (j)(1), (j)(2), (j)(3)(i), (j)(3)(ii), 
(j)(5), (k)(1)(i)(A), (k)(1)(i)(C), (k)(1)(ii)(B), (l)(1) introductory 
text, (l)(2)(iii), (l)(2)(iv), (m), (n)(4), (o)(1) introductory text, 
(o)(1)(iii), and (o)(2) to read as follows:

Sec.  126.17  Exemption pursuant to the Defense Trade Cooperation 
Treaty between the United States and the United Kingdom.

    (a) * * *
    (1) * * *
    (iv) Intermediate consignee means, for purposes of this section, an 
approved entity or person who receives, but does not have access to, 
defense articles, including technical data, for the sole purpose of 
effecting onward movement to members of the Approved Community (see 
paragraph (k) of this section).
    (2) Persons or entities exporting or transferring defense articles 
or defense services are exempt from the otherwise applicable licensing 
requirements if such persons or entities comply with the regulations 
set forth in this section. Except as provided in Supplement No. 1 to 
part 126 of this subchapter, Port Directors of U.S. Customs and Border 
Protection and postmasters shall permit the permanent and temporary 
export without a license from members of the United States Community to 
members of the United Kingdom Community (see paragraph (d) of this 
section regarding the identification of members of the United Kingdom 
Community) of defense articles and defense services not listed in 
Supplement No. 1 to part 126 of this subchapter, for the end-uses 
specifically identified pursuant to paragraphs (e) and (f) of this 
section. The purpose of this section is to specify the requirements to 
export, transfer, reexport, retransfer, or otherwise dispose of a 
defense article or defense service pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom. 
All persons must continue to comply with statutory and regulatory 
requirements outside of this subchapter concerning the import of 
defense articles and defense services or the possession or transfer of 
defense articles, including, but not limited to, regulations issued by 
the Bureau of Alcohol, Tobacco, Firearms and Explosives found at 27 CFR 
parts 447, 478, and 479, which are unaffected by the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
continue to apply fully to defense articles and defense services 
subject to either of the aforementioned treaties and the exemptions 
contained in this section.
    (3) * * *
    (i) The exporter must be registered with the Directorate of Defense 
Trade Controls (DDTC) and must be eligible, according to the 
requirements and prohibitions of the Arms Export Control Act, this 
subchapter, and other provisions of United States law, to obtain an 
export license (or other forms of authorization to export) from any 
agency of the U.S. Government without restriction (see paragraphs (b) 
and (c) of this section for specific requirements);
* * * * *
    (4) Transfers. In order for a member of the Approved Community 
(i.e., the United States Community and United Kingdom Community) to 
transfer a defense article or defense service under the Defense Trade 
Cooperation Treaty within the Approved Community, all of the following 
conditions must be met:
* * * * *
    (iii) The transfer is required for an end-use specified in the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom and mutually agreed to by the Government of the United 
States and the Government of the United Kingdom pursuant to the terms 
of the Defense Trade Cooperation Treaty between the United States and 
the United Kingdom and the United Kingdom Implementing Arrangement (see 
paragraphs (e) and (f) of this section regarding authorized end-uses);
* * * * *
    (b) * * *
    (2) Non-governmental U.S. persons registered with DDTC and 
eligible, according to the requirements and prohibitions of the Arms 
Export Control Act, this subchapter, and other provisions of United 
States law, to obtain an export license (or other form

[[Page 8086]]

of authorization to export) from any agency of the U.S. Government 
without restriction, including their employees acting in their official 
capacity with, as appropriate, a security clearance and a need-to-know.
* * * * *
    (d) * * *
    (1) Her Majesty's Government entities and facilities identified as 
members of the Approved Community through the DDTC Web site at the time 
of a transaction under this section; and
    (2) The non-governmental United Kingdom entities and facilities 
identified as members of the Approved Community through the DDTC Web 
site (www.pmddtc.state.gov) at the time of a transaction under this 
section; non-governmental United Kingdom entities and facilities that 
become ineligible for such membership will be removed from the United 
Kingdom Community.
    (e) Authorized End-uses. The following end-uses, subject to 
paragraph (f) of this section, are specified in the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom:
* * * * *
    (f) * * *
    (1) Operations, programs, and projects that can be publicly 
identified will be posted on the DDTC Web site;
    (2) Operations, programs, and projects that cannot be publicly 
identified will be confirmed in written correspondence from DDTC; or
* * * * *
    (g) * * *
    (1) An exporter authorized pursuant to paragraph (b)(2) of this 
section may market a defense article to members of the United Kingdom 
Community if that exporter has been licensed by DDTC to export (as 
defined by Sec.  120.17 of this subchapter) the identical type of 
defense article to any foreign person and end-use of the article is for 
an end-use identified in paragraph (e) of this section.
    (2) The export of any defense article specific to the existence of 
(e.g., reveals the existence of or details of) anti-tamper measures 
made at U.S. Government direction always requires prior written 
approval from DDTC.
* * * * *
    (4) U.S.-origin defense articles specific to developmental systems 
that have not obtained written Milestone B approval from the U.S. 
Department of Defense milestone approval authority are not eligible for 
export unless such export is pursuant to a written solicitation or 
contract issued or awarded by the U.S. Department of Defense for an 
end-use identified pursuant to paragraph (e)(1), (2), or (4) of this 
section.
    (5) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category XI 
(a)(3) electronically scanned array radar excluded by Note 2) that are 
embedded in a larger system that is eligible to ship under this section 
(e.g., a ship, an aircraft) must separately comply with any 
restrictions placed on that embedded defense article under this 
subchapter. The exporter must obtain a license or other authorization 
from DDTC for the export of such embedded defense articles (for 
example, USML Category XI (a)(3) electronically scanned array radar 
systems that are exempt from this section that are incorporated in an 
aircraft that is eligible to ship under this section continue to 
require separate authorization from DDTC for their export, transfer, 
reexport, or retransfer).
* * * * *
    (h) * * *
    (2) Any transfer or other provision of a defense article or defense 
service for an end-use that is not authorized by the exemption provided 
by this section is prohibited without a license or the prior written 
approval of DDTC (see paragraphs (e) and (f) of this section regarding 
authorized end-uses).
    (3) Any retransfer or reexport, or other provision of a defense 
article or defense service by a member of the United Kingdom Community 
to a foreign person that is not a member of the United Kingdom 
Community, or to a U.S. person that is not a member of the United 
States Community, is prohibited without a license or the prior written 
approval of DDTC (see paragraph (d) of this section for specific 
information on the identification of the United Kingdom Community).
    (4) Any change in the use of a defense article or defense service 
previously exported, transferred, or obtained under this exemption by 
any foreign person, including a member of the United Kingdom Community, 
to an end-use that is not authorized by this exemption is prohibited 
without a license or other written approval of DDTC (see paragraphs (e) 
and (f) of this section regarding authorized end-uses).
* * * * *
    (6) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category XI 
(a)(3) electronically scanned array radar systems) that are embedded in 
a larger system that is eligible to ship under this section (e.g., a 
ship, an aircraft) must separately comply with any restrictions placed 
on that embedded defense article unless otherwise specified. A license 
or other authorization must be obtained from DDTC for the export, 
transfer, reexport, retransfer, or change in end-use of any such 
embedded defense article (for example, USML Category XI(a)(3) 
electronically scanned array radar systems that are excluded from this 
section by Supplement No. 1 to part 126 of this subchapter, Note 2 that 
are incorporated in an aircraft that is eligible to ship under this 
section continue to require separate authorization from DDTC for their 
export, transfer, reexport, or retransfer).
    (7) A license or prior approval from DDTC is not required for a 
transfer, retransfer, or reexport of an exported defense article or 
defense service under this section, if:
    (i) The transfer of defense articles or defense services is made by 
a member of the United States Community to United Kingdom Ministry of 
Defence (UK MOD) elements deployed outside the Territory of the United 
Kingdom and engaged in an authorized end-use (see paragraphs (e) and 
(f) of this section regarding authorized end-uses) using United Kingdom 
Armed Forces transmission channels or the provisions of this section;
    (ii) The transfer of defense articles or defense services is made 
by a member of the United States Community to an Approved Community 
member (either United States or UK) that is operating in direct support 
of UK MOD elements deployed outside the Territory of the United Kingdom 
and engaged in an authorized end-use (see paragraphs (e) and (f) of 
this section regarding authorized end-uses) using United Kingdom Armed 
Forces transmission channels or the provisions of this section;
    (iii) The reexport is made by a member of the United Kingdom 
Community to UK MOD elements deployed outside the Territory of the 
United Kingdom engaged in an authorized end-use (see paragraphs (e) and 
(f) of this section regarding authorized end-uses) using United Kingdom 
Armed Forces transmission channels or the provisions of this section;
    (iv) The reexport is made by a member of the United Kingdom 
Community to an Approved Community member (either U.S. or UK) that is 
operating in direct support of UK MOD elements deployed outside the 
Territory of the United Kingdom engaged in an authorized end-use (see 
paragraphs (e) and (f) of this section regarding authorized end-uses) 
using United

[[Page 8087]]

Kingdom Armed Forces transmission channels or the provisions of this 
section; or
    (v) The defense article or defense service will be delivered to the 
UK MOD for an authorized end-use (see paragraphs (e) and (f) of this 
section regarding authorized end-uses); the UK MOD may deploy the item 
as necessary when conducting official business within or outside the 
Territory of the United Kingdom. The item must remain under the 
effective control of the UK MOD while deployed and access may not be 
provided to unauthorized third parties.
    (8) U.S. persons registered, or required to be registered, pursuant 
to part 122 of this subchapter and members of the United Kingdom 
Community must immediately notify DDTC of any actual or proposed sale, 
retransfer, or reexport of a defense article or defense service on the 
U.S. Munitions List originally exported under this exemption to any of 
the countries listed in Sec.  126.1 of this subchapter or any person 
acting on behalf of such countries, whether within or outside the 
United States. Any person knowing or having reason to know of such a 
proposed or actual sale, reexport, or retransfer shall submit such 
information in writing to the Office of Defense Trade Controls 
Compliance, Directorate of Defense Trade Controls.
    (i) Transitions. (1) Any previous export of a defense article under 
a license or other approval of the U.S. Department of State remains 
subject to the conditions and limitations of the original license or 
authorization unless DDTC has approved in writing a transition to this 
section.
    (2) If a U.S. exporter desires to transition from an existing 
license or other approval to the use of the provisions of this section, 
the following is required:
    (i) The U.S. exporter must submit a written request to DDTC, which 
identifies the defense articles or defense services to be transitioned, 
the existing license(s) or other authorizations under which the defense 
articles or defense services were originally exported, and the Treaty-
eligible end-use for which the defense articles or defense services 
will be used. Any license(s) filed with U.S. Customs and Border 
Protection should remain on file until the exporter has received 
approval from DDTC to retire the license(s) and transition to this 
section. When this approval is conveyed to U.S. Customs and Border 
Protection by DDTC, the license(s) will be returned to DDTC by U.S. 
Customs and Border Protection in accord with existing procedures for 
the return of expired licenses in Sec.  123.22(c) of this subchapter.
    (ii) Any license(s) not filed with U.S. Customs and Border 
Protection must be returned to DDTC with a letter citing approval by 
DDTC to transition to this section as the reason for returning the 
license(s).
    (3) If a member of the United Kingdom Community desires to 
transition defense articles received under an existing license or other 
approval to the processes established under the Treaty, the United 
Kingdom Community member must submit a written request to DDTC, either 
directly or through the original U.S. exporter, which identifies the 
defense articles or defense services to be transitioned, the existing 
license(s) or other authorizations under which the defense articles or 
defense services were received, and the Treaty-eligible end-use (see 
paragraphs (e) and (f) of this section regarding authorized end-uses) 
for which the defense articles or defense services will be used. The 
defense article or defense service shall remain subject to the 
conditions and limitations of the existing license or other approval 
until the United Kingdom Community member has received approval from 
DDTC.
    (4) Authorized exporters identified in paragraph (b)(2) of this 
section who have exported a defense article or defense service that has 
subsequently been placed on the list of exempted items in Supplement 
No. 1 to part 126 of this subchapter must review and adhere to the 
requirements in the relevant Federal Register notice announcing such 
removal. Once removed, the defense article or defense service will no 
longer be subject to this section, and such defense article or defense 
service previously exported shall remain on the U.S. Munitions List and 
be subject to the requirements of this subchapter unless the applicable 
Federal Register notice states otherwise. Subsequent reexport or 
retransfer must be made pursuant to Sec.  123.9 of this subchapter.
* * * * *
    (j) Marking of exports. (1) All defense articles and defense 
services exported or transitioned pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
this section shall be marked or identified prior to movement as 
follows:
    (i) For classified defense articles and defense services the 
standard marking or identification shall read ``//CLASSIFICATION LEVEL 
USML//REL USA and GBR Treaty Community//.'' For example, for defense 
articles classified SECRET, the marking or identification shall be ``//
SECRET USML//REL USA and GBR Treaty Community//.''
    (ii) Unclassified defense articles and defense services exported 
under or transitioned pursuant to this section shall be handled while 
in the UK as ``Restricted USML'' and the standard marking or 
identification shall read ``//RESTRICTED USML//REL USA and GBR Treaty 
Community//.''
    (2) Where U.S.-origin defense articles are returned to a member of 
the United States Community identified in paragraph (b) of this 
section, any defense articles marked or identified pursuant to 
paragraph (j)(1)(ii) of this section as ``//RESTRICTED USML//REL USA 
and GBR Treaty Community//'' will be considered unclassified and the 
marking or identification shall be removed; and
    (3) * * *
    (i) Defense articles (other than technical data) shall be 
individually labeled with the appropriate identification detailed in 
paragraphs (j)(1) and (j)(2) of this section; or, where such labeling 
is impracticable (e.g., propellants, chemicals), shall be accompanied 
by documentation (such as contracts or invoices) clearly associating 
the defense articles with the appropriate markings as detailed in 
paragraphs (j)(1)(i) and (j)(1)(ii) of this section;
    (ii) Technical data (including data packages, technical papers, 
manuals, presentations, specifications, guides and reports), regardless 
of media or means of transmission (physical, oral, or electronic), 
shall be individually labeled with the appropriate identification 
detailed in paragraphs (j)(1) and (j)(2) of this section; or, where 
such labeling is impractical shall be accompanied by documentation 
(such as contracts or invoices) or verbal notification clearly 
associating the technical data with the appropriate markings as 
detailed in paragraphs (j)(1)(i) and (j)(1)(ii) of this section; and
* * * * *
    (5) The exporter shall incorporate the following statement as an 
integral part of the bill of lading and the invoice whenever defense 
articles are to be exported: ``These U.S. Munitions List commodities 
are authorized by the U.S. Government under the U.S.-UK Defense Trade 
Cooperation Treaty for export only to United Kingdom for use in 
approved projects, programs or operations by members of the United 
Kingdom Community. They may not be retransferred or reexported or used 
outside of an approved project, program,

[[Page 8088]]

or operation, either in their original form or after being incorporated 
into other end-items, without the prior written approval of the U.S. 
Department of State.''
    (k) * * *
    (1) * * *
    (i) * * *
    (A) Exporters registered with DDTC and eligible;
* * * * *
    (C) Commercial air freight and surface shipment carriers, freight 
forwarders, or other parties not exempt from registration under Sec.  
129.3(b)(3) of this subchapter, that are identified at the time of 
export as being on the U.S. Department of Defense Civil Reserve Air 
Fleet (CRAF) list of approved air carriers, a link to which is 
available on the DDTC Web site; or
    (ii) * * *
    (B) Freight forwarders, customs brokers, commercial air freight and 
surface shipment carriers, or other United Kingdom parties that are 
identified at the time of export as being on the list of Authorized 
United Kingdom Intermediate Consignees, which is available on the DDTC 
Web site.
* * * * *
    (l) * * *
    (1) All exporters authorized pursuant to paragraph (b)(2) of this 
section who export defense articles or defense services pursuant to the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom and this section shall maintain detailed records of 
their exports, imports, and transfers. Exporters shall also maintain 
detailed records of any reexports and retransfers approved or otherwise 
authorized by DDTC of defense articles or defense services subject to 
the Defense Trade Cooperation Treaty between the United States and the 
United Kingdom and this section. These records shall be maintained for 
a minimum of five years from the date of export, import, transfer, 
reexport, or retransfer and shall be made available upon request to 
DDTC or a person designated by DDTC (e.g., U.S. Department of State's 
Bureau of Diplomatic Security) or U.S. Immigration and Customs 
Enforcement, or U.S. Customs and Border Protection. Records in an 
electronic format must be maintained using a process or system capable 
of reproducing all records on paper. Such records when displayed on a 
viewer, monitor, or reproduced on paper, must exhibit a high degree of 
legibility and readability. (For the purpose of this section, 
``legible'' and ``legibility'' mean the quality of a letter or numeral 
that enables the observer to identify it positively and quickly to the 
exclusion of all other letters or numerals. ``Readable'' and 
``readability'' means the quality of a group of letters or numerals 
being recognized as complete words or numbers.) These records shall 
consist of the following:
* * * * *
    (2) * * *
    (iii) For exports in support of mutually determined specific 
security and defense projects where the Government of the United 
Kingdom is the end-user identify Sec.  126.17(e)(3) (the name or an 
appropriate description of the project shall be placed in the 
appropriate field in the EEI, as well); or
    (iv) For exports that will have a U.S. Government end-use identify 
Sec.  126.17(e)(4) (the U.S. Government contract number or solicitation 
number (e.g., ``U.S. Government contract number XXXXX'') shall be 
placed in the appropriate field in the EEI, as well). Such exports must 
meet the required export documentation and filing guidelines, including 
for defense services, of Sec.  123.22(a), (b)(1), and (b)(2) of this 
subchapter.
    (m) Fees and commissions. All exporters authorized pursuant to 
paragraph (b)(2) of this section shall, with respect to each export, 
transfer, reexport, or retransfer, pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
this section, submit a statement to DDTC containing the information 
identified in Sec.  130.10 of this subchapter relating to fees, 
commissions, and political contributions on contracts or other 
instruments valued in an amount of $500,000 or more.
    (n) * * *
    (4) DDTC or a person designated by DDTC (e.g., U.S. Department of 
State's Bureau of Diplomatic Security), U.S. Immigration and Customs 
Enforcement, or U.S. Customs and Border Protection may require the 
production of documents and information relating to any actual or 
attempted export, transfer, reexport, or retransfer pursuant to this 
section. Any foreign person refusing to provide such records within a 
reasonable period of time shall be suspended from the United Kingdom 
Community and ineligible to receive defense articles or defense 
services pursuant to the exemption under this section or otherwise.
    (o) * * *
    (1) Exports pursuant to the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom and this section by 
any person identified in paragraph (b)(2) of this section shall not 
take place until 30 days after DDTC has acknowledged receipt of a 
written notification from the exporter notifying the Department of 
State if the export involves one or more of the following:
* * * * *
    (iii) A contract, regardless of value, for the manufacturing abroad 
of any item of significant military equipment (see Sec.  120.7 of this 
subchapter); or
* * * * *
    (2) The written notification required in paragraph (o)(1) of this 
section shall indicate the item/model number, general item description, 
U.S. Munitions List category, value, and quantity of items to be 
exported pursuant to the Defense Trade Cooperation Treaty between the 
United States and the United Kingdom and this section, and shall be 
accompanied by the following additional information:
* * * * *

PART 127--VIOLATIONS AND PENALTIES

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

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

0
14. Section 127.1 is amended by revising paragraph (d)(2), to read as 
follows:

Sec.  127.1  Violations.

* * * * *
    (d) * * *
    (2) Order, buy, receive, use, sell, deliver, store, dispose of, 
forward, transport, finance, or otherwise service or participate in any 
manner in any transaction subject to this subchapter that may involve 
any defense article, which includes technical data, defense services, 
or brokering activities, where such ineligible person may obtain any 
benefit therefrom or have any direct or indirect interest therein.
* * * * *
0
15. Section 127.11 is amended by revising paragraph (b), to read as 
follows:

Sec.  127.11  Past violations.

* * * * *
    (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

[[Page 8089]]

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 Deputy Assistant Secretary of State for 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.
* * * * *

PART 128--ADMINISTRATIVE PROCEDURES

0
16. The authority citation for part 128 continues to read as follows:

    Authority: Sections 2, 38, 40, 42, and 71, Arms Export Control 
Act. 90 Stat. 744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); 22 
U.S.C. 2651a; E.O. 12291, 46 FR 1981; E.O. 13637, 78 FR 16129.

0
17. Section 128.5 is amended by revising paragraph (c), to read as 
follows:

Sec.  128.5  Answer and demand for oral hearing.

* * * * *
    (c) Submission of answer. The answer, written demand for oral 
hearing (if any) and supporting evidence required by paragraph (b) of 
this section shall be in duplicate and mailed or delivered to the 
designated Administrative Law Judge. A copy shall be simultaneously 
mailed to the Deputy Assistant Secretary of State for Defense Trade 
Controls, SA-1, Room 1200, Department of State, Washington, DC 20522-
0112, or delivered to 2401 Street NW., Washington, DC addressed to the 
Deputy Assistant Secretary of State for Defense Trade Controls, SA-1, 
Room 1200, Department of State, Washington, DC 20037.
0
18. Section 128.10 is revised to read as follows:

Sec.  128.10  Disposition of proceedings.

    Where the evidence is not sufficient to support the charges, the 
Deputy Assistant Secretary of State for Defense Trade Controls or the 
Administrative Law Judge will dismiss the charges. Where the 
Administrative Law Judge finds that a violation has been committed, the 
Administrative Law Judge's recommendation shall be advisory only. The 
Assistant Secretary of State for Political-Military Affairs will review 
the record, consider the report of the Administrative Law Judge, and 
make an appropriate disposition of the case. The Deputy Assistant 
Secretary of State for Defense Trade Controls may issue an order 
debarring the respondent from participating in the export of defense 
articles or technical data or the furnishing of defense services as 
provided in Sec.  127.7 of this subchapter, impose a civil penalty as 
provided in Sec.  127.10 of this subchapter, or take such action as the 
Administrative Law Judge may recommend. Any debarment order will be 
effective for the period of time specified therein and may contain such 
additional terms and conditions as are deemed appropriate. A copy of 
the order together with a copy of the Administrative Law Judge's report 
will be served upon the respondent.

0
19. Section 128.13 is amended by revising paragraph (e)(1), to read as 
follows:

Sec.  128.13  Appeals.

* * * * *
    (e) Preparation of appeals--(1) General requirements. An appeal 
shall be in letter form. The appeal and accompanying material should be 
filed in duplicate, unless otherwise indicated, and a copy 
simultaneously mailed to the Deputy Assistant Secretary of State for 
Defense Trade Controls, SA-1, Room 1200, Department of State, 
Washington, DC 20522-0112 or delivered to 2401 E Street NW., 
Washington, DC addressed to the Deputy Assistant Secretary of State for 
Defense Trade Controls, SA-1, Room 1200, Department of State, 
Washington, DC 20037.
* * * * *
0
20. Section 128.15 is amended by revising paragraph (a), to read as 
follows:

Sec.  128.15  Orders containing probationary periods.

    (a) Revocation of probationary periods. A debarment order may set a 
probationary period during which the order may be held in abeyance for 
all or part of the debarment period, subject to the conditions stated 
therein. The Deputy Assistant Secretary of State for Defense Trade 
Controls may apply, without notice to any person to be affected 
thereby, to the Administrative Law Judge for a recommendation on the 
appropriateness of revoking probation when it appears that the 
conditions of the probation have been breached. The facts in support of 
the application will be presented to the Administrative Law Judge, who 
will report thereon and make a recommendation to the Assistant 
Secretary of State for Political-Military Affairs. The latter will make 
a determination whether to revoke probation and will issue an 
appropriate order. The party affected by this action may request the 
Assistant Secretary of State for Political-Military Affairs to 
reconsider the decision by submitting a request within 10 days of the 
date of the order.
* * * * *

PART 130--POLITICAL CONTRIBUTIONS, FEES AND COMMISSIONS

0
21. The authority citation for part 130 is revised to read as follows:

    Authority: Sec. 39, Pub. L. 94-329, 90 Stat. 767 (22 U.S.C. 
2779); 22 U.S.C. 2651a; E.O. 13637, 78 FR 16129.

0
22. Section 130.9 is amended by revising paragraph (a)(1)(ii), to read 
as follows:

Sec.  130.9  Obligation to furnish information to the Directorate of 
Defense Trade Controls.

    (a)(1) * * *
    (ii) Fees or commissions in an aggregate amount of $100,000 or 
more. If so, applicant must furnish to the Directorate of Defense Trade 
Controls the information specified in Sec.  130.10. The furnishing of 
such information or an explanation satisfactory to the Director of the 
Office of Defense Trade Controls Licensing as to why all the 
information cannot be furnished at that time is a condition precedent 
to the granting of the relevant license or approval.
* * * * *

    Dated: January 23, 2014.
Rose E. Gottemoeller,
Acting Under Secretary, Arms Control and International Security, 
Department of State.
[FR Doc. 2014-02293 Filed 2-10-14; 8:45 am]
BILLING CODE 4710-25-P
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