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[Federal Register Volume 78, Number 165 (Monday, August 26, 2013)]
[Rules and Regulations]
[Pages 52680-52694]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20743]

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DEPARTMENT OF STATE

22 CFR Parts 120, 122, 126, 127, 128, and 129

RIN 1400-AC37
[Public Notice 8437]

Amendment to the International Traffic in Arms Regulations: 
Registration and Licensing of Brokers, Brokering Activities, and 
Related Provisions

AGENCY: Department of State.

ACTION: Interim final rule.

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SUMMARY: The Department of State is issuing this interim final rule 
amending the International Traffic in Arms Regulations (ITAR) relating 
to brokers and brokering activities and to related provisions of the 
ITAR. These amendments clarify registration requirements, the scope of 
brokering activities, prior approval requirements and exemptions, 
procedures for obtaining prior approval and guidance, and reporting and 
recordkeeping of such activities. Conforming and technical changes are 
made to other parts of the ITAR that affect export as well as brokering 
activities. The revisions contained in this rule are part of the 
Department of State's retrospective plan under E.O. 13563 completed on 
August 17, 2011.

DATES: This rule is effective October 25, 2013. Interested parties may 
submit comments on this rule by October 10, 2013. The Department will 
publish a final rule notifying of any changes to the rule pursuant to 
public comment assessment.

ADDRESSES: Interested parties may submit comments within 45 days of the 
date of publication by one of the following methods:
     Email: DDTCResponseTeam@state.gov with the subject line, 
``Brokering Rule.''
     Internet: At www.regulations.gov, search for this document 
by using this document's RIN (1400-AC37).
    Comments received after that date will be considered if feasible, 
but consideration cannot be assured. Those submitting comments should 
not include any personally identifying information they do not desire 
to be made public or information for which a claim of confidentiality 
is asserted because those comments and/or transmittal emails will be 
made available for public inspection and copying after the close of the 
comment period via the Directorate of Defense Trade Controls Web site 
at www.pmddtc.state.gov. Parties who wish to comment anonymously may do 
so by submitting their comments via www.regulations.gov, leaving the 
fields that would identify the commenter blank and including no 
identifying information in the comment itself. Comments submitted via 
www.regulations.gov are immediately available for public inspection.

FOR FURTHER INFORMATION CONTACT: Ms. Sarah J. Heidema, Acting Director, 
Office of Defense Trade Controls Policy, U.S. Department of State, 
telephone (202) 663-2809, or email DDTCResponseTeam@state.gov. ATTN: 
Brokering Rule. The Department of State's full retrospective plan can 
be accessed at http://www.state.gov/documents/organization/181028.pdf.

SUPPLEMENTARY INFORMATION: This rule makes changes to part 129 and 
related sections of the ITAR that regulate brokers and brokering 
activities and implement the brokering amendment to the Arms Export 
Control Act (AECA) (section 38(b)(1)(A)(ii) of the AECA, 22 U.S.C. 
2778(b)(1)(A)(ii)).
    The AECA was amended in 1996 (Pub. L. 104-164) to provide for the 
regulation of brokering activities. The following year, implementing 
regulations were added to the ITAR in part 129. These regulations have 
remained unchanged except for two minor technical changes.
    In 2003, in a report to Congress, the Department of State noted 
that it was beginning a review of the brokering regulations. The 
purpose of the review was to assess the need to modify the regulations 
in light of the experience gained in administering them. Based on this 
experience as well as comments received from other agencies and 
industry, including the Defense Trade Advisory Group, a Department of 
State Federal advisory committee, the Department published a proposed 
rule on December 19, 2011 (see ``Amendment to the International Traffic 
in Arms Regulations: Registration and Licensing of Brokers, Brokering 
Activities, and Related Provisions,'' 76 FR 78578) modifying the 
provisions relating to brokering and brokering activities. The comment 
period ended February 17, 2012. Thirty-one parties filed comments 
recommending changes, which were reviewed and considered by the 
Department and other agencies. The Department's evaluation of the 
written comments and recommendations follows.
    The Department received numerous comments and recommendations 
regarding the definitions for terms and provisions set forth in ITAR 
part 129. The Department reviewed and considered these comments, and 
where the recommendations were in conformance with the requirements for 
brokering as set forth in the AECA, and clarified the regulation, the 
Department has made amendments accordingly.
    Twenty-seven commenting parties expressed concerns regarding the 
scope of ``broker'' and ``brokering activities,'' and that the revised 
definition of ``broker'' in conjunction with the revised definition of 
``brokering activities'' would result in a greatly increased number of 
persons requiring to register as brokers. In conformance with the 
statutory requirements for the brokering of defense articles and 
services, the Department has revised the proposed changes to these 
definitions to clarify their scope. In particular, the Department has 
clarified that foreign persons that are required to register as brokers 
are those that are in the United States and those foreign persons 
outside the United States that are owned/controlled by a U.S. person. 
And the Department has removed from the definition of ``brokering 
activities'' the activities of any foreign person located outside the 
United States acting on behalf of a U.S. person.
    One commenting party requested clarification on whether the 
addition of ``or are otherwise charged'' to ITAR Sec.  120.1(c)(2) 
would preclude any person charged with any export violation from 
applying for, obtaining, or using export control documents, and 
recommended the Department identify such ineligible parties to prevent 
applicants from including the ineligible parties on export license 
applications and other submissions. The Department confirms that any 
person charged with a violation of the U.S. criminal statutes 
enumerated in ITAR Sec.  120.27 is generally ineligible

[[Page 52681]]

to be involved in ITAR-regulated activities.
    One commenting party noted that the addition of ``source or 
manufacturer'' to the list of ineligible persons in ITAR Sec.  120.1(d) 
could add a significant burden to applicants. The Department notes that 
applicants already should be screening all parties to their 
transaction, including screening the source or manufacturer. The 
addition of the phrase ``source or manufacturer'' is not a new 
requirement, but a clarification of requirements.
    Two commenting parties recommended reconsideration of the inclusion 
of reference to ``foreign criminal statutes dealing with subject matter 
similar to that in the U.S. criminal statutes enumerated in ITAR Sec.  
120.27,'' as the reference is imprecise and may lead to confusion and 
misapplication, and that it would be an undue burden to supply this 
information. The Department has revised this provision to apply to the 
more specific circumstances of a person violating a foreign criminal 
law on exportation of defense articles where conviction of such law 
carries a minimum term of imprisonment of greater than one year.
    One commenting party recommended that the Department allow U.S. 
exporters registered pursuant to ITAR part 122 to include U.S. and 
foreign person third parties to be listed and identified as brokers in 
their Statements of Registration. The new ITAR Sec.  129.3(d) allows 
U.S. and foreign subsidiaries and affiliates owned or otherwise 
controlled by a registrant to be listed as brokers on the registrant's 
manufacturer/exporter registration. The Department notes that while 
these entities, under these circumstances, are not required to submit a 
separate broker registration or pay a separate broker registration fee, 
all other requirements of ITAR part 129 apply to such brokers and their 
brokering activities.
    One commenting party recommended that revised ITAR Sec.  122.2 be 
changed to impose notification requirements on foreign brokers, and not 
on the registrants. The inclusion of foreign affiliates or brokers in a 
registrant's Statement of Registration may occur where the registrant 
owns or otherwise controls such foreign subsidiaries and affiliates who 
may be listed as brokers. As the registrant is the responsible party in 
this regard, the Department did not accept this recommendation.
    Several parties commented that the brokering prior approval 
requirement effectively results in multiple authorizations for the same 
transaction. These parties recommended that the logic of the removal of 
the former ITAR Sec.  126.8 requirement for prior approval of certain 
export activities be adopted in this instance, and require prior 
brokering approval only when no other U.S. export authorization would 
be applicable for regulation. Because the export or retransfer of U.S. 
origin defense articles, defense services, and technical data stemming 
from brokering activities still requires prior written authorization, 
the Department's review or enforcement authority will not be 
diminished. The Department agrees with this assessment in part. Rather 
than requiring prior approval for brokering activities related to all 
U.S. Munitions List (USML) items, the new ITAR Sec.  129.4 specifies 
which of these items requires prior approval for brokering generally 
consistent with U.S. international commitments or obligations.
    Seven parties expressed concerns regarding the proposed requirement 
in ITAR Sec.  126.13 to identify brokers and brokering activities in 
all authorization requests. The parties stated this requirement would 
be burdensome, would supersede any prior approval exemption, would 
result in registrant liability for the actions of non-employee brokers, 
and could result in multiple license requirements for the same 
activity. The Department has removed this provision from the revised 
regulation.
    Two commenting parties recommended that the Department remove the 
proposed inclusion of brokers and brokering activities from the 
liabilities of the registrant in ITAR Sec.  127.1. The Department notes 
that this is not a new provision, but a clarification of existing 
requirements.
    One commenting party recommended the Department clarify that 
activities undertaken within the corporate family of a single 
registrant do not qualify as brokering under ITAR part 129. Section 
129.2 provides that brokering activity does not include activities 
performed by an affiliate on behalf of another affiliate.
    Two commenting parties recommended reconsideration of including 
``financing, insuring, transporting, and freight forwarding'' and 
``soliciting'' and ``promoting'' within the scope of ``brokering 
activities.'' The Department has provided an exemption for persons 
whose business is exclusively financing, insuring, transporting, or 
freight forwarding, as distinct from those who engage in these 
activities as part of their direct involvement in arranging 
transactions for defense articles or defense services or hold title to 
defense articles, even when no physical custody of defense articles is 
involved. In addition, the Department believes that ``soliciting'' or 
``promoting'' the purchase, sale, transfer, loan, or lease of a defense 
article or defense service is an integral aspect of a broker's 
brokering activities, and therefore did not accept the recommendation 
to remove these activities from the definition of ``brokering 
activities.''
    Three commenting parties recommended clarification of the services 
a broker may receive from an attorney, to specifically provide that any 
kind of legal advice or any export compliance services provided by an 
attorney to a client is not within the definition of ``brokering 
activities.'' The Department has clarified that ``activities by an 
attorney that do not extend beyond the provision of legal advice to 
clients'' is not within the definition, and notes that ``legal advice'' 
includes the provision of export compliance advice by an attorney to a 
client.
    One commenting party recommended the removal of the requirement to 
provide information on what if any consideration is expected to be 
received with regard to a brokering activity, as it would be a 
duplication of reporting given the requirement to provide similar 
information pursuant to ITAR part 130. While the Department has removed 
this provision with regard to procedures for obtaining prior approval, 
it has not removed this requirement from the annual reporting of 
brokering activities. The part 130 requirement has reporting 
limitations that the brokering requirement does not have.
    One commenting party recommended the provision of an exhaustive 
list for the definition of brokering activities, which would obviate 
the need for the regulatory provision enabling Department guidance to 
industry upon request. The Department does not believe it is 
practicable to provide such a listing, and therefore did not accept 
this recommendation.
    While the Department agrees with one commenting party that the new 
reporting provision of the regulation does expand the list of required 
elements to report to the Department, it disagrees that this would be 
an undue burden on industry, as the requested information should be 
readily available to the broker, and would assist the Department in its 
statutory requirement to monitor this activity.
    One commenting party requested an expanded implementation period 
(12 months) for the new brokering regulation, given the numerous 
changes involved. The Department notes that the proposed rule was 
published in December 2011, and an updated version

[[Page 52682]]

of the regulation has been available on the Department's Directorate of 
Defense Trade Controls Web site since November 2012. The Department 
believes the affected public has had the opportunity to become informed 
of the impending changes, and therefore does not agree that a prolonged 
implementation period is necessary.
    One commenting party recommended the Department adopt a form DS-
2032 amendment process to enable persons to add brokering to their 
existing registrations once the new rule is implemented. The Department 
has added a provision to the regulations instructing registrants to 
apply for a consolidated registration covering manufacturers/exporters 
and brokers, as applicable, during their registration renewal rather 
than upon the effective date of this rule. The Department has added a 
similar provision to the regulations regarding the listing of firms on 
a Statement of Registration that are wholly owned or otherwise 
controlled, providing that registrants should notify the Department of 
these changes during their registration renewal, rather than within 
five days of the effective date of this rule (see ITAR Sec.  129.8(d) 
and note to paragraph (d)).

Other Changes

    Section 120.1 is amended to revise the section heading and make 
editorial changes in all paragraphs. Section 120.20 is revised to 
provide a definition for ``other approval.'' Section 120.25(a)(4) is 
revised to include ``brokering activity.'' Section 120.27 is revised to 
update and clarify the definition for ``U.S. criminal statutes.'' 
Section 120.40 is added to provide a definition for ``affiliate.'' 
Section 120.44 is added to provide a definition for ``foreign defense 
article or defense service.''
    Section 122.1 is revised to provide clarifications and editorial 
changes. Section 122.2 is revised by removing provisions regarding 
submission of registration fee payment, adding a provision regarding 
the reporting of affiliates on the Statement of Registration, and 
providing other clarifications and editorial changes. Section 122.3(a) 
is revised by removing the paragraphs describing the registration fee, 
and providing a reference to the DDTC Web site for this information. 
Section 122.4(a) is revised to provide clarifications and editorial 
changes, and to add provisions instructing registrants to apply for a 
consolidated registration covering manufacturers/exporters and brokers, 
as applicable, and to notify the Department of changes to their 
registrations regarding the listing of firms that are wholly owned or 
otherwise controlled, during their registration renewal rather than 
upon the effective date of this rule.
    Section 126.1 is revised to provide clarification and editorial 
changes, and to provide a definition for terms used in paragraph (e). 
Section 126.13 is revised to provide updated process information, as 
well clarifications and editorial changes.
    Part 127 is revised to reorganize, clarify, and provide editorial 
changes to sections 1, 2, and 7, and remove section 8 (regarding 
interim suspensions). Additionally, ITAR Sec. Sec.  127.9, 128.2, 
128.3, 128.15, and 128.17 are amended to remove references to interim 
suspension, given removal of ITAR Sec.  127.8.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense articles and services is a foreign affairs 
function of the United States Government and that rules implementing 
this function are exempt from sections 553 (rulemaking) and 554 
(adjudications) of the Administrative Procedure Act (APA). Although the 
Department is of the opinion that this rule is exempt from the 
rulemaking provisions of the APA, the Department has published this 
rule as a proposed rule (76 FR 78578) with a 60-day provision for 
public comment and without prejudice to its determination that 
controlling the import and export, and brokering thereof, of defense 
articles and defense 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

    Based on the criteria of 5 U.S.C. 804(2), the Department does not 
believe this rulemaking will have an annual effect on the economy of 
$100,000,000 or more. The Department estimates that approximately 1,300 
of the currently-registered brokers will not need to maintain 
registration following implementation of this rule, and that 
approximately 300 brokers will be eligible to consolidate into their 
manufacturer/exporter registration and no longer be required to pay a 
broker registration fee. This estimate is based on internal data on the 
number of foreign person brokers who are now registered but will not 
need to be so after implementation of the revised brokering regulation 
in the first instance, and the number of registered manufacturers/
exporters who are also registered as brokers in the second instance. 
The submission of 1,600 fewer brokering-only registration applications 
would result in an annual time burden reduction of 3,200 hours for the 
public, based on the revised burden of two hours to complete a 
Statement of Registration. In addition, this would result in the 
elimination of approximately $3,600,000 in registration fees that 
otherwise would have been collected by the Department.
    A rule is also considered ``major'' if it will result in a major 
increase in costs or prices for consumers, individual industries, 
Federal, state, or local government agencies, or geographic regions. 
The Department does not anticipate major increases in any of those 
categories. As described in the preceding paragraph, this rule, among 
other things, clarifies who is required to register as a broker of 
defense articles and services. The clarification will result in fewer 
persons registering as brokers. These brokers will no longer have the 
expense of registering as brokers with the Department.
    Finally, a rule is considered major if it will 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. 
To the extent that a clarification of regulatory scope that leads to 
the decrease in the types of regulated persons and types of regulated 
activities results in an economic competitive advantage, the Department 
anticipates that this rule will not have an adverse effect in these 
categories.
    This rulemaking has been found not to be a major rule within the 
meaning of the 5 U.S.C. 804.

Executive Orders 13132 and 12372

    This rulemaking will not have substantial direct effects on the 
States, on the relationship between the national

[[Page 52683]]

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 been designated a ``significant regulatory action,'' 
although not economically significant, under section 3(f) of Executive 
Order 12866. Accordingly, this rule has been reviewed by the Office of 
Management and Budget (OMB).

Executive Order 12988

    The Department of State has 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 has determined that this rulemaking will 
not have tribal implications, will not impose substantial direct 
compliance costs on Indian tribal governments, and will not pre-empt 
tribal law. Accordingly, the provisions of Executive Order 13175 do not 
apply to this rulemaking.

Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA,'' 44 U.S.C. 3501 et seq.) 
requires all Federal agencies to analyze proposed regulations for 
potential burdens on the regulated community created by provisions in 
the proposed regulations that require the submission or retention of 
information. As part of its continuing effort to reduce paperwork and 
respondent burden, and to conform with the requirements as set forth in 
this rule, the Department of State has submitted the following approved 
information collections to the Office of Management and Budget (OMB) 
for re-approval, in light of the changes to these collections: DS-2032, 
Statement of Registration (approved by OMB under control number 1405-
0002); the Annual Brokering Report (OMB control number 1405-0141); and 
Brokering Prior Approval (OMB control number 1405-0142).

Information Collection

 Title of Information Collection: DS-2032 Statement of 
Registration
 OMB Control Number: 1405-0002
 Type of Request: Revision of Currently Approved Collection
 Originating Office: Bureau of Political-Military Affairs, 
Directorate of Defense Trade Controls, PM/DDTC
 Form Number: DS-2032
 Respondents: Business and Nonprofit Organizations
 Estimated Number of Respondents: 11,500
 Estimated Number of Responses: 11,500
 Average Hours per Response: 2 hours
 Total Estimated Burden: 23,000 hours
 Frequency: Annually and On Occasion
 Obligation to Respond: Mandatory

 Title of Information Collection: Annual Brokering Report
 OMB Control Number: 1405-0141
 Type of Request: Revision of Currently Approved Collection
 Originating Office: Bureau of Political-Military Affairs, 
Directorate of Defense Trade Controls, PM/DDTC
 Form Number: None
 Respondents: Business and Nonprofit Organizations
 Estimated Number of Respondents: 760
 Estimated Number of Responses: 760
 Average Hours per Response: 2 hours
 Total Estimated Burden: 1,520 hours
 Frequency: Annually
 Obligation to Respond: Mandatory

 Title of Information Collection: Brokering Prior Approval 
(License)
 OMB Control Number: 1405-0142
 Type of Request: Revision of Currently Approved Collection
 Originating Office: Bureau of Political-Military Affairs, 
Directorate of Defense Trade Controls, PM/DDTC
 Form Number: None
 Respondents: Business and Nonprofit Organizations
 Estimated Number of Respondents: 760
 Estimated Number of Responses: 150
 Average Hours Per Response: 2 hours
 Total Estimated Burden: 300 hours
 Frequency: On Occasion
 Obligation to Respond: Required to Obtain Benefits

    We are soliciting public comments to permit the Department to:
     Evaluate whether the proposed collections of information 
is necessary for the proper functions of the Department.
     Evaluate the accuracy of our estimate of the burden of the 
proposed collections, including the validity of the methodology and 
assumptions used.
     Enhance the quality, utility, and clarity of the 
information to be collected.
     Minimize the reporting burden on those who are to respond, 
including the use of automated collection techniques or other forms of 
technology.
    Please note that comments submitted in response to this document 
are public record. Before including any detailed personal information, 
you should be aware that your comments as submitted, including your 
personal information, will be available for public review.
    Submit comments on these information collections (and not the rule 
within which notice of these collections is provided) to OMB up to 30 
days from date of publication in the Federal Register.
    Direct comments on these information collections to the Department 
of State Desk Officer in the Office of Information and Regulatory 
Affairs at the Office of Management and Budget (OMB). You may submit 
comments by the following methods:
     Email: oira_submission@omb.eop.gov. You must include the 
DS form number, information collection title, and OMB control number in 
the subject line of your message.
     Fax: 202-395-5806. Attention: Desk Officer for Department 
of State.
    Comments and questions regarding the collections listed in this 
document should be directed to Daniel L. Cook, Chief, Compliance and 
Registration Division, Office of Defense Trade Controls Compliance, 
Directorate of Defense Trade Controls, Department of State, 12th Floor, 
SA-1, 2401 E Street NW., Washington, DC 20037; or email 
DDTCResponseTeam@state.gov, with the subject line ``Brokering Rule 
Information Collections.''
    Abstract of Proposed Collections: The export, temporary import, 
temporary export, and brokering of defense articles, defense services, 
and related technical data are licensed by the Department of State in 
accordance with the International Traffic in Arms Regulations (22 CFR 
parts 120-130) and

[[Page 52684]]

Section 38 of the Arms Export Control Act. Those of the public who 
manufacture or export defense articles, defense services, and related 
technical data, or the brokering thereof, must register with the 
Department of State. Persons desiring to engage in brokering activities 
must submit an application or written request to conduct the 
transaction to the Department to obtain a decision whether it is in the 
interests of U.S. foreign policy and national security to approve the 
transaction. Also, registered brokers must submit annual reports 
regarding all brokering activity that was transacted, and registered 
manufacturers and exporters must maintain records of defense trade 
activities for five years.
    Methodology: These forms/information collections may be sent to the 
Directorate of Defense Trade Controls via email, regular mail, or 
personal delivery.
    Summary of Proposed Changes to the Information Collections: The 
proposed changes to the DS-2032, Statement of Registration, follow the 
changes to ITAR parts 122 and 129. One change would allow 
manufacturers/exporters to register as brokers on the same form, with 
one registration fee. In addition, the form asks for more information 
regarding company structure, specifically for information on 
intermediary and ultimate parents of the registering party, if 
applicable. Finally, the form requests further clarification when the 
registrant is foreign (non-U.S.) owned or controlled.
    As a result of the changes to the brokering regulations, the 
Department estimates there will be time burden and cost reductions to 
the public with regard to the Statement of Registration collection. The 
Department estimates that approximately 1,300 of the currently-
registered brokers will not need to maintain registration following 
implementation of this rule, and that approximately 300 brokers will be 
eligible to consolidate into their manufacturer/exporter registration 
and no longer be required to pay a broker registration fee. This 
estimate is based on Department data on the number of foreign person 
brokers who are now registered but will not need to be so after 
implementation of the revised brokering regulation in the first 
instance, and the number of registered exporters who are also 
registered as brokers in the second instance. The submission of 1,600 
fewer brokering-only registration applications would result in an 
annual time burden reduction of 3,200 hours for the public, based on 
the revised burden of two hours to complete a Statement of 
Registration. In addition, this would result in the elimination of 
approximately $3,600,000 in registration fees that otherwise would have 
been collected by the Department.
    The revised regulations provide that the Annual Brokering Report 
collection be submitted with the DS-2032, as an attachment. New 
information that is required on the report includes the following: 
Brokering registration code; signature and certification of the report 
by an empowered official; identification of all parties involved in the 
brokering transaction (formerly, the regulations required only the 
identification of purchasers and recipients); and identification of the 
source of any consideration paid for the brokering transaction.
    As a result of the changes to the brokering regulations, the 
Department estimates there will be time burden reductions to the public 
with regard to the Annual Brokering Report collection. The Department 
estimates that the reduction in the number of responses and the annual 
time burden for this collection will reflect the reduction in the 
number of brokers who need to register: 1,300 fewer responses, with a 
burden reduction of 2,600 hours annually. Those who would no longer 
need to register as brokers as a result of the changes to the brokering 
regulation will no longer be required to submit a brokering report.
    Clarification of the requirements for obtaining Brokering Prior 
Approval result in the applicant providing additional information, to 
include the following: categorization of the types of defense articles 
and services to be brokered, including whether the defense articles are 
significant military equipment; identification of the type of sale that 
is to be brokered (commercial or under the Foreign Military Sales 
program); listing of any consideration expected to be received; and 
signature of an empowered official certifying the information provided 
is complete and accurate. The Department does not anticipate any time 
burden changes or change in number of responses for this information 
collection at this time.

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.

22 CFR Part 128

    Administrative practice and procedure, Arms and munitions, Exports.

22 CFR Part 129

    Arms and munitions, Brokers, Exports, Technical assistance.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 120, 122, 126, 127, 128, and 129 are amended 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 revised 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 and the 
Managing Director of the Directorate of Defense Trade Controls, Bureau 
of Political-Military Affairs.
    (b)(1) Authorized officials. All authorities conferred upon the 
Deputy Assistant Secretary of State for Defense Trade Controls or the 
Managing Director for the Directorate of Defense Trade Controls by 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 unless the Legal Adviser or the 
Assistant Legal Adviser for Political-Military Affairs of the 
Department of State determines that any specific

[[Page 52685]]

exercise of this authority under this paragraph may be inappropriate.
    (2) In the Bureau of Political-Military Affairs, there is a Deputy 
Assistant Secretary of State for Defense Trade Controls and a Managing 
Director for the Directorate of Defense Trade Controls. The Deputy 
Assistant Secretary of State for Defense Trade Controls and Managing 
Director for the Directorate of Defense Trade Controls are responsible 
for exercising the authorities conferred under this subchapter. The 
Deputy Assistant Secretary of State for Defense Trade Controls is 
responsible for oversight of the defense trade controls function. The 
Managing Director for the Directorate of Defense Trade Controls is 
responsible for the Directorate of Defense Trade Controls, which 
oversees the subordinate offices described in paragraphs (b)(2)(ii) 
through (b)(2)(iv) of this section.
    (i) The Managing Director will have responsibilities related to the 
management of defense trade controls operations, to include the 
exercise of general authorities in this part 120, and the design, 
development, and refinement of processes, activities, and functional 
tools for the export licensing regime and to effect export compliance/
enforcement activities.
    (ii) The Office of Defense Trade Controls Licensing and the 
Director, Office of Defense Trade Controls Licensing, which have 
responsibilities related to licensing or other authorization of defense 
trade, including references under parts 120, 123, 124, 125, 126, 129, 
and 130 of this subchapter.
    (iii) 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.
    (iv) 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 this part 120 and part 126 of this subchapter, and the commodity 
jurisdiction procedure under this subchapter, including under this part 
120.
    (c) Receipt of licenses and eligibility. (1) A U.S. person may 
receive a license or other approval pursuant to this subchapter. A 
foreign person may not receive such a license or other approval, except 
as follows:
    (i) A foreign governmental entity in the U.S. may receive a license 
or other approval;
    (ii) A foreign person may receive a reexport or retransfer 
approval; or
    (iii) A foreign person may receive a prior approval for brokering 
activities.
    A request for a license or other approval by a U.S. person or by a 
person referred to in paragraphs (c)(1)(i) and (c)(1)(iii) of this 
section will be considered only if the applicant has registered with 
the Directorate of Defense Trade Controls pursuant to part 122 or 129 
of this subchapter, as appropriate.
    (2) Persons who have been convicted of violating the U.S. criminal 
statutes enumerated in Sec.  120.27, who have been debarred pursuant to 
part 127 or 128 of this subchapter, who are subject to indictment or 
are otherwise charged (e.g., charged by criminal information in lieu of 
indictment) with violating the U.S. criminal statutes enumerated in 
Sec.  120.27, who are ineligible to contract with or to receive a 
license or other form of authorization to import defense articles or 
defense services from any agency of the U.S. Government, who are 
ineligible to receive an export license or other approval from any 
other agency of the U.S. Government, or who are subject to a Department 
of State policy of denial, suspension, or revocation under Sec.  
126.7(a) of this subchapter, are generally ineligible to be involved in 
activities regulated under the subchapter.
    (d) The exemptions provided in this subchapter do not apply to 
transactions in which the exporter, any party to the export (see Sec.  
126.7(e) of this subchapter), any source or manufacturer, broker or 
other participant in the brokering activities, is generally ineligible 
as set forth in paragraph (c)(2) of this section, unless prior written 
authorization has been granted by the Directorate of Defense Trade 
Controls.

0
3. 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 
Managing Director, Directorate of 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 Managing Director, 
Directorate of 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.

0
4. Section 120.25 is amended by revising paragraph (a)(4)(i) and adding 
paragraph (b), to read as follows:

Sec.  120.25  Empowered official.

    (a) * * *
    (4) * * *
    (i) Inquire into any aspect of a proposed export, temporary import, 
or brokering activity by the applicant;
* * * * *
    (b) For the purposes of a broker who is a foreign person, the 
empowered official may be a foreign person who otherwise meets the 
criteria for an empowered official in paragraph (a) of this section.

0
5. Section 120.27 is amended by revising paragraphs (a)(3), (a)(6), 
(a)(8), (a)(12), and (a)(13), removing and reserving paragraph (a)(11), 
and adding paragraphs (a)(14) through (a)(18), to read as follows:

Sec.  120.27  U.S. criminal statutes.

    (a) * * *
    (3) Section 793, 794, or 798 of title 18, United States Code 
(relating to espionage involving defense or classified information) or 
section 2332d, 2339A, 2339B, 2339C, or 2339D of such title (relating to 
financial transactions with the government of a country designated as a 
country supporting international terrorism, providing material support 
to terrorists or terrorist organizations, financing of terrorism, or 
receiving military-type training from a foreign terrorist 
organization);
* * * * *
    (6) Section 30A of the Securities Exchange Act of 1934 (15 U.S.C. 
78dd-1) or section 104 of the Foreign Corrupt Practices Act (15 U.S.C. 
78dd-2 or 78dd-3);
* * * * *
    (8) Section 4(b) of the Internal Security Act of 1950 (relating to 
communication of classified information; 50 U.S.C. 783(a));
* * * * *
    (11) [Reserved]
    (12) Section 371 of title 18, United States Code (when it involves 
conspiracy to violate any of the statutes listed in this section);
    (13) Sections 3, 4, 5, and 6 of the Intelligence Reform and 
Terrorism Prevention Act of 2004, Public Law 108-458 sections 6903-
6906, relating to missile systems designed to destroy aircraft (18 
U.S.C. 2332g), prohibitions

[[Page 52686]]

governing atomic weapons (42 U.S.C. 2122), radiological dispersal 
services (18 U.S.C. 2332h), and variola virus (18 U.S.C. 175c);
    (14) Sections 2779 and 2780 of title 22, United States Code 
(relating to fees of military sales agents and other payments, and 
transactions with countries supporting acts of international 
terrorism);
    (15) Section 542 of title 18, United States Code (relating to the 
entry of goods by means of false statements), where the underlying 
offense involves a defense article, including technical data, or 
violations related to the Arms Export Control Act or International 
Traffic in Arms Regulations;
    (16) Section 545 of title 18, United States Code (relating to 
smuggling goods into the United States), where the underlying offense 
involves a defense article, including technical data, or violations 
related to the Arms Export Control Act or International Traffic in Arms 
Regulations;
    (17) Section 554 of title 18, United States Code (relating to 
smuggling goods from the United States), where the underlying offense 
involves a defense article, including technical data, or violations 
related to the Arms Export Control Act or International Traffic in Arms 
Regulations; and
    (18) Section 1001 of title 18, United States Code (relating to 
false statements or entries generally), Section 1831 of title 18, 
United States Code (relating to economic espionage), and Section 1832 
of title 18, United States Code (relating to theft of trade secrets) 
where the underlying offense involves a defense article, including 
technical data, or violations related to the Arms Export Control Act or 
International Traffic in Arms Regulations.
* * * * *

0
6. Section 120.40 is added to read as follows:

Sec.  120.40  Affiliate.

    An affiliate of a registrant is a person that directly, or 
indirectly through one or more intermediaries, controls, or is 
controlled by, or is under common control with, such registrant.

    Note to Sec.  120.40: For purposes of this section, ``control'' 
means having the authority or ability to establish or direct the 
general policies or day-to-day operations of the firm. Control is 
rebuttably presumed to exist where there is ownership of 25 percent 
or more of the outstanding voting securities if no other person 
controls an equal or larger percentage.

0
7. Section 120.43 is added and reserved, as follows:

Sec.  120.43  [Reserved]

0
8. Section 120.44 is added to read as follows:

Sec.  120.44  Foreign defense article or defense service.

    Foreign defense article or defense service means any article or 
service described on the U.S. Munitions List of non-U.S. origin. Unless 
otherwise provided in this subchapter, the terms defense article and 
defense service refer to both U.S. and foreign origin defense articles 
and defense services described on the U.S. Munitions List. A defense 
article or defense service is determined exclusively in accordance with 
the Arms Export Control Act and this subchapter, regardless of any 
designation (either affirming or contrary) that may be attributed to 
the same article or service by any foreign government or international 
organization.

PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS

0
9. The authority citation for part 122 is revised 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
10. Section 122.1 is revised to read as follows:

Sec.  122.1  Registration requirements.

    (a) Any person who engages in the United States in the business of 
manufacturing or exporting or temporarily importing defense articles, 
or furnishing defense services, is required to register with the 
Directorate of Defense Trade Controls under Sec.  122.2. For the 
purpose of this subchapter, engaging in such a business requires only 
one occasion of manufacturing or exporting or temporarily importing a 
defense article or furnishing a defense service. A manufacturer who 
does not engage in exporting must nevertheless register. (See part 129 
of this subchapter for requirements for registration of persons who 
engage in brokering activities.)
    (b) Exemptions. The registration requirements of paragraph (a) of 
this section do not apply to:
    (1) Officers and employees of the U.S. Government acting in an 
official capacity;
    (2) Persons whose pertinent business activity is confined to the 
production of unclassified technical data only;
    (3) Persons all of whose manufacturing and export activities are 
licensed under the Atomic Energy Act of 1954, as amended; or
    (4) Persons who engage in the fabrication of articles solely for 
experimental or scientific purposes, including research and 
development.

    Note to paragraph (b):  Persons who qualify for the exemptions 
in paragraphs (b)(2) or (b)(4) of this section remain subject to the 
requirements for licenses or other approvals for exports of defense 
articles and defense services and may not receive an export license 
or approval unless registered under Sec.  122.2.

    (c) Purpose. Registration is primarily a means to provide the U.S. 
Government with necessary information on who is involved in certain 
manufacturing and exporting activities. Registration does not confer 
any export rights or privileges. It is generally a precondition to the 
issuance of any license or other approval under this subchapter, unless 
an exception is granted by the Directorate of Defense Trade Controls.

0
11. Section 122.2 is amended by revising paragraphs (a), (b)(1), and 
(b)(2), to read as follows:

Sec.  122.2  Submission of registration statement.

    (a) General. An intended registrant must submit a Statement of 
Registration (Department of State form DS-2032) to the Office of 
Defense Trade Controls Compliance by following the submission 
guidelines available on the Directorate of Defense Trade Controls Web 
site at www.pmddtc.state.gov. The Statement of Registration must be 
signed by a U.S. person senior officer (e.g., chief executive officer, 
president, secretary, partner, member, treasurer, general counsel) who 
has been empowered by the intended registrant to sign such documents. 
The Statement of Registration may include subsidiaries and affiliates 
when more than 50 percent of the voting securities are owned by the 
registrant or the subsidiaries and affiliates are otherwise controlled 
by the registrant (see Sec.  120.40 of this subchapter). The intended 
registrant also shall submit documentation that demonstrates that it is 
incorporated or otherwise authorized to do business in the U.S. The 
Directorate of Defense Trade Controls will notify the registrant if the 
Statement of Registration is incomplete either by notifying the 
registrant of what information is required or through the return of the 
entire registration package. Registrants may not establish new entities 
for the purpose of reducing registration fees.
    (b) * * *
    (1) Whether the intended registrant or its parent, subsidiary, or 
other affiliate listed in the Statement of Registration, or any of its 
chief executive officers,

[[Page 52687]]

presidents, vice presidents, secretaries, partners, members, other 
senior officers or officials (e.g., comptroller, treasurer, general 
counsel), or any member of the board of directors of the intended 
registrant, or of any parent, subsidiary, or other affiliate listed in 
the Statement of Registration:
    (i) Has ever been indicted or otherwise charged (e.g., charged by 
criminal information in lieu of indictment) for or has been convicted 
of violating any U.S. criminal statutes enumerated in Sec.  120.27 of 
this subchapter or violating a foreign criminal law on exportation of 
defense articles where conviction of such law carries a minimum term of 
imprisonment of greater than 1 year; or
    (ii) Is ineligible to contract with, or to receive a license or 
other approval to import defense articles or defense services from, or 
to receive an export license or other approval from, any agency of the 
U.S. Government; and
    (2) Whether the intended registrant is foreign owned or foreign 
controlled (see Sec.  120.37 of this subchapter). If the intended 
registrant is foreign owned or foreign controlled, the certification 
shall include an explanation of such ownership or control, including 
the identities of the foreign person or persons who ultimately own or 
control the registrant. This requirement applies to a registrant who is 
a U.S. person and is owned or controlled by a foreign person. It also 
applies to a registrant who is a foreign person and is owned or 
controlled by a foreign person from the same country or a foreign 
person from another country.

0
12. Section 122.3 is amended by revising paragraph (a) to read as 
follows:

Sec.  122.3  Registration fees.

    (a) Frequency of registration and fee. A person who is required to 
register must do so on an annual basis by submitting a completed 
Statement of Registration (form DS-2032) and payment of a fee following 
the payment guidelines available on the Directorate of Defense Trade 
Controls Web site at www.pmddtc.state.gov. For those renewing a 
registration, notice of the fee due for the next year's registration 
will be sent to the registrant of record at least 60 days prior to its 
expiration date.
* * * * *

0
13. Section 122.4 is amended by revising paragraph (a), and adding 
notes to paragraph (a), to read as follows:

Sec.  122.4  Notification of changes in information furnished by 
registrants.

    (a) A registrant must, within five days of the event, provide to 
the Directorate of Defense Trade Controls a written notification, 
signed by a senior officer (e.g., chief executive officer, president, 
secretary, partner, member, treasurer, general counsel), if:
    (1) Any of the persons referred to in Sec.  122.2(b) is indicted or 
otherwise charged (e.g., by criminal information in lieu of indictment) 
for or convicted of violating any of the U.S. criminal statutes 
enumerated in Sec.  120.27 of this subchapter or violating a foreign 
criminal law on exportation of defense articles where conviction of 
such law carries a minimum term of imprisonment of greater than 1 year, 
or becomes ineligible to contract with, or to receive a license or 
other approval to export or temporarily import defense articles or 
defense services from any agency of the U.S. Government; or
    (2) There is a change in the following information contained in the 
Statement of Registration:
    (i) Registrant's name;
    (ii) Registrant's address;
    (iii) Registrant's legal organization structure;
    (iv) Ownership or control;
    (v) The establishment, acquisition, or divestment of a U.S. or 
foreign subsidiary or other affiliate who is engaged in manufacturing 
defense articles, exporting defense articles or defense services; or
    (vi) Board of directors, senior officers, partners, or owners.

    Note 1 to paragraph (a):  All other changes in the Statement of 
Registration must be provided as part of annual registration 
renewal.

    Note 2 to paragraph (a):  For one year from the effective date 
of the rule, ``Amendment to the International Traffic in Arms 
Regulations: Registration and Licensing of Brokers, Brokering 
Activities, and Related Provisions,'' RIN 1400-AC37, the following 
changes must be provided as part of the annual registration renewal: 
Pursuant to Sec.  129.3(d) of this subchapter, changes to combine an 
existing broker registration with an existing manufacturer/exporter 
registration; and pursuant to Sec.  122.2(a) of this subchapter, 
changes to an existing registration to remove partially owned and 
not otherwise controlled subsidiaries or affiliates, which are not 
the subject of an internal reorganization, merger, acquisition, or 
divestiture.

* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

0
14. 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
15. Section 126.1 is amended by revising paragraphs (a), (b), and (e), 
and adding a note to paragraph (e), to read as follows:

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

    (a) General. It is the policy of the United States to deny licenses 
and other approvals for exports and imports of defense articles and 
defense services, destined for or originating in certain countries. 
This policy applies to Belarus, Cuba, Eritrea, Iran, North Korea, 
Syria, and Venezuela. This policy also applies to countries with 
respect to which the United States maintains an arms embargo (e.g., 
Burma, China, and the Republic of the Sudan) or whenever an export 
would not otherwise be in furtherance of world peace and the security 
and foreign policy of the United States. Information regarding certain 
other embargoes appears elsewhere in this section. Comprehensive arms 
embargoes are normally the subject of a Department of State notice 
published in the Federal Register. The exemptions provided in this 
subchapter, except Sec. Sec.  123.17, 126.4, and 126.6 of this 
subchapter or when the recipient is a U.S. Government department or 
agency, do not apply with respect to defense articles or defense 
services originating in or for export to any proscribed countries, 
areas, or persons identified in this section or to brokering activities 
involving such countries, areas, or persons. (See Sec.  129.7 of this 
subchapter, which imposes restrictions on brokering activities similar 
to those in this section.)
    (b) Shipments. A defense article licensed or otherwise authorized 
for export, temporary import, reexport, or retransfer under this 
subchapter may not be shipped on a vessel, aircraft, spacecraft, or 
other means of conveyance that is owned by, operated by, leased to, or 
leased from any of the proscribed countries, areas, or other persons 
referred to in this section.
* * * * *
    (e)(1) Proposed and final sales. No sale, export, transfer, 
reexport, or retransfer of, and no proposal or presentation to sell, 
export, transfer, reexport, or retransfer, any defense articles or 
defense services subject to this subchapter may be made to any country 
referred to in this section (including the embassies or consulates of 
such a country), or to any person

[[Page 52688]]

acting on its behalf, whether in the United States or abroad, without 
first obtaining a license or written approval of the Directorate of 
Defense Trade Controls. However, in accordance with paragraph (a) of 
this section, it is the policy of the Department of State to deny 
licenses and approvals in such cases.
    (2) Duty to notify. Any person who knows or has reason to know of a 
proposed, final, or actual sale, export, transfer, reexport, or 
retransfer of articles, services, or data as described in paragraph 
(e)(1) of this section must immediately inform the Directorate of 
Defense Trade Controls. Such notifications should be submitted to the 
Office of Defense Trade Controls Compliance, Directorate of Defense 
Trade Controls.

    Note to paragraph (e):  ``Proposal'' and ``presentation'' mean 
the communication of information in sufficient detail that it would 
permit an intended purchaser to decide to acquire the article in 
question or to enter into an agreement as described in part 124 of 
this subchapter. For example, communicating information on the 
equipment's performance characteristics, price, and probable 
availability for delivery would be a proposal or presentation 
requiring a license or other approval.

* * * * *

0
16. Section 126.13 is amended by revising paragraphs (a)(1) through 
(a)(4), (b), and (c), to read as follows:

Sec.  126.13  Required information.

    (a) * * *
    (1) The applicant or the chief executive officer, president, vice-
presidents, secretary, partner, member, other senior officers or 
officials (e.g., comptroller, treasurer, general counsel) or any member 
of the board of directors is the subject of an indictment or has been 
otherwise charged (e.g., by criminal information in lieu of indictment) 
for, or has been convicted of, violating any of the U.S. criminal 
statutes enumerated in Sec.  120.27 of this subchapter;
    (2) The applicant or the chief executive officer, president, vice-
presidents, secretary, partner, member, other senior officers or 
officials (e.g., comptroller, treasurer, general counsel) or any member 
of the board of directors is ineligible to contract with, or to receive 
a license or other approval to temporarily import or export defense 
articles or defense services from any agency of the U.S. Government;
    (3) To the best of the applicant's knowledge, any party to the 
export as defined in Sec.  126.7(e) has been convicted of violating any 
of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter, or is ineligible to contract with, or to receive a license 
or other approval to temporarily import or export defense articles or 
defense services from any agency of the U.S. government; and
    (4) The natural person signing the application, notification, or 
other request for approval (including the statement required by this 
subchapter) is a citizen or national of the United States, has been 
lawfully admitted to the United States for permanent residence (and 
maintains such lawful permanent residence status) under the Immigration 
and Nationality Act, as amended (8 U.S.C. 1101(a)(20), 66 Stat. 163), 
or is an official of a foreign government entity in the United States, 
or is a foreign person making a request pursuant to Sec.  123.9 of this 
subchapter.
    (b) In addition, all applications for licenses must include the 
complete names and addresses of all U.S. consignors and freight 
forwarders, and all foreign consignees and foreign intermediate 
consignees involved in the transaction. Port Directors of U.S. Customs 
and Border Protection and Department of Defense transmittal authorities 
will permit only those U.S. consignors or freight forwarders listed on 
the license to make shipments under the license, and only to those 
foreign consignees and foreign intermediate consignees listed on the 
license. Applicants should list all freight forwarders who may be 
involved with shipments under the license to ensure that the list is 
complete and to avoid the need for amendments after the license has 
been approved. If there are unusual or extraordinary circumstances that 
preclude the specific identification of all the U.S. consignors and 
freight forwarders and all foreign consignees and foreign intermediate 
consignees, the applicant must provide a letter of explanation with 
each application.
    (c) In cases when natural foreign persons are employed at or 
assigned to security-cleared facilities, provision by the applicant of 
a technology control plan will facilitate processing.

PART 127--VIOLATIONS AND PENALTIES

0
17. The authority citation for part 127 is revised 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
18. Section 127.1 is amended by adding paragraph (a)(5), and revising 
paragraphs (a)(3), (a)(4), (c), (d), and (e), to read as follows:

Sec.  127.1  Violations.

    (a) * * *
    (3) To import or attempt to import any defense article whenever a 
license is required by this subchapter;
    (4) To conspire to export, import, reexport, retransfer, furnish or 
cause to be exported, imported, reexported, retransferred or furnished, 
any defense article, technical data, or defense service for which a 
license or written approval is required by this subchapter; or
    (5) To possess or attempt to possess any defense article with 
intent to export or transfer such defense article in violation of 22 
U.S.C. 2778 and 2779, or any regulation, license, approval, or order 
issued thereunder.
* * * * *
    (c) Any person who is granted a license or other approval or acts 
pursuant to an exemption under this subchapter is responsible for the 
acts of employees, agents, brokers, and all authorized persons to whom 
possession of the defense article, which includes technical data, has 
been entrusted regarding the operation, use, possession, 
transportation, and handling of such defense article abroad. All 
persons abroad subject to U.S. jurisdiction who obtain custody of a 
defense article exported from the United States or produced under an 
agreement described in part 124 of this subchapter, and regardless 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 transferor.
    (d) A person who is ineligible pursuant to Sec.  120.1(c)(2) of 
this subchapter, or a person with knowledge that another person is 
ineligible pursuant to Sec.  120.1(c)(2) of this subchapter, 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 Sec.  127.2(b) for such ineligible person; or
    (2) Order, buy, receive, use, sell, deliver, store, dispose of, 
forward, transport, finance, or otherwise service or participate in any 
manner in any transaction that may involve any defense article, which 
includes technical data, defense services, or brokering activities 
subject to this subchapter, where such ineligible person may obtain any 
benefit therefrom or have any direct or indirect interest therein.
    (e) No person may knowingly or willfully attempt, solicit, cause, 
or aid, abet, counsel, demand, induce, procure,

[[Page 52689]]

or permit the commission 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.

0
19. Section 127.2 is amended by revising paragraph (b)(13) to read as 
follows:

Sec.  127.2  Misrepresentation and omission of facts.

* * * * *
    (b) * * *
    (13) Any other document used in the regulation or control of a 
defense article, defense service, or brokering activity regulated by 
this subchapter.
* * * * *

0
20. Section 127.7 is revised to read as follows:

Sec.  127.7  Debarment.

    (a) Administrative debarment. In implementing section 38 of the 
Arms Export Control Act, the Assistant Secretary of State for 
Political-Military Affairs may debar and thereby prohibit any person 
from participating directly or indirectly in any activities that are 
subject to this subchapter for any of the reasons listed below. Any 
such prohibition is referred to as an administrative debarment for 
purposes of this subchapter. The Assistant Secretary of State for 
Political-Military Affairs shall determine the appropriate period of 
time for administrative debarment, which generally shall be for a 
period of three years. Reinstatement is not automatic, however, and in 
all cases the debarred persons must submit a request for reinstatement 
and be approved for reinstatement before engaging in any activities 
subject to this subchapter. (See part 128 of this subchapter for 
administrative procedures.)
    (b) 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 section 
38(g)(1) of the Arms Export Control Act. 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 statutorily 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. 
Statutory 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.
    (c) Grounds. (1) The basis for statutory debarment, as described in 
paragraph (b) of this section, is any conviction for violating the Arms 
Export Control Act (see Sec.  127.3) or any conspiracy to violate the 
Arms Export Control Act.
    (2) The basis for administrative debarment, as described in 
paragraph (a) of this section and 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.
    (d) Appeals. Any person who is ineligible pursuant to paragraph (b) 
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 Sec.  128.13 
of this subchapter will be used in submitting a reconsideration appeal.

0
21. Section 127.8 is removed and reserved, as follows:

Sec.  127.8  [Reserved]

0
22. Section 127.9 is revised to read as follows:

Sec.  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 Sec.  127.7 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.

PART 128--ADMINISTRATIVE PROCEDURES

0
23. The authority citation for part 128 is revised 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
24. Section 128.2 is revised to read as follows:

Sec.  128.2  Administrative Law Judge.

    The Administrative Law Judge referred to in this part is an 
Administrative Law Judge appointed by the Department of State. The 
Administrative Law Judge is authorized to exercise the powers and 
perform the duties provided for in Sec. Sec.  127.7 and 128.3 through 
128.16 of this subchapter.

0
25. Section 128.3 is amended by revising paragraph (a) to read as 
follows:

Sec.  128.3  Institution of Administrative Proceedings.

    (a) Charging letters. The Deputy Assistant Secretary of State for 
Defense Trade Controls or the Director, Office of Defense Trade 
Controls Compliance, with the concurrence of the Office of the Legal 
Adviser, Department of State, may initiate proceedings to impose 
debarment or civil penalties in accordance with Sec.  127.7 or Sec.  
127.10 of this subchapter, respectively. Administrative proceedings 
shall be initiated by means of a charging letter. The charging letter 
will state the essential facts constituting the alleged violation and 
refer to the regulatory or other provision involved. It will give 
notice to the respondent to answer the charges within 30 days, as 
provided in Sec.  128.5(a), and indicate that a failure to answer will 
be taken as an admission of the truth of the charges. It will inform 
the respondent that he or she is entitled to an oral hearing if a 
written demand for one is filed with the answer or within seven days 
after service of the answer. The respondent will also be informed that 
he or she may, if so desired, be represented by counsel of his or her 
choosing. Charging letters may be amended from time to time, upon 
reasonable notice.

0
26. 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 Managing Director, Directorate of 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

[[Page 52690]]

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.
* * * * *

0
27. Section 128.17 is revised to read as follows:

Sec.  128.17  Availability of orders.

    All charging letters, debarment orders, and orders imposing civil 
penalties and probationary periods are available for public inspection 
in the Public Reading Room of the Department of State.

PART 129--REGISTRATION AND LICENSING OF BROKERS

0
28. The authority citation for part 129 is revised to read as follows:

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

0
29. The table of contents for part 129 is revised to read as follows:
Sec.
129.1 Purpose.
129.2 Definitions.
129.3 Requirement to register.
129.4 Requirement for approval.
129.5 Exemption from requirement for approval.
129.6 Procedures for obtaining approval.
129.7 Policy on embargoes and other proscriptions.
129.8 Submission of Statement of Registration, registration fees, 
and notification of changes in information furnished by registrants.
129.9 Guidance.
129.10 Reports.
129.11 Maintenance of brokering records by registrants.

0
30. Section 129.1 is revised to read as follows:

Sec.  129.1  Purpose.

    (a) Section 38(b)(1)(A)(ii) of the Arms Export Control Act (22 
U.S.C. 2778) provides that persons engaged in the business of brokering 
activities shall register and pay a registration fee as prescribed in 
regulations, and that no person may engage in the business of brokering 
activities without a license issued in accordance with the Act.
    (b) The brokering activities identified in this subchapter apply to 
those defense articles and defense services controlled for purposes of 
export on the U.S. Munitions List (see part 121 of this subchapter) or 
for purposes of permanent import on the U.S. Munitions Import List (see 
27 CFR part 447).

0
31. Section 129.2 is revised to read as follows:

Sec.  129.2  Definitions.

    As used in this part:
    (a) Broker means any person (see Sec.  120.14 of this subchapter) 
described below who engages in the business of brokering activities:
    (1) Any U.S. person (see Sec.  120.15 of this subchapter) wherever 
located;
    (2) Any foreign person (see Sec.  120.16 of this subchapter) 
located in the United States; or
    (3) Any foreign person located outside the United States where the 
foreign person is owned or controlled by a U.S. person.

    Note to paragraph (a)(3): For purposes of this paragraph, 
``owned by a U.S. person'' means more than 50 percent of the 
outstanding voting securities of the firm are owned by a U.S. 
person, and ``controlled by a U.S. person'' means one or more U.S. 
persons have the authority or ability to establish or direct the 
general policies or day-to-day operations of the firm. U.S. person 
control is rebuttably presumed to exist where U.S. persons own 25 
percent or more of the outstanding voting securities unless one 
foreign person controls an equal or larger percentage.

    (b) Brokering activities means any action on behalf of another to 
facilitate the manufacture, export, permanent import, transfer, 
reexport, or retransfer of a U.S. or foreign defense article or defense 
service, regardless of its origin.
    (1) Such action includes, but is not limited to:
    (i) Financing, insuring, transporting, or freight forwarding 
defense articles and defense services; or
    (ii) Soliciting, promoting, negotiating, contracting for, 
arranging, or otherwise assisting in the purchase, sale, transfer, 
loan, or lease of a defense article or defense service.
    (2) Such action does not include:
    (i) Activities by a U.S. person in the United States that are 
limited exclusively to U.S. domestic sales or transfers (e.g., not for 
export);
    (ii) Activities by employees of the U.S. Government acting in an 
official capacity;
    (iii) Activities by regular employees (see Sec.  120.39 of this 
subchapter) acting on behalf of their employer, including those regular 
employees who are dual nationals or third-country nationals that 
satisfy the requirements of Sec.  126.18 of this subchapter;

    Note to paragraph (b)(2)(iii):  The exclusion does not apply to 
persons subject to U.S. jurisdiction with respect to activities 
involving a defense article or defense service originating in or 
destined for any proscribed country, area, or person identified in 
Sec.  126.1 of this subchapter.

    (iv) Activities that do not extend beyond administrative services, 
such as providing or arranging office space and equipment, hospitality, 
advertising, or clerical, visa, or translation services, collecting 
product and pricing information to prepare a response to Request for 
Proposal, generally promoting company goodwill at trade shows, or 
activities by an attorney that do not extend beyond the provision of 
legal advice to clients;
    (v) Activities performed by an affiliate, as defined in Sec.  
120.40 of this subchapter, on behalf of another affiliate; or
    (vi) Activities by persons, including their regular employees (see 
Sec.  120.39 of this subchapter), that do not extend beyond acting as 
an end-user of a defense article or defense service exported pursuant 
to a license or other approval under parts 123, 124, or 125 of this 
subchapter, or subsequently acting as a reexporter or retransferor of 
such article or service under such license or other approval, or under 
an approval pursuant to Sec.  123.9 of this subchapter.
    (c) For the purposes of this subchapter, engaging in the business 
of brokering activities requires only one occasion of brokering as 
described in paragraph (b) of this section.

0
32. Section 129.3 is revised to read as follows:

Sec.  129.3  Requirement to register.

    (a) Except as provided in paragraph (b) of this section, any person 
who engages in brokering activities (see Sec.  129.2) is required to 
register with the Directorate of Defense Trade Controls. Registration 
under this section is generally a precondition for the issuance of 
approval for brokering activities required under this part 129 or the 
use of exemptions.
    (b) Exemptions. Registration, approval, recordkeeping, and 
reporting under this section are not required for:
    (1) Foreign governments or international organizations, including 
their employees, acting in an official capacity; or
    (2) Persons exclusively in the business of financing, insuring, 
transporting, customs brokering, or freight forwarding, whose 
activities do not extend beyond financing, insuring, transporting, 
customs brokering, or freight forwarding. Examples include air carriers 
or freight forwarders that merely

[[Page 52691]]

transport or arrange transportation for licensed defense articles, and 
banks or credit companies who merely provide commercially available 
lines or letters of credit to persons registered or required to 
register in accordance with parts 122 or 129 of this subchapter. 
However, banks, firms, or other persons providing financing for defense 
articles or defense services are required to register under certain 
circumstances, such as when the bank or its employees are directly 
involved in arranging transactions involving defense articles or 
defense services or hold title to defense articles, even when no 
physical custody of defense articles is involved. In such 
circumstances, the banks, firms, or other persons providing financing 
for defense articles or defense services are not exempt.
    (c) Persons exempt from registration, approval, recordkeeping, and 
reporting as provided in Sec.  129.3(b) are subject to the policy on 
embargoes and other proscriptions as outlined in Sec.  129.7.
    (d) U.S. persons who are registered as a manufacturer or exporter 
in accordance with part 122 of this subchapter, including their U.S. or 
foreign subsidiaries and other affiliates listed on their Statement of 
Registration who are required to register under this part, are not 
required to submit a separate broker registration or pay a separate 
broker registration fee when more than 50 percent of the voting 
securities are owned by the registrant or such subsidiaries and 
affiliates are otherwise controlled by the registrant (see Sec.  120.40 
of this subchapter), and they are listed and identified as brokers 
within their manufacturer or exporter Statement of Registration. All 
other requirements of this part apply to such brokers and their 
brokering activities.
    (e) Registration under this section is a precondition for the 
issuance of approval for brokering activities required under this 
section or the use of exemptions, unless an exception is granted by the 
Directorate of Defense Trade Controls.

0
33. Sections 129.6, 129.7, 129.8, 129.5, 129.4, 129.10, and 129.9 are 
redesignated as Sec. Sec.  129.4, 129.5, 129.6, 129.7, 129.8, 129.9, 
and 129.10 respectively.

0
34. Newly redesignated Sec.  129.4 is revised to read as follows:

Sec.  129.4  Requirement for approval.

    (a) Except as provided in Sec.  129.5, no person who is required to 
register as a broker pursuant to Sec.  129.3 of this subchapter may 
engage in the business of brokering activities pursuant to Sec.  
129.2(b) without first obtaining the approval of the Directorate of 
Defense Trade Controls for the brokering of any of the following:
    (1) Any foreign defense article or defense service (see Sec.  
120.44 of this subchapter, and Sec.  129.5 for exemptions); or
    (2) Any of the following U.S. origin defense articles or defense 
services:
    (i) Firearms and other weapons of a nature described by Category 
I(a) through (d), Category II(a) and (d), and Category III(a) of Sec.  
121.1 of this subchapter;
    (ii) Rockets, bombs, and grenades as well as launchers for such 
defense articles of a nature described by Category IV(a), and launch 
vehicles and missile and anti-missile systems of a nature described by 
Category IV(b) of Sec.  121.1 of this subchapter (including man-
portable air-defense systems);
    (iii) Vessels of war described by Category VI of Sec.  121.1 of 
this subchapter;
    (iv) Tanks and military vehicles described by Category VII of Sec.  
121.1 of this subchapter;
    (v) Aircraft and unmanned aerial vehicles described by Category 
VIII of Sec.  121.1 of this subchapter;
    (vi) Night vision-related defense articles and inertial platform, 
sensor, and guidance-related systems of a nature described by Category 
XII(c) and (d) of Sec.  121.1 of this subchapter;
    (vii) Chemical agents and precursors described by Category XIV(a), 
(c), and (e) of Sec.  121.1 of this subchapter, biological agents and 
biologically derived substances described by Category XIV(b) of Sec.  
121.1 of this subchapter, and equipment described by Category XIV(f) of 
Sec.  121.1 of this subchapter for dissemination of the chemical agents 
and biological agents described by Category XIV(a), (b), and (e) of 
Sec.  121.1 of this subchapter;
    (viii) Submersible vessels described by Category XX of Sec.  121.1 
of this subchapter; and
    (ix) Miscellaneous articles of a nature described by Category XXI 
of Sec.  121.1 of this subchapter.

0
35. Newly redesignated Sec.  129.5 is revised to read as follows:

Sec.  129.5  Exemption from requirement for approval.

    (a) Unless paragraph (c) of this section applies, brokering 
activities undertaken for an agency of the U.S. Government pursuant to 
a contract between the broker and that agency are exempt from the 
requirement for approval provided that:
    (1) The brokering activities concern defense articles or defense 
services solely for the use of the agency; or
    (2) The brokering activities are undertaken for carrying out a 
foreign assistance or sales program authorized by law and subject to 
control by the President by other means, as demonstrated by one of the 
following conditions being met:
    (i) The U.S. Government agency contract with the broker contains an 
explicit provision stating the contract supports a foreign assistance 
or sales program authorized by law and the contracting agency has 
established control of the activity covered by the contract by other 
means equivalent to that established under this subchapter; or
    (ii) The Directorate of Defense Trade Controls provides written 
concurrence in advance that the condition is met.
    (b) Unless paragraph (c) of this section applies, brokering 
activities regarding a foreign defense article or defense service (see 
Sec.  120.44 of this subchapter) are exempt from the requirement for 
approval when arranged wholly within and destined exclusively for the 
North Atlantic Treaty Organization, any member country of that 
organization, Australia, Israel, Japan, New Zealand, or the Republic of 
Korea, except in the case of the defense articles or defense services 
specified in Sec.  129.4(a)(2), for which approval is required.
    (c) Brokers engaging in brokering activities described in paragraph 
(a) or (b) of this section are not exempt from obtaining approval from 
the Directorate of Defense Trade Controls if:
    (1) The broker is not registered as required by Sec.  129.3;
    (2) The broker or any person who has a direct or indirect interest 
in or may benefit from the brokering activities, including any related 
defense article or defense service transaction, is ineligible as 
defined in Sec.  120.1(c)(2) of this subchapter; or
    (3) A country or person referred to in Sec.  126.1 of this 
subchapter is involved in the brokering activities or such activities 
are otherwise subject to Sec.  129.7.
    (d) Brokers who use the exemptions in this section must comply with 
all other provisions of this part 129.

0
36. Newly redesignated Sec.  129.6 is revised to read as follows:

Sec.  129.6  Procedures for obtaining approval.

    (a) All requests for approval of brokering activities must be made 
to the Directorate of Defense Trade Controls, be signed by an empowered 
official, and include the following information:
    (1) The applicant's name, address and registration code;
    (2) A certification on whether:
    (i) The applicant or the chief executive officer, president, vice

[[Page 52692]]

presidents, secretary, partner, member, other senior officers or 
officials (e.g., comptroller, treasurer, general counsel), or any 
member of the board of directors is the subject of an indictment or has 
been otherwise charged (e.g., by criminal information in lieu of 
indictment) for, or has been convicted of, violating any of the U.S. 
criminal statutes enumerated in Sec.  120.27 of this subchapter;
    (ii) The applicant or the chief executive officer, president, vice 
presidents, secretary, partner, member, other senior officers or 
officials (e.g., comptroller, treasurer, general counsel), or any 
member of the board of directors is ineligible to contract with, or to 
receive a license or other approval to import defense articles or 
defense services from, or to receive an export license or other 
approval from, any agency of the U.S. Government; and
    (iii) To the best of the applicant's knowledge, any other person 
involved in the brokering activities enumerated in the request for 
approval as defined in Sec.  129.2 is the subject of an indictment or 
has been otherwise charged (e.g., charged by criminal information in 
lieu of indictment) for or has been convicted of violating any of the 
U.S. criminal statutes enumerated in Sec.  120.27 of this subchapter, 
or is ineligible to contract with, or to receive a license or other 
approval to import defense articles or defense services from, or to 
receive an export license or other approval from, any agency of the 
U.S. Government.
    (b) The request for approval shall describe fully the brokering 
activities that will be undertaken, including:
    (1) The action to be taken by the applicant to facilitate the 
manufacture, export, import, or transfer of a defense article or 
defense service (which may be referred to as a ``defense article or 
defense service transaction'');
    (2) The name, nationality, address, and place of business of all 
persons who may participate in the brokering activities;
    (3) A description of each defense article or defense service that 
may be involved, including:
    (i) The U.S. Munitions List category and sub-category for each 
article;
    (ii) The name or military nomenclature of each defense article;
    (iii) Whether the defense article is significant military 
equipment;
    (iv) Estimated quantity of each defense article;
    (v) Estimated U.S. dollar value of defense articles and defense 
services;
    (vi) Security classification; and
    (vii) End-user and end-use; and
    (4) A statement whether the brokering activities are related to a 
sale through direct commercial sale or under the U.S. Foreign Military 
Sales program or other activity in support of the U.S. Government.
    (c) The empowered official signing the request for approval shall 
include a certification that the request is complete and accurate.
    (d) If at the time of submission certain information required by 
paragraph (b) of this section is not yet available, this fact must be 
stated and explained in the certification required by paragraph (c) of 
this section. The Directorate of Defense Trade Controls will take any 
such explanation into account in deciding whether to approve the 
request.
    (e) The period of validity for an approval may not exceed four 
years.

0
37. Newly redesignated Sec.  129.7 is revised to read as follows:

Sec.  129.7  Policy on embargoes and other proscriptions.

    (a) This section applies to brokering activities defined in Sec.  
129.2, regardless of whether the person involved in such activities has 
registered or is exempt from registration under Sec.  129.3. The 
exemptions in Sec.  129.5 from the requirement for approval are not 
applicable to brokering activities subject to this section.
    (b) No person may engage in or make a proposal to engage in 
brokering activities that involve any country, area, or person referred 
to in Sec.  126.1 of this subchapter without first obtaining the 
approval of the Directorate of Defense Trade Controls.
    (c) No person may engage in or make a proposal to engage in 
brokering activities without first obtaining approval of the 
Directorate of Defense Trade Controls if such activities involve 
countries or persons identified by the Department of State through 
notice in the Federal Register, with respect to which certain 
limitations on defense articles or defense services are imposed for 
reasons of U.S. national security, foreign policy, or law enforcement 
interests (e.g., an individual subject to debarment pursuant to Sec.  
127.7 of this subchapter). (See Sec.  127.1(c) of this subchapter for 
additional disclosure and approval requirements applicable to brokering 
activities.)
    (d) It is the policy of the Department of State to deny requests 
for approval of brokering activities or proposals to engage in 
brokering activities involving the countries or persons referred to in 
paragraph (b) or (c) of this section. Any person who knows or has 
reason to know of brokering activities involving such countries or 
persons must immediately inform the Directorate of Defense Trade 
Controls.

0
38. Section 129.4 is redesignated as Sec.  129.8 revised to read as 
follows:

Sec.  129.8  Submission of Statement of Registration, registration 
fees, and notification of changes in information furnished by 
registrants.

    (a) An intended registrant must submit a Department of State form 
DS-2032 (Statement of Registration) to the Office of Defense Trade 
Controls Compliance by following the submission guidelines available on 
the Directorate of Defense Trade Controls Web site at 
www.pmddtc.state.gov. The Statement of Registration must be signed by a 
U.S. person senior officer (e.g., chief executive officer, president, 
secretary, partner, member, treasurer, general counsel) who has been 
empowered by the intended registrant to sign such documents, with the 
exception that a foreign senior officer may sign the Statement of 
Registration if the intended registrant seeks only to register as a 
foreign broker. The Statement of Registration may include subsidiaries 
and affiliates when more than 50 percent of the voting securities are 
owned by the registrant or the subsidiaries and affiliates are 
otherwise controlled by the registrant (see Sec.  120.40 of this 
subchapter). The intended registrant, whether a U.S. or foreign person, 
shall submit documentation that demonstrates it is incorporated or 
otherwise authorized to do business in its respective country. Foreign 
persons who are required to register shall provide information that is 
substantially similar in content to that which a U.S. person would 
provide under this provision (e.g., foreign business license or similar 
authorization to do business). The Directorate of Defense Trade 
Controls will notify the registrant if the Statement of Registration 
(form DS-2032) is incomplete either by notifying the registrant of what 
information is required or through the return of the entire 
registration package.
    (b)(1) Frequency of registration and fee. A person who is required 
to register must do so on an annual basis by submitting a completed 
Statement of Registration (form DS-2032) and a fee following the fee 
guidelines available on the Directorate of Defense Trade Controls Web 
site at www.pmddtc.state.gov. Registrants are not required to submit a 
separate statement of registration and pay an additional fee when 
provisions in Sec.  129.3(d) are met.
    (2) Expiration of registration. A registrant must submit its 
request for registration renewal at least 30 days, but no earlier than 
60 days, prior to the expiration date.

[[Page 52693]]

    (3) Lapse in registration. A registrant who fails to renew a 
registration and, after an intervening period, seeks to register again 
must pay registration fees for any part of such intervening period 
during which the registrant engaged in the business of brokering 
defense articles or defense services.
    (c) Statement of Registration Certification. The Statement of 
Registration (form DS-2032) of the intended registrant shall include a 
certification by an authorized senior officer of the following:
    (1) Whether the intended registrant or its parent, subsidiary, or 
other affiliate listed in the Statement of Registration, or any of its 
chief executive officers, presidents, vice presidents, secretaries, 
partners, members, other senior officers or officials (e.g., 
comptroller, treasurer, general counsel), or any member of the board of 
directors of the intended registrant, or of any parent, subsidiary, or 
other affiliate listed in the Statement of Registration:
    (i) Has ever been indicted or otherwise charged (e.g., charged by 
criminal information in lieu of indictment) for or has been convicted 
of violating any U.S. criminal statutes enumerated in Sec.  120.27 of 
this subchapter or violating a foreign criminal law on exportation of 
defense articles where conviction of such law carries a minimum term of 
imprisonment of greater than 1 year; or
    (ii) Is ineligible to contract with, or to receive a license or 
other approval to import defense articles or defense services from, or 
to receive an export license or other approval from, any agency of the 
U.S. Government; and
    (2) Whether the intended registrant is foreign owned or foreign 
controlled (see Sec.  120.37 of this subchapter). If the intended 
registrant is foreign owned or foreign controlled, the certification 
shall include an explanation of such ownership or control, including 
the identities of the foreign person or persons who ultimately own or 
control the registrant. This requirement applies to a registrant who is 
a U.S. person and is owned or controlled by a foreign person. It also 
applies to a registrant who is a foreign person and is owned or 
controlled by a foreign person from the same country or a foreign 
person from another country.
    (d) A registrant must, within five days of the event, provide to 
the Directorate of Defense Trade Controls a written notification, 
signed by a senior officer (e.g., chief executive officer, president, 
secretary, partner, member, treasurer, general counsel), if:
    (1) Any of the persons referred to in Sec.  129.8(c) is indicted or 
otherwise charged (e.g., charged by criminal information in lieu of 
indictment) for or convicted of violating any of the U.S. criminal 
statutes enumerated in Sec.  120.27 of this subchapter or violating a 
foreign criminal law on exportation of defense articles where 
conviction of such law carries a minimum term of imprisonment of 
greater than 1 year; or becomes ineligible to contract with, or to 
receive a license or other approval to export or import defense 
articles or defense services from, any agency of the U.S. government; 
or
    (2) There is a change in the following information contained in the 
Statement of Registration (form DS-2032):
    (i) Registrant's name;
    (ii) Registrant's address;
    (iii) Registrant's legal organization structure;
    (iv) Ownership or control;
    (v) The establishment, acquisition or divestment of a U.S. or 
foreign subsidiary or other affiliate who is engaged in brokering 
activities or otherwise required to be listed in registrant's Statement 
of Registration; or
    (vi) Board of directors, senior officers, partners and owners.

    Note 1 to paragraph (d): All other changes in the Statement of 
Registration must be provided as part of annual registration 
renewal.

    Note 2 to paragraph (d): For one year from October 25, 2013, 
``Amendment to the International Traffic in Arms Regulations: 
Registration and Licensing of Brokers, Brokering Activities, and 
Related Provisions,'' RIN 1400-AC37, the following changes must be 
provided as part of the annual registration renewal: pursuant to 
Sec.  129.3(d), changes to combine an existing broker registration 
with an existing manufacturer/exporter registration, and pursuant to 
Sec.  129.8(a), changes to an existing registration to remove 
partially owned and not otherwise controlled subsidiaries or 
affiliates, which are not the subject of an internal reorganization, 
merger, acquisition, or divestiture.

    (e) A U.S. or foreign registrant must provide written notification 
to the Directorate of Defense Trade Controls at least sixty (60) days 
in advance of any intended sale or transfer to a foreign person of 
ownership or control of the registrant or any parent, subsidiary, or 
other affiliate listed and covered in its Statement of Registration. 
Such notice does not relieve the registrant from obtaining any prior 
approval required under this subchapter.
    (f) The new entity formed when a registrant merges with another 
company or acquires, or is acquired by, another company or a subsidiary 
or division of another company, shall advise the Directorate of Defense 
Trade Controls of the following:
    (1) The new firm name and all previous firm names;
    (2) The registration number that will continue and those that are 
to be discontinued (if any); and
    (3) The numbers of all approvals for brokering activities under the 
continuing registration number, since any approval not the subject of 
notification will be considered invalid.
    (g) A registrant whose registration lapses because of failure to 
renew and, after an intervening period, seeks to register again must 
pay registration fees for any part of such intervening period during 
which the registrant engaged in the business of brokering activities.

0
39. Newly redesignated Sec.  129.9 is revised to read as follows:

Sec.  129.9  Guidance.

    (a) Any person desiring guidance on whether an activity constitutes 
a brokering activity within the scope of this part 129 may request in 
writing guidance from the Directorate of Defense Trade Controls. The 
request for guidance shall identify the applicant and registrant code 
(if applicable) and describe fully the activities that will be 
undertaken, including:
    (1) The specific activities to be undertaken by the applicant and 
any other U.S. or foreign person;
    (2) The name, nationality, and geographic location of all U.S. and 
foreign persons who may participate in the activities;
    (3) A description of each defense article or defense service that 
may be involved, including:
    (i) The U.S. Munitions List category and sub-category for each 
article;
    (ii) The name or military nomenclature of each defense article;
    (iii) Whether the defense article is significant military 
equipment;
    (iv) Estimated quantity of each defense article;
    (v) Estimated U.S. dollar value of defense articles and defense 
services; and
    (vi) Security classification;
    (4) End-user and end-use; and
    (5) A copy of any agreement or documentation, if available, between 
or among the requester and other persons who will be involved in the 
activity or related transactions that describes the activity to be 
taken by such persons.
    (b) If at the time of submission certain information is not yet 
available, this circumstance must be stated and explained. The 
Directorate of Defense Trade Controls will take the completeness of the 
information into account in providing guidance on whether the 
activities constitute brokering activities. The guidance will

[[Page 52694]]

constitute an official determination by the Department of State. The 
guidance shall not substitute for approval when required under Sec.  
129.4.
    (c) Persons desiring guidance on other aspects of this part may 
also request guidance from the Directorate of Defense Trade Controls in 
a similar manner by submitting a description of the relevant facts or 
copies of relevant documentation.

0
40. Newly redesignated Sec.  129.10 is revised to read as follows:

Sec.  129.10  Reports.

    (a) Any person required to register under this part (including 
those registered in accordance with Sec.  129.3(d)) shall provide to 
the Directorate of Defense Trade Controls on an annual basis a report 
of its brokering activities in the previous twelve months. Such report 
shall be submitted along with the registrant's annual renewal 
submission or, if not renewing, within 30 days after expiration of 
registration.
    (b) The report shall include brokering activities that received or 
were exempt from approval as follows:
    (1) The report shall identify the broker's name, address, and 
registration code and be signed by an empowered official who shall 
certify that the report is complete and accurate. The report shall 
describe each of the brokering activities, including the number 
assigned by the Directorate of Defense Trade Controls to the approval 
or the exemption claimed; and
    (2) For each of the brokering activities, the report shall identify 
all persons who participated in the activities, including each person's 
name, address, nationality, and country where located and role or 
function; the quantity, description, and U.S. dollar value of the 
defense articles or defense services; the type and U.S. dollar value of 
any consideration received or expected to be received, directly or 
indirectly, by any person who participated in the brokering activities, 
and the source thereof.
    (c) If there were no brokering activities, the report shall certify 
that there were no such activities.

0
41. Section 129.11 is added to read as follows:

Sec.  129.11  Maintenance of brokering records by registrants.

    A person who is required to register pursuant to this part 
(including those registered in accordance with Sec.  129.3(d)) must 
maintain records concerning brokering activities in accordance with 
Sec.  122.5 of this subchapter.

Rose E. Gottemoeller,
Acting Under Secretary, Arms Control and International Security, 
Department of State.
[FR Doc. 2013-20743 Filed 8-23-13; 8:45 am]
BILLING CODE 4710-25-P
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