[Federal Register Volume 77, Number 55 (Wednesday, March 21, 2012)]
[Rules and Regulations]
[Pages 16592-16643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6825]



[[Page 16591]]

Vol. 77

Wednesday,

No. 55

March 21, 2012

Part II





Department of State





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 22 CFR Parts 120, 123, 124, et al.





Implementation of the Defense Trade Cooperation Treaty Between the 
United States and the United Kingdom; Final Rule

Federal Register / Vol. 77 , No. 55 / Wednesday, March 21, 2012 / 
Rules and Regulations

[[Page 16592]]


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DEPARTMENT OF STATE

22 CFR Parts 120, 123, 124, 126, 127, and 129

RIN 1400-AC95
[Public Notice 7828]


Implementation of the Defense Trade Cooperation Treaty Between 
the United States and the United Kingdom

AGENCY: Department of State.

ACTION: Final rule.

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SUMMARY: The Department of State is amending the International Traffic 
in Arms Regulations (ITAR) to implement the Defense Trade Cooperation 
Treaty between the United States and the United Kingdom, and identify 
via a supplement the defense articles and defense services that may not 
be exported pursuant to the Treaty. This final rule implements only the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom. The final rule implementing the Defense Trade 
Cooperation Treaty between the United States and Australia will be 
published later in the year once that treaty enters into force. 
Additionally, the Department of State amends the section pertaining to 
the Canadian exemption to reference the new supplement, and, with 
regard to Congressional certification, the Department of State adds 
Israel to the list of countries and entities that have a shorter 
certification time period and a higher dollar value reporting 
threshold.

DATES: This rule is effective upon the entry into force of the Treaty 
Between the Government of the United States of America and the 
Government of the United Kingdom of Great Britain and Northern Ireland 
Concerning Defense Trade Cooperation (Treaty Doc. 110-7). We will 
publish a rule document in the Federal Register announcing the 
effective date of this rule.

FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade 
Controls Policy, Department of State, Telephone (202) 663-2809 or Email 
<a href="/cdn-cgi/l/email-protection#c78383938495a2b4b7a8a9b4a293a2a6aa87b4b3a6b3a2e9a0a8b1"><span class="__cf_email__" data-cfemail="b7f3f3e3f4e5d2c4c7d8d9c4d2e3d2d6daf7c4c3d6c3d299d0d8c1">[email protected]</span></a>. Attn: Regulatory Change--Treaties.

SUPPLEMENTARY INFORMATON: The Department of State is amending the 
International Traffic in Arms Regulations (ITAR) to implement the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom, and identify via a supplement the defense articles and 
defense services that may not be exported pursuant to the Treaty. This 
final rule implements only the Defense Trade Cooperation Treaty between 
the United States and the United Kingdom.
    These final amendments affect parts 120, 123, 124, 126, 127, and 
129, with a new section in part 126 describing the licensing exemptions 
pursuant to the Treaty.
    On November 22, 2011 (76 FR 72246), the Department's Directorate of 
Defense Trade Controls (DDTC) published for public comment a proposed 
rule to amend the ITAR to implement the Defense Trade Cooperation 
Treaty between the United States and the United Kingdom, and the 
Defense Trade Cooperation Treaty between the United States and 
Australia, and to identify, via a supplement, the defense articles and 
defense services that may not be exported pursuant to the Treaties. 
However, this rule implements only the Treaty between the United States 
and the United Kingdom. The final rule implementing the Treaty between 
the United States and Australia will be published later in the year 
once that treaty enters into force. The proposed rule also sought to 
amend the section pertaining to the Canadian exemption to reference the 
new supplement, and, with regard to Congressional certification, add 
Israel to the list of countries and entities that have a shorter 
certification time period and a higher dollar value reporting 
threshold.
    The proposed rule's comment period ended December 22, 2011. Fifteen 
(15) parties filed comments. Having thoroughly reviewed and evaluated 
the comments and the recommended changes, the Department has determined 
that it will, and hereby does, adopt the proposed rule, with changes 
noted and minor edits, and promulgates it as a final rule. The 
Department's evaluation of the written comments and recommendations 
follows:
    The majority of commenting parties expressed support for the intent 
of the Treaty, to ease export licensing burdens with one of the U.S.'s 
closest allies. However, the commenting parties expressed concern that 
the exemption is overly complicated and its requirements too burdensome 
to be truly workable for industry. DDTC appreciates these comments and 
believes the clarifying edits made in this final rule make application 
of the exemption clear.
    One commenting party requested Sec.  123.9(a) clarify whether the 
United Kingdom government could deploy items received pursuant to the 
Treaty. DDTC has reviewed this request and has not made changes to this 
paragraph. Section 126.17(h) identifies the process by which items 
exported pursuant to the Treaty may be deployed by the United Kingdom 
government.
    One commenting party requested edits to the note to Sec.  123.9(a) 
to use the word ``knowledge.'' DDTC rejected this request because the 
language in the note is sufficient, but has added clarifying language 
to the note.
    Three commenting parties suggested that DDTC delete the reference 
to defense services in Sec.  123.9(b) and (c). DDTC accepts this 
request and has deleted the reference.
    One commenting party requested clarification of the addition and 
use of the word ``destination'' in Sec.  123.9 (c). The term 
``destination'' is added because while the end-user may remain the 
same, the destination may change, therefore requiring authorization 
from DDTC.
    One commenting party sought clarification of whether Sec.  
123.9(c)(4) set up a different process for a retransfer request if such 
were submitted for articles received under the new Sec.  126.17. 
Section 123.9(c)(4)does not set up a new process; it identifies who may 
submit a retransfer request and is language reflective of Section 9(3) 
of the Implementing Arrangement.
    Three commenting parties noted that the proposed revised text of 
Sec.  123.26 appeared to conflict with provisions of Sec.  123.22. DDTC 
has considered these comments and has revised Sec.  123.26 to clarify 
that its requirements are consistent with those of Sec.  123.22.
    One commenting party requested that DDTC delete the requirement in 
Sec.  123.26 to record the time of the transaction. DDTC accepts this 
suggestion and has removed the text accordingly.
    One commenting party requested Sec.  126.5(b) be revised to 
reference screening programs developed pursuant to Sec.  126.18. 
Guidance for using Sec.  126.18 is available on DDTC's Web site and is 
not appropriate to add to this section. Therefore, no edits were made 
to this section.
    Two commenting parties noted that the proposed rule changed the 
word ``or'' to ``for'' in Sec.  126.5(b). DDTC has corrected this 
typographical error, and that text in the first sentence again reads, 
``or for return to the United States.''
    One commenting party noted that by reserving Sec.  126.5(c) and 
removing the items previously controlled there to Supplement No. 1, the 
requirement to obtain written certifications, as well as recordkeeping 
requirements, were removed. Clarification was requested as to whether 
this was intentional. DDTC has reviewed this section and confirms that 
the removal of these requirements

[[Page 16593]]

was inadvertent. Therefore, Supplement No. 1 has been revised to 
clarify that all previous requirements of the Canadian exemption, 
including those provided in paragraph (c), remain. There is no 
intention to change the requirements for using the Canadian exemption.
    Several commenting parties requested additional guidance with 
various aspects of the new Sec.  126.17. As part of Treaty 
implementation, DDTC will be posting Frequently Asked Questions (FAQs) 
on its Web site. These FAQs will address these requests for guidance.
    Two commenting parties suggested that DDTC add a definition for 
defense articles to Sec.  126.17(a)(1) to clarify that the definition 
also includes technical data for purposes of the exemption. DDTC does 
not believe this change is necessary as the definition in Sec.  120.6 
clearly identifies technical data as within the scope of the ``defense 
article'' definition. Unless specifically indicated otherwise, the use 
of the term ``defense article'' includes technical data.
    One commenting party requested clarification of the term ``access'' 
as used in Sec.  126.17(a)(1)(iv), indicating that it is common for 
U.S. Customs and Border Protection (CBP) to authorize a physical 
manipulation of a container, which would result in an intermediate 
consignee having access to an item in the shipment. DDTC believes the 
meaning of ``access'' is plain and does not see a need to revise this 
paragraph. A directive from a CBP official to open a container is not 
the type of access that would require a license from DDTC. Another 
party requested DDTC place a reference to paragraph (k), which 
discusses intermediate consignees, in this section. DDTC accepted this 
suggestion and has made corresponding changes.
    One commenting party expressed concerns that the process by which 
the U.S. Government would obtain maintained records, as provided in 
Sec.  126.17(a)(3)(vi) and other sections of the exemption, is unclear. 
These sections are not intended to identify the process by which record 
requests will be made. The process will be the same as for any request 
currently made under the ITAR. Therefore, DDTC has not revised these 
paragraphs.
    One commenting party noted the language in Sec.  126.17(a)(4) 
seemed to limit transfers just to exports to the United States. DDTC 
has revised this section to clarify that it applies to transfers within 
the Approved Community.
    Two commenting parties requested DDTC change the word ``required'' 
to ``pursuant to'' in Sec.  126.17(a)(4)(iii). This change has been 
rejected as the word ``required'' is a requirement of the Treaty.
    Two commenting parties asked DDTC to clarify the requirements in 
Sec.  126.17(a)(5) related to items delivered via the Foreign Military 
Sales program. DDTC has revised Sec.  126.17(a)(5) to provide 
clarifying language.
    Three commenting parties suggested DDTC include additional 
information in Sec.  126.17(d) to explain the vetting process for the 
UK Community. DDTC does not accept this suggestion. The vetting 
requirements are identified in the Treaty and Implementing Arrangement, 
which are available on DDTC's Web site. One commenting party noted that 
there was no reference to Her Majesty's Government (HMG) entities and 
facilities in Sec.  126.17(d). DDTC has revised this paragraph to also 
reference HMG.
    Three commenting parties requested DDTC provide additional guidance 
with respect to identification of operations, programs and projects 
that cannot be publicly identified (i.e., are classified). DDTC has not 
added additional language to Sec.  126.17(f)(2), but will provide 
additional guidance on its Web site for requesting confirmation of 
Treaty eligibility for classified programs.
    One commenting party inquired whether DDTC will post on its Web 
site a complete list of U.S. Government contracts that are Treaty 
eligible. DDTC will not do so. The U.S. Department of Defense has 
updated the Defense Federal Acquisition Regulation Supplement (DFARS) 
and certain contract clauses, which will identify treaty eligibility 
when incorporated into a contract.
    Three commenting parties requested clarifying language be added to 
Sec.  126.17(g)(1) to indicate whether this paragraph applied to 
marketing to members of the Approved Community. These parties also 
requested clarification of the term ``identical type.'' Finally, 
parties requested that this paragraph be removed in its entirety. DDTC 
cannot remove this requirement as it is part of the Treaty's Exempted 
Technology List. DDTC, however, has revised the paragraph to indicate 
that marketing may be to members of the United Kingdom Community so 
long as it is for an approved Treaty end-use and it meets the other 
requirements of Sec.  126.17(g)(1).
    One commenting party recommended removal of Sec.  126.17(g)(4) or, 
in the alternative, adding a parenthetical ``(or foreign equivalent)'' 
after ``Milestone B.'' DDTC cannot remove this paragraph as it is part 
of the Treaty's Exempted Technology List. DDTC considered adding a 
parenthetical to include foreign equivalents, but has decided to reject 
this suggestion as there is no equivalent in the UK to ``Milestone B.''
    One commenting party requested changes to Sec.  126.17(g)(5) to 
allow for the export of embedded exempted technologies in certain 
circumstances. DDTC is not, at this time, prepared to broaden this 
paragraph to include embedded exempted technologies.
    Four commenting parties expressed concerns with Sec.  126.17(g)(8) 
and the reference to the European Union Dual Use List. DDTC has revised 
this paragraph to clarify that any such items have been included in 
Supplement No. 1 to Part 126.
    Two commenting parties raised concerns with the complexity of using 
Sec.  126.17(h) with a diverse supply chain and requested clarification 
on the applicability of Sec.  123.9(e) to this exemption. DDTC 
appreciates the diverse nature of global supply chains, but believes 
the mechanisms provided in Sec.  126.17(h) are no more onerous than 
current retransfer or reexport requirements. Further, as indicated in 
Sec.  126.17(h)(5), any retransfer, reexport, or change in end-use 
under Sec.  126.17(h) shall be made in accordance with Sec.  123.9, 
which includes Sec.  123.9(e).
    One commenting party requested definition of ``United Kingdom Armed 
Forces transmission channels'' in Sec.  126.17(h)(7). This language is 
used in the Implementing Arrangement and DDTC believes Sec.  
126.17(h)(7) and the Implementing Arrangement are clear. Therefore, 
DDTC has not provided an additional definition.
    Two commenting parties requested DDTC delete the words ``any 
citizen of such countries'' from Sec.  126.17(h)(8). DDTC accepts this 
suggestion and has revised this paragraph accordingly.
    Three commenting parties requested clarification as to the form a 
written request under Sec.  126.17(i)(2)(i) should take. Parties should 
submit such requests in the form of a General Correspondence (GC), the 
required elements of which are identified in Sec.  126.17(i)(2)(i).
    One commenting party requested clarification as to the form a 
written request under Sec.  126.17(i)(3) should take. Parties should 
also submit such requests in the form of a GC to DDTC.
    Ten commenting parties expressed concerns with the marking 
requirements contained in Sec.  126.17(j). Of most concern was a 
perception that the requirements of this section made using the 
exemption overly burdensome and costly. Various suggestions were 
provided ranging from removal of the paragraph, to rewording of certain 
sections. The majority of commenting

[[Page 16594]]

parties requested DDTC remove the requirement in Sec.  126.17(j)(2) for 
exporters to remove Treaty markings. DDTC appreciates the concerns 
expressed. However, the requirements contained in 126.17(j) are 
reflective of the requirements in the Treaty and its Implementing 
Arrangement. DDTC has made some minor edits to provide clarity in this 
paragraph, but the requirement to remove certain markings will not be 
removed from the regulations at this time.
    One commenting party requested DDTC edit the text of the statement 
required by Sec.  126.17(j)(5) to indicate the items being exported 
were USML items and authorized only for export to the UK under the 
Treaty. DDTC accepts this suggestion and has revised the text 
accordingly.
    One commenting party requested that registered brokers be included 
in paragraph Sec.  126.17(k)(1)(ii). United Kingdom intermediate 
consignees must meet the requirements of Sec.  126.17(k)(1)(ii). If a 
registered broker meets these requirements, then it may be an 
intermediate consignee for purposes of this exemption. However, simply 
being a registered broker does not automatically qualify an entity as a 
United Kingdom intermediate consignee.
    Five commenting parties suggested DDTC clarify the language related 
to recordkeeping in Sec.  126.17(l) and ensure that it is consistent 
with other recordkeeping provisions in the ITAR. DDTC concurs with the 
need to keep ITAR sections consistent and has updated Sec.  123.26 to 
reference the recordkeeping requirements of Sec.  126.17(l). DDTC has 
also made clarifying edits to Sec.  126.17(l).
    One commenting party suggested changing the word ``all'' in Sec.  
126.17(l)(1) to ``their'' to acknowledge that the U.S. exporter may not 
be aware or have record of a reexport/retransfer request submitted by a 
UK Community member. DDTC agrees with this request and has revised the 
paragraph accordingly.
    One commenting party requested clarification of Sec.  
126.17(l)(1)(x) as to whether this referred to the USML category or 
security classification. This is intended to refer to security 
classification. DDTC has revised the paragraph accordingly.
    One commenting party requested DDTC delete the reference to 
``defense services'' in Sec.  126.17(l)(2). DDTC accepted this request 
and has revised the paragraph accordingly.
    Two commenting parties asked DDTC to clarify whether Sec.  
126.17(m) required exporters to submit negative reports. DDTC confirms 
that reporting requirements under Sec.  126.17(m) are contingent on 
meeting the requirements of ITAR Sec.  130.9.
    Two commenting parties requested clarification on whether the 
congressional notification requirement under the Treaty is identical to 
that required under normal license authorization processes. DDTC 
confirms that the process will be the same.
    Ten commenting parties expressed various concerns regarding the 
scope and wording of Supplement No. 1 to Part 126. In particular, 
comments indicated concern that the Supplement was too broad and 
possibly excluded too much to make the exemption useful. DDTC 
appreciates these comments, and has made clarifying edits to Supplement 
No. 1 to the extent possible within the confines of the Treaty, the 
Implementing Arrangements, and the Exempted Technology List.
BILLING CODE 4710-25-P

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BILLING CODE 4710-25-C

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense services is a foreign affairs function of 
the United States Government and that rules implementing this function 
are exempt from Sec.  553 (Rulemaking) and Sec.  554 (Adjudications) of 
the Administrative Procedure Act. Nevertheless, as noted in the text 
above, the Department published this rule as a Notice of Proposed Rule 
Making on November 22, 2011 (76 FR 72246), with a 30-day comment 
period, and without prejudice to its determination that controlling the 
import and export of defense services is a foreign affairs function. 
This rule is effective upon the entry into force of the Treaty Between 
the Government of the United States of America and the Government of 
the United Kingdom of Great Britain and Northern Ireland Concerning 
Defense Trade Cooperation (Treaty Doc. 110-7). Once the Treaty is in 
force, exports must be able to utilize the Treaty for qualifying 
exports of defense articles.

Regulatory Flexibility Act

    Since this amendment is not subject to the notice-and-comment 
procedures of 5 U.S.C. 553, it does not require analysis under the 
Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

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

Executive Order 13175

    The Department of State has determined that this amendment will not 
have tribal implications, will not impose substantial direct compliance 
costs on Indian tribal governments, and will not preempt tribal law. 
Accordingly, Executive Order 13175 does not apply to this rulemaking.

Small Business Regulatory Enforcement Fairness Act of 1996

    This amendment has been found not to be a major rule within the 
meaning of the Small Business Regulatory Enforcement Fairness Act of 
1996.

Executive Orders 12372 and 13132

    This amendment will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this amendment 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 amendment.

Executive Order 12866

    The Department is of the opinion that restricting defense articles 
exports is a foreign affairs function of the United States Government 
and that rules governing the conduct of this function are exempt from 
the requirements of Executive order 12866. However, the Department has 
nevertheless reviewed this regulation to ensure its consistency with 
the regulatory philosophy and principles set forth in that Executive 
Order.

Executive Order 12988

    The Department of State has reviewed this amendment 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 13563

    The Department of State has considered this rule in light of 
Executive Order 13563, dated January 18, 2011, and affirms that this 
regulation is consistent with the guidance therein.

Paperwork Reduction Act

    This amendment does not impose any new reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act, 44 U.S.C. chapter 
35. The burden or number of respondents to any of the existing OMB 
approved information collections is not expected to change annually as 
a result of this rule.

List of Subjects

22 CFR Parts 120, 123, 124, and 126

    Arms and munitions, Exports.

22 CFR Part 127

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

22 CFR Part 129

    Arms and munitions, Exports, Brokering.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 120, 123, 124, 126, 127, and 129 are amended as 
follows:

PART 120--PURPOSE AND DEFINITIONS

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


[[Page 16597]]


    Authority:  Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; E.O. 11958, 42 FR 
4311; E.O. 13284, 68 FR 4075; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 
2651a; Pub. L. 105-261, 112 Stat. 1920; Pub. L. 111-266.


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


Sec.  120.1  General authorities and eligibility.

    (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 was delegated to the Secretary of State 
by Executive Order 11958, as amended. This subchapter implements that 
authority. Portions of this subchapter also implement the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom. 
(Note, however, that the Treaty is not the source of authority for the 
prohibitions in part 127, but instead is the source of one limitation 
on the scope of such prohibitions.) 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 and Regional Security and the Managing Director of Defense Trade 
Controls, Bureau of Political-Military Affairs.
* * * * *
    (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 United States may receive 
an export license or other export approval;
    (ii) A foreign person may receive a reexport or retransfer 
approval; and
    (iii) A foreign person may receive a prior approval for brokering 
activities.
    Requests for a license or other approval, other than by a person 
referred to in paragraphs (c)(1)(i) and (c)(1)(ii) 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 criminal 
statutes enumerated in Sec.  120.27 of this subchapter, who have been 
debarred pursuant to part 127 or 128 of this subchapter, who are 
subject to indictment or are otherwise charged (e.g., by information) 
for violating the criminal statutes enumerated in Sec.  120.27 of this 
subchapter, 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, or to interim suspension under Sec.  127.8 
of this subchapter, are generally ineligible to be involved in 
activities regulated under this subchapter.
    (d) The exemptions provided in this subchapter do not apply to 
transactions in which the exporter, any party to the export (as defined 
in Sec.  126.7(e) of this subchapter), any source or manufacturer, 
broker or other participant in the brokering activities, is generally 
ineligible in paragraph (c) of this section, unless prior written 
authorization has been granted by the Directorate of Defense Trade 
Controls.
* * * * *

0
3. Section 120.19 is revised to read as follows:


Sec.  120.19  Reexport or retransfer.

    Reexport or retransfer means the transfer of defense articles or 
defense services to an end-use, end-user, or destination not previously 
authorized by license, written approval, or exemption pursuant to this 
subchapter.

0
4. Section 120.28 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  120.28  Listing of forms referred to in this subchapter.

* * * * *
    (b) * * *
    (2) Electronic Export Information filed via the Automated Export 
System.
* * * * *

0
5. Section 120.34 is added to read as follows:


Sec.  120.34  Defense Trade Cooperation Treaty between the United 
States and the United Kingdom.

    Defense Trade Cooperation Treaty between the United States and the 
United Kingdom means the Treaty between the Government of the United 
States of America and the Government of the United Kingdom of Great 
Britain and Northern Ireland Concerning Defense Trade Cooperation, done 
at Washington DC and London, June 21 and 26, 2007. For additional 
information on making exports pursuant to this Treaty, see Sec.  126.17 
of this subchapter.

0
6. Section 120.36 is added to read as follows:


Sec.  120.36  United Kingdom Implementing Arrangement.

    United Kingdom Implementing Arrangement means the Implementing 
Arrangement Pursuant to the Treaty between the Government of the United 
States of America and the Government of the United Kingdom of Great 
Britain and Northern Ireland Concerning Defense Trade Cooperation, done 
at Washington DC, February 14, 2008, as it may be amended.

PART 123--LICENSES FOR THE EXPORT OF DEFENSE ARTICLES

0
7. The authority citation for part 123 continues to read as follows:

    Authority:  Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2753; E.O. 11958, 42 FR 
4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub. 
L. 105-261, 112 Stat. 1920; Sec. 1205(a), Pub. L. 107-228.


0
8. Section 123.4 is amended by revising paragraph (d) introductory text 
to read as follows:


Sec.  123.4  Temporary import license exemptions.

* * * * *
    (d) Procedures. To the satisfaction of the Port Directors of U.S. 
Customs and Border Protection, the importer and exporter must comply 
with the following procedures:
* * * * *

0
9. Section 123.9 is amended by revising paragraphs (a), (b), (c), (e) 
introductory text, (e)(1), (e)(3), and (e)(4), adding a note after 
paragraph (a), and removing and reserving paragraph (d), to read as 
follows:


Sec.  123.9  Country of ultimate destination and approval of reexports 
or retransfers.

    (a) The country designated as the country of ultimate destination 
on an application for an export license, or in an Electronic Export 
Information filing where an exemption is claimed under this subchapter, 
must be the country of ultimate end-use. The written approval of the 
Directorate of Defense Trade Controls must be obtained before 
reselling, transferring, reexporting, retransferring, transshipping, or 
disposing of a defense article to any end-user, end-use, or destination 
other than as stated on the export license, or in the Electronic Export 
Information filing in cases where an exemption is claimed under this 
subchapter, except in accordance with the provisions of an exemption 
under this subchapter that explicitly authorizes the resell, transfer,

[[Page 16598]]

reexport, retransfer, transshipment, or disposition of a defense 
article without such approval. Exporters must determine the specific 
end-user, end-use, and destination prior to submitting an application 
to the Directorate of Defense Trade Controls or claiming an exemption 
under this subchapter.

    Note to paragraph (a):  In making the aforementioned 
determination, a person is expected to review all readily available 
information, including information readily available to the public 
generally as well as information readily available from other 
parties to the transaction.

    (b) The exporter shall incorporate the following statement as an 
integral part of the bill of lading, airway bill, or other shipping 
documents, and the invoice whenever defense articles are to be exported 
or transferred pursuant to a license, other written approval, or an 
exemption under this subchapter, other than the exemptions contained in 
Sec.  126.16 and Sec.  126.17 of this subchapter (Note: for exports 
made pursuant to Sec.  126.16 or Sec.  126.17 of this subchapter, see 
Sec.  126.16(j)(5) or Sec.  126.17(j)(5)):
    ``These commodities are authorized by the U.S. Government for 
export only to [country of ultimate destination] for use by [end-user]. 
They may not be transferred, transshipped on a non-continuous voyage, 
or otherwise be disposed of, to any other country or end-user, either 
in their original form or after being incorporated into other end-
items, without the prior written approval of the U.S. Department of 
State.''
    (c) Any U.S. person or foreign person requesting written approval 
from the Directorate of Defense Trade Controls for the reexport, 
retransfer, other disposition, or change in end-use, end-user, or 
destination of a defense article initially exported or transferred 
pursuant to a license or other written approval, or an exemption under 
this subchapter, must submit all the documentation required for a 
permanent export license (see Sec.  123.1 of this subchapter) and shall 
also submit the following:
    (1) The license number, written authorization, or exemption under 
which the defense article or defense service was previously authorized 
for export from the United States (Note: For exports under exemptions 
at Sec.  126.16 or Sec.  126.17 of this subchapter, the original end-
use, program, project, or operation under which the item was exported 
must be identified.);
    (2) A precise description, quantity, and value of the defense 
article or defense service;
    (3) A description and identification of the new end-user, end-use, 
and destination; and
    (4) With regard to any request for such approval relating to a 
defense article or defense service initially exported pursuant to an 
exemption contained in Sec.  126.16 or Sec.  126.17 of this subchapter, 
written request for the prior approval of the transaction from the 
Directorate of Defense Trade Controls must be submitted: By the 
original U.S. exporter, provided a written request is received from a 
member of the Australian Community, as identified in Sec.  126.16 of 
this subchapter, or the United Kingdom Community, as identified in 
Sec.  126.17 of this subchapter (where such a written request includes 
a written certification from the member of the Australian Community or 
the United Kingdom Community providing the information set forth in 
Sec.  126.17 of this subchapter); or by a member of the Australian 
Community or the United Kingdom Community, where such request provides 
the information set forth in this section. All persons must continue to 
comply with statutory and regulatory requirements outside of this 
subchapter concerning the import of defense articles and defense 
services or the possession or transfer of defense articles, including, 
but not limited to, regulations issued by the Bureau of Alcohol, 
Tobacco, Firearms and Explosives found at 27 CFR parts 447, 478, and 
479, which are unaffected by the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom and continue to apply 
fully to defense articles and defense services subject to either of the 
aforementioned treaties and the exemptions contained in Sec.  126.17 of 
this subchapter.
    (d) [Reserved]
    (e) Reexports or retransfers of U.S.-origin components incorporated 
into a foreign defense article to NATO, NATO agencies, a government of 
a NATO country, or the governments of Australia, Israel, Japan, New 
Zealand, or the Republic of Korea are authorized without the prior 
written approval of the Directorate of Defense Trade Controls, 
provided:
    (1) The U.S.-origin components were previously authorized for 
export from the United States, either by a license, written 
authorization, or an exemption other than those described in either 
Sec.  126.16 or Sec.  126.17 of this subchapter;
* * * * *
    (3) The person reexporting the defense article provides written 
notification to the Directorate of Defense Trade Controls of the 
retransfer not later than 30 days following the reexport. The 
notification must state the articles being reexported and the recipient 
government.
    (4) The original license or other approval of the Directorate of 
Defense Trade Controls did not include retransfer or reexport 
restrictions prohibiting use of this exemption.

0
10. Section 123.15 is amended by revising paragraphs (a)(1), (a)(2), 
and (b) to read as follows:


Sec.  123.15  Congressional certification pursuant to Section 36(c) of 
the Arms Export Control Act.

    (a) * * *
    (1) A license for the export of major defense equipment sold under 
a contract in the amount of $14,000,000 or more, or for defense 
articles and defense services sold under a contract in the amount of 
$50,000,000 or more, to any country that is not a member of the North 
Atlantic Treaty Organization (NATO), or Australia, Israel, Japan, New 
Zealand, or the Republic of Korea that does not authorize a new sales 
territory; or
    (2) A license for export to a country that is a member country of 
NATO, or Australia, Israel, Japan, New Zealand, or the Republic of 
Korea, of major defense equipment sold under a contract in the amount 
of $25,000,000 or more, or for defense articles and defense services 
sold under a contract in the amount of $100,000,000 or more, and 
provided the transfer does not include any other countries; or
* * * * *
    (b) Unless an emergency exists which requires the final export in 
the national security interests of the United States, approval may not 
be granted for any transaction until at least 15 calendar days have 
elapsed after receipt by the Congress of the certification required by 
22 U.S.C. 2776(c)(1) involving NATO, or Australia, Israel, Japan, New 
Zealand, or the Republic of Korea or at least 30 calendar days have 
elapsed for any other country; in the case of a license for an export 
of a commercial communications satellite for launch from, and by 
nationals of, the Russian Federation, Ukraine, or Kazakhstan, until at 
least 15 calendar days after the Congress receives such certification.
* * * * *

0
11. Section 123.16 is amended by revising paragraphs (a), (b)(1)(iii), 
and (b)(2)(vi) to read as follows:


Sec.  123.16  Exemptions of general applicability.

    (a) The following exemptions apply to exports of unclassified 
defense articles for which no approval is needed from

[[Page 16599]]

the Directorate of Defense Trade Controls. These exemptions do not 
apply to: Proscribed destinations under Sec.  126.1 of this subchapter; 
exports for which Congressional notification is required (see Sec.  
123.15 of this subchapter); MTCR articles; Significant Military 
Equipment (SME); and may not be used by persons who are generally 
ineligible as described in Sec.  120.1(c) of this subchapter. All 
shipments of defense articles, including but not limited to those to 
Australia, Canada, and the United Kingdom, require an Electronic Export 
Information (EEI) filing or notification letter. If the export of a 
defense article is exempt from licensing, the EEI filing must cite the 
exemption. Refer to Sec.  123.22 of this subchapter for EEI filing and 
letter notification requirements.
    (b) * * *
    (1) * * *
    (iii) The exporter identifies in the EEI filing by selecting the 
appropriate code that the export is exempt from the licensing 
requirements of this subchapter; and
* * * * *
    (2) * * *
    (vi) The exporter must certify on the invoice, the bill of lading, 
air waybill, or shipping documents that the export is exempt from the 
licensing requirements of this subchapter. This is done by writing ``22 
CFR 123.16(b)(2) applicable.''
* * * * *

0
12. Section 123.22 is amended by revising paragraphs (a) introductory 
text and (b)(2) introductory text to read as follows:


Sec.  123.22  Filing, retention, and return of export licenses and 
filing of export information.

    (a) Any export, as defined in this subchapter, of a defense article 
controlled by this subchapter, to include defense articles transiting 
the United States, requires the electronic reporting of export 
information. The reporting of the export information shall be to the 
U.S. Customs and Border Protection using the Automated Export System 
(AES) or directly to the Directorate of Defense Trade Controls (DDTC). 
Any license or other approval authorizing the permanent export of 
hardware must be filed at a U.S. Port before any export. Licenses or 
other approvals for the permanent export of technical data and defense 
services shall be retained by the applicant who will send the export 
information directly to DDTC. Temporary export or temporary import 
licenses for such items need not be filed with the U.S. Customs and 
Border Protection, but must be presented to the U.S. Customs and Border 
Protection for decrementing of the shipment prior to departure and at 
the time of entry. The U.S. Customs and Border Protection will only 
decrement a shipment after the export information has been filed 
correctly using the AES. Before the export of any hardware using an 
exemption in this subchapter, the DDTC registered applicant/exporter, 
or an agent acting on the filer's behalf, must electronically provide 
export information using the AES (see paragraph (b) of this section). 
In addition to electronically providing the export information to the 
U.S. Customs and Border Protection before export, all the mandatory 
documentation must be presented to the port authorities (e.g., 
attachments, certifications, proof of AES filing; such as the Internal 
Transaction Number (ITN)). Export authorizations shall be filed, 
retained, decremented or returned to DDTC as follows:
* * * * *
    (b) * * *
    (2) Emergency shipments of hardware that cannot meet the pre-
departure filing requirements. U.S. Customs and Border Protection may 
permit an emergency export of hardware by truck (e.g., departures to 
Mexico or Canada) or air, by a U.S. registered person, when the 
exporter is unable to comply with the Electronic Export Information 
(EEI) filing timeline in paragraph (b)(1)(i) of this section. The 
applicant, or an agent acting on the applicant's behalf, in addition to 
providing the EEI using the AES, must provide documentation required by 
U.S. Customs and Border Protection and this subchapter. The 
documentation provided to U.S. Customs and Border Protection at the 
port of exit must include the Internal Transaction Number (ITN) for the 
shipment and a copy of a notification to the Directorate of Defense 
Trade Controls stating that the shipment is urgent and must be 
accompanied by an explanation for the urgency. The original of the 
notification must be immediately provided to the Directorate of Defense 
Trade Controls. The AES filing of the export information must be made 
at least two hours prior to any departure by air from the United 
States. When shipping via ground, the AES filing must be made at the 
time when the exporter provides the articles to the carrier or at least 
one hour prior to departure from the United States, when the permanent 
export of the hardware has been authorized for export:
* * * * *

0
13. Section 123.26 is revised to read as follows:


Sec.  123.26  Recordkeeping for exemptions.

    Any person engaging in any export, reexport, transfer, or 
retransfer of a defense article or defense service pursuant to an 
exemption must maintain records of each such export, reexport, 
transfer, or retransfer. The records shall, to the extent applicable to 
the transaction and consistent with the requirements of Sec.  123.22 of 
this subchapter, include the following information: A description of 
the defense article, including technical data, or defense service; the 
name and address of the end-user and other available contact 
information (e.g., telephone number and electronic mail address); the 
name of the natural person responsible for the transaction; the stated 
end-use of the defense article or defense service; the date of the 
transaction; the Electronic Export Information (EEI) Internal 
Transaction Number (ITN); and the method of transmission. The person 
using or acting in reliance upon the exemption shall also comply with 
any additional recordkeeping requirements enumerated in the text of the 
regulations concerning such exemption (e.g., requirements specific to 
the Defense Trade Cooperation Treaties in Sec.  126.16 and Sec.  126.17 
of this subchapter).

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

0
14. The authority citation for part 124 is revised to read as follows:

    Authority:  Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311; 3 CFR 1977 
Comp. p. 79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub. L. 105-261; Pub. 
L. 111-266.

0
15. Section 124.11 is amended by revising paragraph (b) to read as 
follows:


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

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

[[Page 16600]]

Congress has enacted a joint resolution prohibiting the export.
* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

0
16. The authority citation for part 126 is revised 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); E.O. 11958, 
42 FR 4311; 3 CFR, 1977 Comp. p. 79; 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.


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


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

* * * * *
    (e) Final sales. No sale, export, transfer, reexport, or retransfer 
and no proposal 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 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.
    (1) Duty to Notify: Any person who knows or has reason to know of 
such a final or actual sale, export, transfer, reexport, or retransfer 
of such articles, services, or data 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.
    (2) [Reserved]
* * * * *

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


Sec.  126.3  Exceptions.

    In a case of exceptional or undue hardship, or when it is otherwise 
in the interest of the United States Government, the Managing Director, 
Directorate of Defense Trade Controls, may make an exception to the 
provisions of this subchapter.

0
19. Section 126.4 is amended by revising paragraph (d) to read as 
follows:


Sec.  126.4  Shipments by or for United States Government agencies.

* * * * *
    (d) An Electronic Export Information (EEI) filing, required under 
Sec.  123.22 of this subchapter, and a written statement by the 
exporter certifying that these requirements have been met must be 
presented at the time of export to the appropriate Port Directors of 
U.S. Customs and Border Protection or Department of Defense transmittal 
authority. A copy of the EEI filing and the written certification 
statement shall be provided to the Directorate of Defense Trade 
Controls immediately following the export.
0
20. Section 126.5 is amended by revising paragraphs (a), (b), (d) 
introductory text, and Notes 1 and 2, and removing and reserving 
paragraph (c) to read as follows:


Sec.  126.5  Canadian exemptions.

    (a) Temporary import of defense articles. Port Directors of U.S. 
Customs and Border Protection and postmasters shall permit the 
temporary import and return to Canada without a license of any 
unclassified defense articles (see Sec.  120.6 of this subchapter) that 
originate in Canada for temporary use in the United States and return 
to Canada. All other temporary imports shall be in accordance with 
Sec. Sec.  123.3 and 123.4 of this subchapter.
    (b) Permanent and temporary export of defense articles. Except as 
provided in Supplement No. 1 to part 126 of this subchapter and for 
exports that transit third countries, Port Directors of U.S. Customs 
and Border Protection and postmasters shall permit, when for end-use in 
Canada by Canadian Federal or Provincial governmental authorities 
acting in an official capacity or by a Canadian-registered person, or 
for return to the United States, the permanent and temporary export to 
Canada without a license of unclassified defense articles and defense 
services identified on the U.S. Munitions List (22 CFR 121.1). The 
exceptions are subject to meeting the requirements of this subchapter, 
to include 22 CFR 120.1(c) and (d), parts 122 and 123 (except insofar 
as exemption from licensing requirements is herein authorized) and 
Sec.  126.1, and the requirement to obtain non-transfer and use 
assurances for all significant military equipment. For purposes of this 
section, ``Canadian-registered person'' is any Canadian national 
(including Canadian business entities organized under the laws of 
Canada), dual citizen of Canada and a third country other than a 
country listed in Sec.  126.1 of this subchapter, and permanent 
resident registered in Canada in accordance with the Canadian Defense 
Production Act, and such other Canadian Crown Corporations identified 
by the Department of State in a list of such persons publicly available 
through the Internet Web site of the Directorate of Defense Trade 
Controls and by other means.
    (c) [Reserved](d) Reexports/retransfer. Reexport/retransfer in 
Canada to another end-user or end-use or from Canada to another 
destination, except the United States, must in all instances have the 
prior approval of the Directorate of Defense Trade Controls. Unless 
otherwise exempt in this subchapter, the original exporter is 
responsible, upon request from a Canadian-registered person, for 
obtaining or providing reexport/retransfer approval. In any instance 
when the U.S. exporter is no longer available to the Canadian end-user 
the request for reexport/retransfer may be made directly to the 
Directorate of Defense Trade Controls. All requests must include the 
information in Sec.  123.9(c) of this subchapter. Reexport/retransfer 
approval is acquired by:
* * * * *

    Notes to Sec.  126.5: 
    1. In any instance when the exporter has knowledge that the 
defense article exempt from licensing is being exported for use 
other than by a qualified Canadian-registered person or for export 
to another foreign destination, other than the United States, in its 
original form or incorporated into another item, an export license 
must be obtained prior to the transfer to Canada.
    2. Additional exemptions exist in other sections of this 
subchapter that are applicable to Canada, for example Sec. Sec.  
123.9, 125.4, and 124.2, that allow for the performance of defense 
services related to training in basic operations and maintenance, 
without a license, for certain defense articles lawfully exported, 
including those identified in Supplement No. 1 to part 126 of this 
subchapter.


0
21. Section 126.7 is amended by revising the section heading and 
paragraphs (a)(3), (a)(7), and (e) introductory text to read as 
follows:


Sec.  126.7  Denial, revocation, suspension, or amendment of licenses 
and other approvals.

    (a) * * *
    (3) An applicant is the subject of a criminal complaint, other 
criminal charge (e.g., an information), or indictment for a violation 
of any of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter; or
* * * * *
    (7) An applicant has failed to include any of the information or 
documentation expressly required to support a license application,

[[Page 16601]]

exemption, or other request for approval under this subchapter, or as 
required in the instructions in the applicable Department of State form 
or has failed to provide notice or information as required under this 
subchapter; or
* * * * *
    (e) Special definition. For purposes of this subchapter, the term 
``Party to the Export'' means:
* * * * *
    22. Section 126.13 is amended by revising paragraphs (a) 
introductory text, (a)(1), and (a)(4) to read as follows:


Sec.  126.13  Required information.

    (a) All applications for licenses (DSP-5, DSP-61, DSP-73, and DSP-
85), all requests for approval of agreements and amendments thereto 
under part 124 of this subchapter, and all requests for other written 
authorizations (including requests for retransfer or reexport pursuant 
to Sec.  123.9 of this subchapter) must include a letter signed by a 
responsible official empowered by the applicant and addressed to the 
Directorate of Defense Trade Controls, stating whether:
    (1) The applicant or the chief executive officer, president, vice-
presidents, other senior officers or officials (e.g., comptroller, 
treasurer, general counsel) or any member of the board of directors is 
the subject of a criminal complaint, other criminal charge (e.g., an 
information), or indictment for or has been convicted of violating any 
of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter since the effective date of the Arms Export Control Act, 
Public Law 94-329, 90 Stat. 729 (June 30, 1976);
* * * * *
    (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), section 101(a)20, 60 
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.
* * * * *

0
23. Section 126.17 is added to read as follows:


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

    (a) Scope of exemption and required conditions. (1) Definitions. 
(i) An export means, for purposes of this section only, the initial 
movement of defense articles or defense services from the United States 
Community to the United Kingdom Community.
    (ii) A transfer means, for purposes of this section only, the 
movement of a previously exported defense article or defense service by 
a member of the United Kingdom Community within the United Kingdom 
Community, or between a member of the United States Community and a 
member of the United Kingdom Community.
    (iii) Retransfer and reexport have the meaning provided in Sec.  
120.19 of this subchapter.
    (iv) Intermediate consignee means, for purposes of this section, an 
entity or person who receives defense articles, including technical 
data, but who does not have access to such defense articles, for the 
sole purpose of effecting onward movement to members of the Approved 
Community (see paragraph (k) of this section).
    (2) Persons or entities exporting or transferring defense articles 
or defense services are exempt from the otherwise applicable licensing 
requirements if such persons or entities comply with the regulations 
set forth in this section. Except as provided in Supplement No. 1 to 
part 126 of this subchapter, Port Directors of U.S. Customs and Border 
Protection and postmasters shall permit the permanent and temporary 
export without a license from members of the U.S. Community to members 
of the United Kingdom Community (see paragraph (d) of this section 
regarding the identification of members of the United Kingdom 
Community) of defense articles and defense services not listed in 
Supplement No. 1 to part 126, for the end-uses specifically identified 
pursuant to paragraphs (e) and (f) of this section. The purpose of this 
section is to specify the requirements to export, transfer, reexport, 
retransfer, or otherwise dispose of a defense article or defense 
service pursuant to the Defense Trade Cooperation Treaty between the 
United States and the United Kingdom. All persons must continue to 
comply with statutory and regulatory requirements outside of this 
subchapter concerning the import of defense articles and defense 
services or the possession or transfer of defense articles, including, 
but not limited to, regulations issued by the Bureau of Alcohol, 
Tobacco, Firearms and Explosives found at 27 CFR parts 447, 478, and 
479, which are unaffected by the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom and continue to apply 
fully to defense articles and defense services subject to either of the 
aforementioned treaties and the exemptions contained in Sec.  126.17 of 
this subchapter.
    (3) Export. In order for an exporter to export a defense article or 
defense service pursuant to the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom, all of the following 
conditions must be met:
    (i) The exporter must be registered with the Directorate of Defense 
Trade Controls and must be eligible, according to the requirements and 
prohibitions of the Arms Export Control Act, this subchapter, and other 
provisions of United States law, to obtain an export license (or other 
forms of authorization to export) from any agency of the U.S. 
Government without restriction (see paragraphs (b) and (c) of this 
section for specific requirements);
    (ii) The recipient of the export must be a member of the United 
Kingdom Community (see paragraph (d) of this section regarding the 
identification of members of the United Kingdom Community). United 
Kingdom non-governmental entities and facilities that become ineligible 
for such membership will be removed from the United Kingdom Community;
    (iii) Intermediate consignees involved in the export must not be 
ineligible, according to the requirements and prohibitions of the Arms 
Export Control Act, this subchapter, and other provisions of United 
States law, to handle or receive a defense article or defense service 
without restriction (see paragraph (k) of this section for specific 
requirements);
    (iv) The export must be for an end-use specified in the Defense 
Trade Cooperation Treaty between the United States and the United 
Kingdom and mutually agreed to by the U.S. Government and the 
Government of the United Kingdom pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
the Implementing Arrangement thereto (United Kingdom Implementing 
Arrangement) (see paragraphs (e) and (f) of this section regarding 
authorized end-uses);
    (v) The defense article or defense service is not excluded from the 
scope of the Defense Trade Cooperation Treaty between the United States 
and the United Kingdom (see paragraph (g) of this section and 
Supplement No. 1 to part 126 of this subchapter for specific 
information on the scope of items excluded from export under this 
exemption) and is marked or identified, at a minimum, as ``Restricted 
USML'' (see paragraph (j) of this section for

[[Page 16602]]

specific requirements on marking exports);
    (vi) All required documentation of such export is maintained by the 
exporter and recipient and is available upon the request of the U.S. 
Government (see paragraph (l) of this section for specific 
requirements); and
    (vii) The Department of State has provided advance notification to 
the Congress, as required, in accordance with this section (see 
paragraph (o) of this section for specific requirements).
    (4) Transfers. In order for a member of the Approved Community 
(i.e., the U.S. Community and United Kingdom Community) to transfer a 
defense article or defense service under the Defense Trade Cooperation 
Treaty within the Approved Community, all of the following conditions 
must be met:
    (i) The defense article or defense service must have been 
previously exported in accordance with paragraph (a)(3) of this section 
or transitioned from a license or other approval in accordance with 
paragraph (i) of this section;
    (ii) The transferor and transferee of the defense article or 
defense service are members of the United Kingdom Community (see 
paragraph (d) of this section regarding the identification of members 
of the United Kingdom Community) or the United States Community (see 
paragraph (b) of this section for information on the United States 
Community/approved exporters);
    (iii) The transfer is required for an end-use specified in the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom and mutually agreed to by the United States and the 
Government of United Kingdom pursuant to the terms of the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
the United Kingdom Implementing Arrangement (see paragraphs (e) and (f) 
of this section regarding authorized end-uses);
    (iv) The defense article or defense service is not identified in 
paragraph (g) of this section and Supplement No. 1 to part 126 of this 
subchapter as ineligible for export under this exemption, and is marked 
or otherwise identified, at a minimum, as ``Restricted USML'' (see 
paragraph (j) of this section for specific requirements on marking 
exports);
    (v) All required documentation of such transfer is maintained by 
the transferor and transferee and is available upon the request of the 
U.S. Government (see paragraph (l) of this section for specific 
requirements); and
    (vi) The Department of State has provided advance notification to 
the Congress in accordance with this section (see paragraph (o) of this 
section for specific requirements).
    (5) This section does not apply to the export of defense articles 
or defense services from the United States pursuant to the Foreign 
Military Sales program. Once such items are delivered to Her Majesty's 
Government, they may be treated as if they were exported pursuant to 
the Treaty and then must be marked, identified, transmitted, stored and 
handled in accordance with the Treaty, the United Kingdom Implementing 
Arrangement, and the provisions of this section.
    (b) United States Community. The following persons compose the 
United States Community and may export or transfer defense articles and 
defense services pursuant to the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom:
    (1) Departments and agencies of the U.S. Government, including 
their personnel acting in their official capacity, with, as 
appropriate, a security clearance and a need-to-know; and
    (2) Non-governmental U.S. persons registered with the Directorate 
of Defense Trade Controls and eligible, according to the requirements 
and prohibitions of the Arms Export Control Act, this subchapter, and 
other provisions of United States law, to obtain an export license (or 
other forms of authorization to export) from any agency of the U.S. 
Government without restriction, including their employees acting in 
their official capacity with, as appropriate, a security clearance and 
a need-to-know.
    (c) An exporter that is otherwise an authorized exporter pursuant 
to paragraph (b) of this section may not export or transfer pursuant to 
the Defense Trade Cooperation Treaty between the United States and the 
United Kingdom if the exporter's president, chief executive officer, 
any vice-president, any other senior officer or official (e.g., 
comptroller, treasurer, general counsel); any member of the board of 
directors of the exporter; any party to the export; or any source or 
manufacturer is ineligible to receive export licenses (or other forms 
of authorization to export) from any agency of the U.S. Government.
    (d) United Kingdom Community. For purposes of the exemption 
provided by this section, the United Kingdom Community consists of:
    (1) Her Majesty's Government entities and facilities identified as 
members of the Approved Community through the Directorate of Defense 
Trade Controls Web site at the time of a transaction under this 
section; and
    (2) The non-governmental United Kingdom entities and facilities 
identified as members of the Approved Community through the Directorate 
of Defense Trade Controls Web site at the time of a transaction under 
this section; non-governmental United Kingdom entities and facilities 
that become ineligible for such membership will be removed from the 
United Kingdom Community.
    (e) Authorized End-uses. The following end-uses, subject to 
paragraph (f) of this section, are specified in the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom:
    (1) United States and United Kingdom combined military or counter-
terrorism operations;
    (2) United States and United Kingdom cooperative security and 
defense research, development, production, and support programs;
    (3) Mutually determined specific security and defense projects 
where the Government of the United Kingdom is the end-user; or
    (4) U.S. Government end-use.
    (f) Procedures for identifying authorized end-uses pursuant to 
paragraph (e) of this section:
    (1) Operations, programs, and projects that can be publicly 
identified will be posted on the Directorate of Defense Trade Controls 
Web site;
    (2) Operations, programs, and projects that cannot be publicly 
identified will be confirmed in written correspondence from the 
Directorate of Defense Trade Controls; or
    (3) U.S. Government end-use will be identified specifically in a 
U.S. Government contract or solicitation as being eligible under the 
Treaty.
    (4) No other operations, programs, projects, or end-uses qualify 
for this exemption.
    (g) Items eligible under this section. With the exception of items 
listed in Supplement No. 1 to part 126 of this subchapter, defense 
articles and defense services may be exported under this section 
subject to the following:
    (1) An exporter authorized pursuant to paragraph (b)(2) of this 
section may market a defense article to members of the United Kingdom 
Community if that exporter has been licensed by the Directorate of 
Defense Trade Controls to export (as defined by Sec.  120.17 of this 
subchapter) the identical type of defense article to any foreign person 
and end-use of the article is for an end-use identified in paragraph 
(e) of this section.
    (2) The export of any defense article specific to the existence of 
(e.g., reveals the existence of or details of) anti-

[[Page 16603]]

tamper measures made at U.S. Government direction always requires prior 
written approval from the Directorate of Defense Trade Controls.
    (3) U.S.-origin classified defense articles or defense services may 
be exported only pursuant to a written request, directive, or contract 
from the U.S. Department of Defense that provides for the export of the 
classified defense article(s) or defense service(s).
    (4) U.S.-origin defense articles specific to developmental systems 
that have not obtained written Milestone B approval from the Department 
of Defense milestone approval authority are not eligible for export 
unless such export is pursuant to a written solicitation or contract 
issued or awarded by the Department of Defense for an end-use 
identified pursuant to paragraphs (e)(1), (2), or (4) of this section.
    (5) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category XI 
(a)(3) electronically scanned array radar excluded by Note 2) that are 
embedded in a larger system that is eligible to ship under this section 
(e.g., a ship or aircraft) must separately comply with any restrictions 
placed on that embedded defense article under this subchapter. The 
exporter must obtain a license or other authorization from the 
Directorate of Defense Trade Controls for the export of such embedded 
defense articles (for example, USML Category XI(a)(3) electronically 
scanned array radar systems that are exempt from this section that are 
incorporated in an aircraft that is eligible to ship under this section 
continue to require separate authorization from the Directorate of 
Defense Trade Controls for their export, transfer, reexport, or 
retransfer).
    (6) No liability shall be incurred by or attributed to the U.S. 
Government in connection with any possible infringement of privately 
owned patent or proprietary rights, either domestic or foreign, by 
reason of an export conducted pursuant to this section.
    (7) Sales by exporters made through the U.S. Government shall not 
include either charges for patent rights in which the U.S. Government 
holds a royalty-free license, or charges for information which the U.S. 
Government has a right to use and disclose to others, which is in the 
public domain, or which the U.S. Government has acquired or is entitled 
to acquire without restrictions upon its use and disclosure to others.
    (8) Defense articles on the European Union Dual Use List (as 
described in Annex 1 to EC Council Regulation No. 428/2009) are not 
eligible for export under the Defense Trade Cooperation Treaty between 
the United States and the United Kingdom. These articles have been 
identified and included in Supplement No.1 to part 126.
    (h) Transfers, Retransfers, and Reexports. (1) Any transfer of a 
defense article or defense service not exempted in Supplement No. 1 to 
part 126 of this subchapter by a member of the United Kingdom Community 
(see paragraph (d) of this section for specific information on the 
identification of the Community) to another member of the United 
Kingdom Community or the United States Community for an end-use that is 
authorized by this exemption (see paragraphs (e) and (f) of this 
section regarding authorized end-uses) is authorized under this 
exemption.
    (2) Any transfer or other provision of a defense article or defense 
service for an end-use that is not authorized by the exemption provided 
by this section is prohibited without a license or the prior written 
approval of the Directorate of Defense Trade Controls (see paragraphs 
(e) and (f) of this section regarding authorized end-uses).
    (3) Any retransfer or reexport, or other provision of a defense 
article or defense service by a member of the United Kingdom Community 
to a foreign person that is not a member of the United Kingdom 
Community, or to a U.S. person that is not a member of the United 
States Community, is prohibited without a license or the prior written 
approval of the Directorate of Defense Trade Controls (see paragraph 
(d) of this section for specific information on the identification of 
the United Kingdom Community).
    (4) Any change in the use of a defense article or defense service 
previously exported, transferred, or obtained under this exemption by 
any foreign person, including a member of the United Kingdom Community, 
to an end-use that is not authorized by this exemption is prohibited 
without a license or other written approval of the Directorate of 
Defense Trade Controls (see paragraphs (e) and (f) of this section 
regarding authorized end-uses).
    (5) Any retransfer, reexport, or change in end-use requiring such 
approval of the U.S. Government shall be made in accordance with Sec.  
123.9 of this subchapter.
    (6) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category XI 
(a)(3) electronically scanned array radar systems) that are embedded in 
a larger system that is eligible to ship under this section (e.g., a 
ship or aircraft) must separately comply with any restrictions placed 
on that embedded defense article unless otherwise specified. A license 
or other authorization must be obtained from the Directorate of Defense 
Trade Controls for the export, transfer, reexport, or retransfer or 
change in end-use of any such embedded defense article (for example, 
USML Category XI(a)(3) electronically scanned array radar systems that 
are excluded from this section by Supplement No. 1 to part 126, Note 2 
that are incorporated in an aircraft that is eligible to ship under 
this section continue to require separate authorization from the 
Directorate of Defense Trade Controls for their export, transfer, 
reexport, or retransfer).
    (7) A license or prior approval from the Directorate of Defense 
Trade Controls is not required for a transfer, retransfer, or reexport 
of an exported defense article or defense service under this section, 
if:
    (i) The transfer of defense articles or defense services is made by 
a member of the United States Community to United Kingdom Ministry of 
Defence elements deployed outside the Territory of the United Kingdom 
and engaged in an authorized end-use (see paragraphs (e) and (f) of 
this section regarding authorized end-uses) using United Kingdom Armed 
Forces transmission channels or the provisions of this section;
    (ii) The transfer of defense articles or defense services is made 
by a member of the United States Community to an Approved Community 
member (either U.S. or UK) that is operating in direct support of 
United Kingdom Ministry of Defence elements deployed outside the 
Territory of the United Kingdom and engaged in an authorized end-use 
(see paragraphs (e) and (f) of this section regarding authorized end-
uses) using United Kingdom Armed Forces transmission channels or the 
provisions of this section;
    (iii) The reexport is made by a member of the United Kingdom 
Community to United Kingdom Ministry of Defence elements deployed 
outside the Territory of the United Kingdom engaged in an authorized 
end-use (see paragraphs (e) and (f) of this section regarding 
authorized end-uses) using United Kingdom Armed Forces transmission 
channels or the provisions of this section;
    (iv) The reexport is made by a member of the United Kingdom 
Community to an Approved Community member (either U.S. or UK) that is 
operating in direct support of United Kingdom Ministry of Defence 
elements deployed outside the Territory of the United Kingdom engaged 
in an authorized end-use (see paragraphs (e)

[[Page 16604]]

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

[[Page 16605]]

associating the technical data with the appropriate markings as 
detailed in paragraph (j)(1)(i) and (ii) of this section; and
    (4) Defense services shall be accompanied by documentation 
(contracts, invoices, shipping bills, or bills of lading) clearly 
labeled with the appropriate identification detailed in paragraphs 
(j)(1) and (j)(2) of this section.
    (5) The exporter shall incorporate the following statement as an 
integral part of the bill of lading and the invoice whenever defense 
articles are to be exported:
    ``These U.S. Munitions List commodities are authorized by the U.S. 
Government under the U.S.-UK Defense Trade Cooperation Treaty for 
export only to United Kingdom for use in approved projects, programs or 
operations by members of the United Kingdom Community. They may not be 
retransferred or reexported or used outside of an approved project, 
program, or operation, either in their original form or after being 
incorporated into other end-items, without the prior written approval 
of the U.S. Department of State.''
    (k) Intermediate Consignees. (1) Unclassified exports under this 
section may only be handled by:
    (i) U.S. intermediate consignees who are:
    (A) Exporters registered with the Directorate of Defense Trade 
Controls and eligible;
    (B) Licensed customs brokers who are subject to background 
investigation and have passed a comprehensive examination administered 
by U.S. Customs and Border Protection; or
    (C) Commercial air freight and surface shipment carriers, freight 
forwarders, or other parties not exempt from registration under Sec.  
129.3(b)(3) of this subchapter, that are identified at the time of 
export as being on the U.S. Department of Defense Civil Reserve Air 
Fleet (CRAF) list of approved air carriers, a link to which is 
available on the Directorate of Defense Trade Controls Web site.
    (ii) United Kingdom intermediate consignees who are:
    (A) Members of the United Kingdom Community; or
    (B) Freight forwarders, customs brokers, commercial air freight and 
surface shipment carriers, or other United Kingdom parties that are 
identified at the time of export as being on the list of Authorized 
United Kingdom Intermediate Consignees, which is available on the 
Directorate of Defense Trade Controls Web site.
    (2) Classified exports must comply with the security requirements 
of the National Industrial Security Program Operating Manual (DoD 
5220.22-M and supplements or successors).
    (l) Records. (1) All exporters authorized pursuant to paragraph 
(b)(2) of this section who export pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
this section shall maintain detailed records of their exports, imports, 
and transfers made by that exporter of defense articles or defense 
services subject to the Defense Trade Cooperation Treaty between the 
United States and the United Kingdom and this section. Exporters shall 
also maintain detailed records of any reexports and retransfers 
approved or otherwise authorized by the Directorate of Defense Trade 
Controls of defense articles or defense services subject to the Defense 
Trade Cooperation Treaty between the United States and the United 
Kingdom and this section. These records shall be maintained for a 
minimum of five years from the date of export, import, transfer, 
reexport, or retransfer and shall be made available upon request to the 
Directorate of Defense Trade Controls or a person designated by the 
Directorate of Defense Trade Controls (e.g. the Diplomatic Security 
Service) or U.S. Immigration and Customs Enforcement, or U.S. Customs 
and Border Protection. Records in an electronic format must be 
maintained using a process or system capable of reproducing all records 
on paper. Such records when displayed on a viewer, monitor, or 
reproduced on paper, must exhibit a high degree of legibility and 
readability. (For the purpose of this section, ``legible'' and 
``legibility'' mean the quality of a letter or numeral that enables the 
observer to identify it positively and quickly to the exclusion of all 
other letters or numerals. ``Readable'' and ``readability'' means the 
quality of a group of letters or numerals being recognized as complete 
words or numbers.) These records shall consist of the following:
    (i) Port of entry/exit;
    (ii) Date of export/import;
    (iii) Method of export/import;
    (iv) Commodity code and description of the commodity, including 
technical data;
    (v) Value of export;
    (vi) Reference to this section and justification for export under 
the Treaty;
    (vii) End-user/end-use;
    (viii) Identification of all U.S. and foreign parties to the 
transaction;
    (ix) How the export was marked;
    (x) Security classification of the export;
    (xi) All written correspondence with the U.S. Government on the 
export;
    (xii) All information relating to political contributions, fees, or 
commissions furnished or obtained, offered, solicited, or agreed upon 
as outlined in paragraph (m) of this section;
    (xiii) Purchase order or contract;
    (xiv) Technical data actually exported;
    (xv) The Internal Transaction Number for the Electronic Export 
Information filing in the Automated Export System;
    (xvi) All shipping documentation (including, but not limited to the 
airway bill, bill of lading, packing list, delivery verification, and 
invoice); and
    (xvii) Statement of Registration (Form DS-2032).
    (2) Filing of export information. All exporters of defense articles 
under the Defense Trade Cooperation Treaty between the United States 
and the United Kingdom and this section must electronically file 
Electronic Export Information (EEI) using the Automated Export System 
citing one of the four below referenced codes in the appropriate field 
in the EEI for each shipment:
    (i) For exports in support of United States and United Kingdom 
combined military or counter-terrorism operations identify Sec.  
126.17(e)(1) (the name or an appropriate description of the operation 
shall be placed in the appropriate field in the EEI, as well);
    (ii) For exports in support of United States and United Kingdom 
cooperative security and defense research, development, production, and 
support programs identify Sec.  126.17(e)(2) (the name or an 
appropriate description of the program shall be placed in the 
appropriate field in the EEI, as well);
    (iii) For exports in support of mutually determined specific 
security and defense projects where the Government of the United 
Kingdom is the end-user identify 126.17(e)(3) (the name or an 
appropriate description of the project shall be placed in the 
appropriate field in the EEI, as well); or
    (iv) For exports that will have a U.S. Government end-use identify 
126.17(e)(4) (the U.S. Government contract number or solicitation 
number (e.g., ``U.S. Government contract number XXXXX'') shall be 
placed in the appropriate field in the EEI, as well). Such exports must 
meet the required export documentation and filing guidelines, including 
for defense services, of Sec. Sec.  123.22(a), (b)(1), and (b)(2) of 
this subchapter.
    (m) Fees and Commissions. All exporters authorized pursuant to 
paragraph (b)(2) of this section shall,

[[Page 16606]]

with respect to each export, transfer, reexport, or retransfer, 
pursuant to the Defense Trade Cooperation Treaty between the United 
States and the United Kingdom and this section, submit a statement to 
the Directorate of Defense Trade Controls containing the information 
identified in Sec.  130.10 of this subchapter relating to fees, 
commissions, and political contributions on contracts or other 
instruments valued in an amount of $500,000 or more.
    (n) Violations and Enforcement. (1) Exports, transfers, reexports, 
and retransfers that do not comply with the conditions prescribed in 
this section will constitute violations of the Arms Export Control Act 
and this subchapter, and are subject to all relevant criminal, civil, 
and administrative penalties (see Sec.  127.1 of this subchapter), and 
may also be subject to penalty under other statutes or regulations.
    (2) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers may take appropriate action to ensure 
compliance with this section as to the export or the attempted export 
of any defense article or technical data, including the inspection of 
loading or unloading of any vessel, vehicle, or aircraft.
    (3) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers have the authority to investigate, detain, 
or seize any export or attempted export of defense articles or 
technical data that does not comply with this section or that is 
otherwise unlawful.
    (4) The Directorate of Defense Trade Controls or a person 
designated by the Directorate of Defense Trade Controls (e.g., the 
Diplomatic Security Service) or U.S. Immigration and Customs 
Enforcement, or U.S. Customs and Border Protection may require the 
production of documents and information relating to any actual or 
attempted export, transfer, reexport, or retransfer pursuant to this 
section. Any foreign person refusing to provide such records within a 
reasonable period of time shall be suspended from the United Kingdom 
Community and ineligible to receive defense articles or defense 
services pursuant to the exemption under this section or otherwise.
    (o) Procedures for Legislative Notification. (1) Exports pursuant 
to the Defense Trade Cooperation Treaty between the United States and 
the United Kingdom and this section by any person identified in 
paragraph (b)(2) of this section shall not take place until 30 days 
after the Directorate of Defense Trade Controls has acknowledged 
receipt of a Form DS-4048 (entitled, ``Projected Sales of Major Weapons 
in Support of Section 25(a)(1) of the Arms Export Control Act'') from 
the exporter notifying the Department of State if the export involves 
one or more of the following:
    (i) A contract or other instrument for the export of major defense 
equipment in the amount of $25,000,000 or more, or for defense articles 
and defense services in the amount of $100,000,000 or more;
    (ii) A contract for the export of firearms controlled under 
Category I of the U.S. Munitions List of the International Traffic in 
Arms Regulations in an amount of $1,000,000 or more;
    (iii) A contract, regardless of value, for the manufacturing abroad 
of any item of significant military equipment; or
    (iv) An amended contract that meets the requirements of paragraphs 
(o)(1)(i) through (o)(1)(iii) of this section.
    (2) The Form DS-4048 required in paragraph (o)(1) of this section 
shall be accompanied by the following additional information:
    (i) The information identified in Sec.  130.10 and Sec.  130.11 of 
this subchapter;
    (ii) A statement regarding whether any offset agreement is final to 
be entered into in connection with the export and a description of any 
such offset agreement;
    (iii) A copy of the signed contract; and
    (iv) If the notification is for paragraph (o)(1)(ii) of this 
section, a statement of what will happen to the weapons in their 
inventory (for example, whether the current inventory will be sold, 
reassigned to another service branch, destroyed, etc.).
    (3) The Department of State will notify the Congress of exports 
that meet the requirements of paragraph (o)(1) of this section.

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PART 127--VIOLATIONS AND PENALTIES

0
25. The authority citation for part 127 is revised to read to as 
follows:

    Authority:  Secs. 2, 38, and 42, Public Law 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2791); E.O. 11958, 42 FR 4311; 3 CFR, 1977 
Comp., p. 79; 22 U.S.C. 401; 22 U.S.C. 2651a; 22 U.S.C. 2779a; 22 
U.S.C. 2780; Pub. L. 111-266.

0
26. Section 127.1 is revised to read as follows:


Sec.  127.1  Violations.

    (a) Without first obtaining the required license or other written 
approval from the Directorate of Defense Trade Controls, it is 
unlawful:
    (1) To export or attempt to export from the United States any 
defense article or technical data or to furnish or attempt to furnish 
any defense service for which a license or written approval is required 
by this subchapter;
    (2) To reexport or retransfer or attempt to reexport or retransfer 
any defense article, technical data, or defense service from one 
foreign end-user, end-use, or destination to another foreign end-user, 
end-use, or destination for which a license or written approval is 
required by this subchapter, including, as specified in Sec.  126.16(h) 
and Sec.  126.17(h) of this subchapter, any defense article, technical 
data, or defense service that was exported from the United States 
without a license pursuant to any exemption under this subchapter;
    (3) To import or attempt to import any defense article whenever a 
license is required by this subchapter; or
    (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.
    (b) It is unlawful:
    (1) To violate any of the terms or conditions of a license or 
approval granted pursuant to this subchapter, any exemption contained 
in this subchapter, or any rule or regulation contained in this 
subchapter;
    (2) To engage in the business of brokering activities for which 
registration and a license or written approval is required by this 
subchapter without first registering or obtaining the required license 
or written approval from the Directorate of Defense Trade Controls. For 
the purposes of this subchapter, engaging in the business of brokering 
activities requires only one occasion of engaging in an activity as 
reflected in Sec.  129.2(b) of this subchapter.
    (3) To engage in the United States in the business of either 
manufacturing or exporting defense articles or furnishing defense 
services without complying with the registration requirements. For the 
purposes of this subchapter, engaging in the business of manufacturing 
or exporting defense articles or furnishing defense services requires 
only one occasion of manufacturing or exporting a defense article or 
furnishing a defense service.
    (c) Any person who is granted a license or other approval or who 
acts pursuant to an exemption under this subchapter is responsible for 
the acts of employees, agents, and all authorized persons to whom 
possession of the defense article or technical data has been entrusted 
regarding the operation, use, possession, transportation, and handling 
of such defense article or technical data abroad. All persons abroad 
subject to U.S. jurisdiction who obtain temporary or permanent custody 
of a defense article exported from the United States or produced under 
an agreement described in part 124 of this subchapter, and irrespective 
of the number of intermediate transfers, are bound by the regulations 
of this subchapter in the same manner and to the same extent as the 
original owner or transferor.
    (d) A person with knowledge that another person is then ineligible

[[Page 16642]]

pursuant to Sec. Sec.  120.1(c) or 126.7 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) of this subchapter 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 
transaction which may involve any defense article or the furnishing of 
any defense service for which a license or approval is required by this 
subchapter or an exemption is available under this subchapter for 
export, where such ineligible person may obtain any benefit therefrom 
or have any direct or indirect interest therein.
    (e) No person may knowingly or willfully cause, or aid, abet, 
counsel, demand, induce, procure, or permit the commission of, any act 
prohibited by, or the omission of any act required by, 22 U.S.C. 2778 
and 2779, or any regulation, license, approval, or order issued 
thereunder.

0
27. Section 127.2 is amended by revising paragraphs (a), (b) 
introductory text, (b)(1), (b)(2), and adding (b)(14), to read as 
follows:


Sec.  127.2  Misrepresentation and omission of facts.

    (a) It is unlawful to use or attempt to use any export or temporary 
import control document containing a false statement or misrepresenting 
or omitting a material fact for the purpose of exporting, transferring, 
reexporting, retransferring, obtaining, or furnishing any defense 
article, technical data, or defense service. Any false statement, 
misrepresentation, or omission of material fact in an export or 
temporary import control document will be considered as made in a 
matter within the jurisdiction of a department or agency of the United 
States for the purposes of 18 U.S.C. 1001, 22 U.S.C. 2778, and 22 
U.S.C. 2779.
    (b) For the purpose of this subchapter, export or temporary import 
control documents include the following:
    (1) An application for a permanent export, reexport, retransfer, or 
a temporary import license and supporting documents.
    (2) Electronic Export Information filing.
* * * * *
    (14) Any other shipping document that has information related to 
the export of the defense article or defense service.

0
28. Section 127.3 is revised to read as follows:


Sec.  127.3  Penalties for violations.

    Any person who willfully:
    (a) Violates any provision of Sec.  38 or Sec.  39 of the Arms 
Export Control Act (22 U.S.C. 2778 and 2779) or any rule or regulation 
issued under either Sec.  38 or Sec.  39 of the Act, or any undertaking 
specifically required by part 124 of this subchapter; or
    (b) In a registration, license application, or report required by 
Sec.  38 or Sec.  39 of the Arms Export Control Act (22 U.S.C. 2778 and 
2779) or by any rule or regulation issued under either section, makes 
any untrue statement of a material fact or omits a material fact 
required to be stated therein or necessary to make the statements 
therein not misleading, shall upon conviction be subject to a fine or 
imprisonment, or both, as prescribed by 22 U.S.C. 2778(c).

0
29. Section 127.4 is amended by revising paragraphs (a) and (c), and 
adding paragraph (d), to read as follows:


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

    (a) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers may take appropriate action to ensure 
observance of this subchapter as to the export or the attempted export 
or the temporary import of any defense article or technical data, 
including the inspection of loading or unloading of any vessel, 
vehicle, or aircraft. This applies whether the export is authorized by 
license or by written approval issued under this subchapter or by 
exemption.
* * * * *
    (c) Upon the presentation to a U.S. Customs and Border Protection 
Officer of a license or written approval, or claim of an exemption, 
authorizing the export of any defense article, the customs officer may 
require the production of other relevant documents and information 
relating to the final export. This includes an invoice, order, packing 
list, shipping document, correspondence, instructions, and the 
documents otherwise required by the U.S. Customs and Border Protection 
or U.S. Immigration and Customs Enforcement.
    (d) If an exemption under this subchapter is used or claimed to 
export, transfer, reexport or retransfer, furnish, or obtain a defense 
article, technical data, or defense service, law enforcement officers 
may rely upon the authorities noted, additional authority identified in 
the language of the exemption, and any other lawful means or 
authorities to investigate such a matter.

0
30. Section 127.7 is amended by revising paragraph (a) to read as 
follows:


Sec.  127.7  Debarment.

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

0
31. Section 127.10 is amended by revising paragraph (a) to read as 
follows:


Sec.  127.10  Civil penalty.

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

0
32. Section 127.12 is amended by adding paragraph (b)(5), and revising 
paragraph (d), to read as follows:


Sec.  127.12  Voluntary disclosures.

* * * * *
    (b) * * *
    (5) Nothing in this section shall be interpreted to negate or 
lessen the affirmative duty pursuant to Sec. Sec.  126.1(e), 
126.16(h)(5), and 126.17(h)(5) of this subchapter upon persons to 
inform the Directorate of Defense Trade Controls of the actual or final 
sale, export, transfer, reexport, or retransfer of a defense article, 
technical data, or defense service to any country referred to in Sec.  
126.1 of this subchapter, any citizen of such

[[Page 16643]]

country, or any person acting on its behalf.
* * * * *
    (d) Documentation. The written disclosure should be accompanied by 
copies of substantiating documents. Where appropriate, the 
documentation should include, but not be limited to:
    (1) Licensing documents (e.g., license applications, export 
licenses, and end-user statements), exemption citation, or other 
authorization description, if any;
    (2) Shipping documents (e.g., Electronic Export Information filing, 
including the Internal Transaction Number, air waybills, and bills of 
laden, invoices, and any other associated documents); and
    (3) Any other relevant documents must be retained by the person 
making the disclosure until the Directorate of Defense Trade Controls 
requests them or until a final decision on the disclosed information 
has been made.
* * * * *

PART 129--REGISTRATION AND LICENSING OF BROKERS

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

    Authority:  Sec. 38, Pub. L. 104-164, 110 Stat. 1437, (22 U.S.C. 
2778).


0
34. Section 129.6 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  129.6  Requirements for license/approval.

* * * * *
    (b) * * *
    (2) Brokering activities that are 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.  129.7(a) of this 
subchapter, for which prior approval is always required.

0
35. Section 129.7 is amended by revising paragraphs (a)(1)(vii) and 
(a)(2) to read as follows:


Sec.  129.7  Prior approval (license).

    (a) * * *
    (1) * * *
    (vii) Foreign defense articles or defense services (other than 
those that are 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 (see Sec. Sec.  129.6(b)(2) and 129.7(a)).
    (2) Brokering activities involving defense articles or defense 
services covered by, or of a nature described by part 121, of this 
subchapter, in addition to those specified in Sec.  129.7(a), that are 
designated as significant military equipment under this subchapter, for 
or from any country not a member of the North Atlantic Treaty 
Organization, Australia, Israel, Japan, New Zealand, or the Republic of 
Korea whenever any of the following factors are present:
* * * * *

     Dated: March 16, 2012.
Rose Gottemoeller,
Acting Under Secretary, Arms Control and International Security, 
Department of State.
[FR Doc. 2012-6825 Filed 3-20-12; 8:45 am]
BILLING CODE 4710-25-P


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