Source: https://www.federalregister.gov/articles/2013/04/16/2013-08351/amendment-to-the-international-traffic-in-arms-regulations-initial-implementation-of-export-control
Timestamp: 2015-08-31 00:35:17
Document Index: 10022322

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Federal Register | Amendment to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reform
Dates: This rule is effective October 15, 2013.
-22759 (20 pages)
Shorter URL: https://federalregister.gov/a/2013-08351 Related Topics
Amendment to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reform 5 actions from November 7th, 2011 to October 15th, 2013
Published for Comment as 1400-AC96
Published for Comment as 1400-AC98
76 FR 76097
Published for Comment as 1400-AD22
The Department of State's full plan can be accessed at http://www.state.gov/documents/organization/181028.pdf.
The Directorate of Defense Trade Controls (DDTC), U.S. Department of State, administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120-130). The items subject to the jurisdiction of the ITAR, i.e.,“defense articles” and “defense services,” are identified on the ITAR's U.S. Munitions List (USML) (22 CFR 121.1). With few exceptions, items not subject to the export control jurisdiction of the ITAR are subject to the jurisdiction of the Export Administration Regulations (“EAR,” 15 CFR parts 730-774, which includes the Commerce Control List (CCL) in Supplement No. 1 to part 774), administered by the Bureau of Industry and Security (BIS), U.S. Department of Commerce. Both the ITAR and the EAR impose license requirements on exports, reexports, and retransfers. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR.
Revision of USML Category VIII Back to Top
This final rule revises USML Category VIII, covering aircraft and related articles, to establish a clearer line between the USML and the CCL regarding controls over these articles. The revised USML Category VIII narrows the types of aircraft and related articles controlled on the USML to only those that warrant control under the requirements of the AECA. Changes include moving similar articles controlled in multiple categories into a single category, including moving gas turbine engines for articles controlled in this category to the newly established USML Category XIX, described elsewhere in this notice, and CCL Export Control Classification Numbers (ECCNs) in the 9Y619 format, in a rule published separately by the Department of Commerce (see elsewhere in this issue of the Federal Register.) In addition, articles common to the Missile Technology Control Regime (MTCR) Annex and articles in this category are identified with the parenthetical “(MT)” at the end of each section containing such articles.
This rule also revises ITAR § 121.3 to more clearly define “aircraft” for purposes of the revised USML Category VIII.
The Department received numerous proposals for alternative definitions for aircraft and alternative phrasing for other sections of USML Category VIII and ITAR § 121.3. The Department has reviewed these recommendations with the objective of realizing the intent of the President's ECR Initiative. In certain instances, the regulation was amended or otherwise edited for fidelity to ECR objectives and for clarity.
Two commenting parties stated that referencing the ITAR § 121.3 definition of “aircraft” in USML Category VIII(a) while not doing so for USML Category VIII(h) is inconsistent and potentially confusing to the exporter. The Department notes that paragraph (h) is to control parts, components, accessories, attachments, and associated equipment regardless of whether the aircraft is controlled on the USML or the CCL. Therefore, a reference to ITAR § 121.3 in paragraph (h) would be inappropriate.
To address the concerns of two commenting parties that including “strategic airlift aircraft” in the definition of “aircraft” in ITAR § 121.3 would control on the USML aircraft more appropriately controlled on the CCL, the Department has added the phrase “with a roll-on/roll-off ramp” to further focus the control on military critical capabilities.
One commenting party recommended enumerating “tilt rotor aircraft” in USML Category VIII(a) and providing corresponding descriptive and defining text in ITAR § 121.3. The Department notes that this type aircraft is effectively covered in USML Category VIII(a)(11), and therefore did not amend the regulation to enumerate tilt rotor aircraft.
One commenting party recommended the term “armed,” as found in ITAR § 121.3(a)(3), be defined, to avoid ambiguity and regulatory overreach. Examples provided of articles potentially captured, but which the Department surely would not have intended to be captured, are aircraft “armed” with water cannons or paintball guns. While the term “armed” is gainfully employed in many contexts, it is the Department's opinion that in the context of defense trade, “armed” can be understood in its plain English meaning. One dictionary consulted by the Department defined “armed” as “furnished with weapons.” Another dictionary provides “having weapons” as the primary meaning. Yet another defined it as “equipped with weapons.” The Department notes the consensus on the meaning of “armed,” and has no quibble or concern with it.
One commenting party recommended the word “equipped” be removed from USML Category VIII(a)(11), and the terms “incorporated” and “integrated” be used in its place, on the grounds that “equipped” is “overly expansive” and inconsistent with terminology used elsewhere in the rule. The Department accepts this comment and has replaced “equipped” with “incorporates,” the term used in ITAR § 121.3(a)(6).
One commenting party recommended that Optionally Piloted Vehicles (OPV) without avionics and software installed that would allow the aircraft to be flown unmanned should be considered manned for purposes of the USML. The Department has clarified the control for OPVs at USML Category VIII(a)(13) and ITAR § 121.3(a)(7).
One commenting party voiced concern over the potential “chilling effect” of controlling on the USML the products of Department of Defense-funded fundamental research. USML Category VIII(f) provides for the control of developmental aircraft and specially designed parts, components, accessories, and attachments therefor developed under a contract with the Department of Defense. For the final rule, the Department has added a note to USML Category VIII(f) providing for developmental aircraft to be “subject to the EAR” (see definition of this term in this rule) if a commodity jurisdiction request leads to such a determination or if the relevant Department of Defense contract stipulates the aircraft is being developed for both civil and military applications. The Department draws a distinction between developmental aircraft developed under a contract funded by the Department of Defense and the conduct of fundamental research. “Fundamental research” is defined at ITAR § 120.11(a)(8). Pursuant to that section, research is not “fundamental research” if the results are restricted for proprietary reasons or specific U.S. Government access and dissemination controls, the researchers accept other restrictions on publication of information resulting from the activity, or the research is funded by the U.S. Government and specific access and dissemination controls protecting information resulting from the research are applicable. Fundamental research—i.e., research without the aforementioned restrictions—is in the public domain, even if funded by the U.S. Government. A few other commenting parties voiced concerns with the scope of this control; the Department intends the answer provided here to address those concerns.
Three commenting parties recommended the defining criteria of “aircraft” in ITAR § 121.3 be included in USML Category VIII. The Department notes Category VIII and ITAR § 121.3 serve different purposes, with the former providing the control parameters and the latter providing the definition of the main articles controlled in Category VIII. Therefore, the Department did not accept this recommendation.
The Department accepted the recommendation of one commenting party to provide a definition for the term “equipment.” A proposed definition has been published by the Department (see “ Amendment to the International Traffic in Arms Regulations: Revision of U.S. Munitions List Category XI and Definition for `Equipment,' ” 77 FR 70958).
One commenting party recommended the Department allow for public comment on a revised USML Category VIII again once a final definition of specially designed is published because analysis of and concerns with USML Category VIII were premised on the definition of specially designed as provided in the proposed rule. Three other commenting parties expressed similar concerns. The Department disagrees with this argument. The extent to which articles are controlled on the USML pursuant to application of the specially designed definition is reflective of the definition itself, and not the controls as provided in USML Category VIII, or any of the other USML categories. Therefore, the Department did not accept this recommendation.
Establishment of USML Category XIX for Gas Turbine Engines and Associated Equipment Back to Top
One commenting party noted potential confusion between USML Categories IV and XIX regarding engine controls, and the need to update ITAR § 121.16 to account for changes in those controls. In line with a major goal of ECR, the Department is revising the categories to make clearer which articles they control. USML Category IV will, to use examples provided by the commenting party, control ramjets and scramjets. In addition, the Department will discontinue identifying those articles common to the USML and the Missile Technology Control Regime Annex in ITAR § 121.16, and instead identify those articles with the parenthetical “(MT)” at the end of each USML category section containing such articles.
One commenting party requested clarification of the controls for printed circuit boards designed for USML articles, and their related designs or digital data. Printed circuit boards “specially designed” (see definition of this term in this rule) for articles in USML Category XIX, as well as for articles in all other USML categories, are controlled in USML Category XI and their related designs or digital data are controlled as technical data, per ITAR § 120.10. However, the Department does not consider printed circuit boards themselves to be technical data. The Department notes that printed circuit boards are to be enumerated in the revised USML Category XI. In the meantime, as noted elsewhere in this notice, USML Category VIII and Category XIX contain a temporary enumeration of printed circuit boards.
Three commenting parties recommended revising USML Category XIX(d) to describe the technologies of concern and not list specific engine families in the regulation because, over time, the listing would capture obsolete engines or not include engines that merit control as defense articles. The Department deems it appropriate to enumerate these engines, as they are used specifically in USML-controlled platforms or share critical technologies with such engines. The Department will amend the regulations as necessary to keep the category updated, and therefore did not accept this recommendation.
Definition for “Specially Designed” Back to Top
Paragraph (a)(1) is limited by the phrase, “if, as a result of development.” The definition also includes a note to paragraph (b)(3) that contains the following definition of “development” for purposes of the specially designed definition: “ `Development' is related to all stages prior to serial production, such as: design, design research, design analyses, design concepts, assembly and testing of prototypes, pilot production schemes, design data, process of transforming design data into a product, configuration design, integration design, layouts.” Therefore, a defense article is caught by the threshold requirement of paragraph (a) only if someone is engaged in any of these “development” activities with respect to the article at issue. Thus one may ask the following to determine if a defense article is within the scope of paragraph (a)(1): Does the commodity or software, as a result of development, have properties peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or functions described in the relevant USML paragraph? If the answer is “no,” then the commodity or software is not specially designed and further analysis pursuant to paragraph (b) is not necessary. If the answer is “yes,” then the exporter or reexporter must determine whether any one of the five exclusions in paragraph (b) of the definition applies. If any one of the five paragraph (b) exclusions applies, then the commodity or software is not specially designed. If none does, then the commodity or software is specially designed.
Paragraph (a)(2) has been revised to incorporate the proposed paragraph (a)(3) as follows: “(2) is a part (see§ 121.8(d) of this subchapter), component (see§ 121.8(b) of this subchapter), accessory (see§ 121.8(c) of this subchapter), attachment (see§ 121.8(c) of this subchapter), or software for use in or with a defense article.” The Department realizes this element is similar to paragraph (a)(1), but believes it needs to be listed separately because not all descriptions of parts and components on the USML include performance levels, characteristics, or functions as a basis for control. Thus one may ask the following to determine if a defense article is within the scope of paragraph (a)(2): Is the part, component, accessory, attachment, or software for use in or with a defense article? If the answer is “no,” then the commodity or software is not specially designed and further analysis pursuant to paragraph (b) is not necessary. If the answer is “yes,” then the exporter or reexporter must determine whether any one of the five exclusions in paragraph (b) of the definition applies. If any one does apply, then the commodity or software is not specially designed. If none does, then the commodity or software is specially designed.
Paragraph (a)(2) is broad enough to capture all the defense articles that would be potentially specially designed, but in practice would capture a larger set of parts, components, accessories, attachments, and software than is intended. Paragraph (b) works to release from inclusion under specially designed specific and non-specific parts, components, accessories, attachments, and software consistent with existing U.S. export control and international commitments. Specifically, any part, component, accessory, attachment, or software described in an exclusion paragraph under (b)(1), (b)(2), (b)(3), (b)(4), or (b)(5), would not be controlled by a USML “catch-all” paragraph. In this way, paragraphs (a) and (b) are inextricably linked and are intended to work together to identify the parts, components, accessories, attachments, and software that need to be treated as specially designed for purposes of the “catch-all” provisions on the USML.
Paragraph (b) codifies the principle in ITAR § 120.3 that, in general, a commodity should not be ITAR controlled if it has a predominant civil application or has performance equivalent (defined by form, fit, and function) to a commodity used for civil applications. If such a commodity warrants control under the ITAR because it provides the United States with a critical military or intelligence advantage or for another reason, then it is or should be enumerated on the USML.
Paragraph (a) creates more objective tests for what defense articles are specially designed based on the criteria identified in (a)(1) or (a)(2). Paragraph (b) creates more objective tests for which parts, components, accessories, attachments, and software are excluded from specially designed under the exclusion criteria identified in (b)(1), (b)(2), (b)(3), (b)(4) or (b)(5). The objective criteria identified in paragraph (a), working with the objective exclusion criteria identified in paragraph (b), allow this specially designed definition to achieve the nine objectives for the definition (see“Proposed Revisions to the Export Administration Regulations (EAR): Control of Items the President Determines No Longer Warrant Control under the United States Munitions List (USML),” 76 FR 41958).
Six commenting parties expressed concern about the relation of specially designed with the current text in ITAR § 120.3. The commenting parties recommended revising ITAR § 120.3 to be consistent with the definition of specially designed and the revision of the USML into a positive list. The Department accepted this recommendation and provides a revised ITAR § 120.3 as part of this final rule.
One commenting party requested confirmation of the intention to remove any perceived obligation on the part of a manufacturer to monitor post-release sales, and to confirm that a first sale to or predominant use by military end-users will not confer specially designed status on an article. The Department confirms this intention and has revised ITAR § 120.3 accordingly. In addition, the Department believes that appropriate application of the specially designed definition will not capture those articles that do not warrant USML control.
One commenting party recommended ITAR § 120.41(a) should specify what type of commodity (i.e., part, component, or end-item) should be considered specially designed if it is “in development.” The Department accepted this recommendation and revised ITAR § 120.41(a) accordingly.
One commenting party recommended reconsideration of limiting the term “development” (and thus “specially designed”) to the phase prior to serial production, noting a manufacturer could theoretically design a lesser capability item and then institute a post-production design change to avoid an article being defined as specially designed. This recommendation was accepted in part. The revised Note 3 to ITAR § 120.41(b)(3) addresses this concern.
Four commenting parties requested confirmation that application of specially designed will not reverse existing commodity jurisdiction (CJ) determinations and recommended revision of the definition to so stipulate. The Department accepted this recommendation and has revised ITAR § 120.41(b)(1) accordingly.
One commenting party recommended adding the words “tooling and test and support equipment” to both Note 2 and the lead-in sentence to paragraph (b) to exclude simple tooling and equipment (e.g., wrenches, winches, dollies). The Department did not accept this recommendation. Tooling and test and support equipment are only controlled if specifically enumerated on the USML. The B group of the new 600 series (e.g., ECCN 9B610) on the CCL should be reviewed for potential controls on tooling and test and support equipment. In response to the query of one commenting party, the Department confirms that, as is noted in Note 1 to the definition, if a commodity is enumerated on the USML it is ITAR-controlled even if it described on the CCL.
One commenting party noted the application of the “as a result of `development' ” standard in the proposed definition is limited by the principle that it will only apply to enumerated items. For this reason, it is essential for Government and the private sector to understand how the “as a result of development” standard works when applied to the 600 series in subparagraph “.y.” The Department agrees with this comment and revised ITAR § 120.41(a) to apply the “as a result of development” standard to ITAR § 120.41(a)(1) and not the broader “catch-all” in ITAR § 120.41(a)(2).
One commenting party discussed its interpretation of the impact the specially designed definition will have on the control of forgings, castings, machined bodies, etc., destined for aircraft or other defense articles. ITAR § 121.10 continues to apply in determining the appropriate controls for these articles.
One commenting party expressed concern that ITAR § 120.41(a) (and its “as a result of `development' ” standard) and ITAR § 120.41(b)(3) of the definition, when taken together, appear to mean that only commercial off the shelf (“COTS”) items with no changes in form or fit are released from the definition of specially designed. The Department revised the paragraphs in question to address this concern because the Department did not intend such a conclusion to be an implication of the definition.
One commenting party requested clarification on the order of review for USML jurisdiction determination using existing criteria and the specially designed definition. The Department accepted this recommendation and has moved the guidance in the preamble to the specially designed definition provided in the proposed rule to a revised ITAR § 121.1, which is included in this final rule. This revised section also provides guidance on the composition of a category and order of review.
Three commenting parties recommended the word “commodity” in ITAR § 120.41(a)(1) refer to the same universe of items as the word “item” in the same section of the Department of Commerce's definition for specially designed. The commenting parties further requested the term “commodity” explicitly include technology, technical data and assistance, and software. The Department accepted this recommendation in part by including the term “software” in ITAR § 120.41(a).
One commenting party recommended the addition of a note to ITAR § 120.41(a)(1) that would include examples of when an item is not covered. The Department did not accept this recommendation. The Department believes the revised, more “positive,” USML categories is the appropriate starting point for determining whether an article is covered by the USML. The provisions of examples in the negative would negate the purpose of a positive list.
One commenting party recommended that changes in dimension, material, coatings, or lubricants to an otherwise excluded item (aircraft fasteners in particular) that do not result in low-observable capability should remain excluded. The Department did not accept this comment. The revisions to ITAR § 120.41(b)(2) and (b)(3) should provide the necessary clarification.
The Department has revised ITAR § 120.41(b) and added an additional note to ITAR § 120.41(b)(3) in response to several commenting parties' recommendations to more specifically address the issue of minor modifications to a commodity. The concerns centered on changes to “fit” and “form” that have no bearing on changes to the “function” of a commodity. The Department added the term “equivalent” to ITAR § 120.41(b)(3) to account for a commodity whose form was modified solely for fit purposes.
One commenting party noted that limiting ITAR § 120.41(b)(2) to single, unassembled parts will result in continued ITAR licensing of minor components that do not meet the requirements for exclusion. The commenting party recommended including in ITAR § 120.41(b)(2) “small assemblies and components of a type commonly used in multiple types of commodities.” The Department did not accept this recommendation because the proposed change would make the “release” too broad and would create the potential for multiple interpretations of the same set of facts.
One commenting party recommended removing as a criterion in ITAR § 120.41(b)(3) the issue of whether a part, component, accessory, or attachment is in production. The Department did not accept this recommendation. Whether a commodity is in development or production is an important factor. The inclusion of this criterion is meant to implement the purpose of ITAR § 120.3 but without imposing the “predominant” standard, which is difficult or impossible for many exporters to know or to stay current with as military and civil markets change over the lifecycle of a product.
One commenting party recommended clarification of the terms “form” and “fit.” The Department accepted this recommendation, and includes a revised ITAR § 120.4 addressing this matter in this final rule.
The Department did not accept the recommendation of one commenting party to remove the term “serial production” in Note 1 to ITAR § 120.41(b)(3) because this term is not expressly used in that paragraph. The definition of “production” in Note 1 is the EAR definition, which includes the concept of “serial production.” “Production” is not defined in the ITAR therefore the Department is providing the EAR definition for the purposes of consistency between the USML and CCL versions of the term specially designed.
One commenting party recommended the definitions for the terms “production” and “development” in Notes 1 and 2 to ITAR § 120.41(b)(3) apply to the entire ITAR and not just to the specially designed definition. The Department did not accept this recommendation. While the adoption of the specially designed definition necessitated the defining of the terms “production” and “development,” the adoption of the definitions for those terms outside of the specially designed definition was beyond the scope of this review.
One commenting party stated that discriminating between the classifications of “production” and “development” for commodities in “production” that are undergoing “development” was unclear, as described in Note 3 to ITAR § 120.41(b)(3), and requested clarification. The Department has accepted this recommendation and has revised Note 3.
One commenting party requested clarification that the intent of ITAR § 120.41(b)(3) is to provide the same function as the note to USML Category VIII (the “Section 17(c) rule”) and that its scope extends beyond USML Category VIII. The Department confirms this understanding.
One commenting party requested revision of ITAR § 120.41(b)(4) to specifically provide that once an item or commodity is determined to be excluded from a “catch-all” provision, the determination remains effective after the item or commodity has entered the marketplace. Although the Department agrees there is no need to revisit a determination made pursuant to ITAR § 120.41(b)(4), it did not revise the regulations in this regard. The Department believes such a revision is unnecessary.
One commenting party noted the difficulty an exporter may have in applying ITAR § 120.41(b)(4) because he may not have knowledge of what the original developer's market expectations were at the time of development. The Department notes exporters would generally use ITAR § 120.41(b)(3) to determine the applicability of specially designed in such cases because its application does not depend upon knowledge of a developer's intent. Developers and manufacturers would generally be the parties to use ITAR § 120.41(b)(4), although (b)(4) would not preclude a developer or manufacturer from informing other exporters of the applicability of the (b)(4) exclusion. In addition, the Department added a new note to ITAR § 120.41(b)(4) and (b)(5) regarding “knowledge” to address the underlying concern of the comment.
One commenting party expressed concern with the effect the specially designed definition would have on the control over fundamental research. In particular, the concern was with ITAR § 120.41(b)(5), as the commenting party believes it is not reasonable for there to be development of a part, component, accessory, or attachment with no reasonable expectation of use for a particular application. The definition of “fundamental research” contained in ITAR § 120.11 is not changed by the definition of specially designed. The Department has revised ITAR § 120.41(b)(5) to more accurately describe the intent of that exclusion. In particular, it has replaced the phrase “reasonable expectation” with “knowledge” and added a definition of “knowledge” to a new note to ITAR § 120.41(b)(4) and (b)(5). This addresses the instance when research or other knowledge indicates a potential market for an un-enumerated mechanical function or electronic function but does not indicate whether the future buyers will use the function for a civil application, a military application, or both, which was the concern of another commenting party.
The Department accepted one commenting party's recommendation to remove the note to ITAR § 120.41(b)(5), agreeing with the observation that it was redundant.
Transition Plan Back to Top
USML categories will have a new (x) paragraph, the purpose of which is to allow for ITAR licensing for commodities, software, and technical data subject to the EAR, provided those commodities, software, and technical data are to be used in or with defense articles controlled on the USML and are described in the purchase documentation submitted with the application.
The Department first presented for public comment its plan for licensing policies and procedures regarding items moving from the export jurisdiction of the Department of State to the Department of Commerce on June 21, 2012 (see“Export Control Reform Transition Plan,” 77 FR 37346). The comment period ended August 6, 2012. Seventeen parties filed comments during the established comment period recommending changes. The Department's evaluation of the written comments and recommendations follows.
Five commenting parties recommended that existing reexport/retransfer authorizations should be grandfathered without expiration. Foreign parties who purchased transitioned items under authorizations that allowed perpetual foreign sales should not have to reauthorize those sales and the U.S. Government should not re-review the authorizations. The Department accepted this recommendation and revised the guidance accordingly. The three scenarios for which this applies are: 1) reexport/retransfer authority granted through a program status DSP-5; 2) the sales territory of a manufacturing license or warehouse and distribution agreement if the agreement continues to be the export authority; and 3) any stand-alone reexport/retransfer authorization received pursuant to ITAR § 123.9(c).
Two commenting parties recommended requiring U.S. exporters to identify ECCNs and prior USML classifications on export documentation for two years following the effective date of transitioned items and mandate prompt responses to requests for ECCNs for legacy items. The Department accepted this recommendation in part. The Department has revised ITAR § 123.9(b) to require identification of the license or other approval to the foreign party.
After consideration of the comments received, and in furtherance of the principles of ECR, the Department has decided to institute a new permanent licensing procedure that will allow ITAR licensing for commodities, software, and technical data subject to the EAR, provided those commodities, software, and technical data are to be used in or with defense articles controlled on the USML and are described in the purchase documentation submitted with the application. This procedure is to be effected by the exporter by use of “(x) paragraph,” added to USML Categories VIII and XIX in this rule, and to be added to other USML categories as they are revised. The Department will begin accepting licenses citing a (x) paragraph entry once the 180-day transition period is effective for the related USML category. The President has provided for this delegation of authority from the Secretary of Commerce to the Secretary of State, and Executive Order 13222 has been amended accordingly (see 78 FR 16129). The Department has revised various sections of, and added certain sections to, the ITAR to accommodate this delegation of authority: ITAR § 120.5 to add a new paragraph (b) to address the delegation; the addition of ITAR § 120.42 to provide a definition of “subject to the EAR”; ITAR § 123.1 to provide guidance on how to use the (x) paragraph; and ITAR § 123.9(b) to identify additional requirements when using the (x) paragraph. The Department of Commerce will have the authority to review “pre-positioned” license applications during the 180-day transition period for items transitioning to EAR jurisdiction. This means the Department of Commerce will be able to review and process license applications for transitioning items. However, these Department of Commerce licenses would not be issued until on or after the effective date of the relevant final rule moving items from the USML to the CCL. Further guidance is provided in the Department of Commerce's companion to this rule (see“Revision to the Export Administration Regulations: Initial Implementation of Export Control Reform,” elsewhere in this edition of the Federal Register).
All reporting requirements for Manufacturing License Agreements under ITAR § 124.9(a)(6) and Warehouse and Distribution Agreements under ITAR § 124.14(c)(6) must be complied with and such reports must be submitted to the Department of State while the agreement is relied upon as an export authorization by the exporter.
If reexport or retransfer was previously authorized under a DDTC authorization, then that reexport or retransfer authority remains valid. The three scenarios for which this applies are: 1) reexport/retransfer authority granted through a program status DSP-5; 2) the sales/distribution territory of a manufacturing license or warehouse and distribution agreement if the agreement continues to provide the export authority; or 3) any stand-alone reexport/retransfer authorization received pursuant to ITAR § 123.9.
License holders may decide to apply for and use Department of Commerce authorizations for export of the newly transitioned CCL items rather than continue to use previously issued Department of State authorizations. In such cases, license holders must return the Department of State licenses in accordance with ITAR § 123.22 after they have obtained the required Department of Commerce authorizations.
Additional Required Changes Back to Top
The Department has revised ITAR § 120.2 to specify the method by which changes are made to the U.S. Munitions List.
The Department has revised ITAR § 120.3 to more accurately describe the policy used in completing the revisions to the USML categories and to account for the definition of specially designed. In concert with this change, the Department also revised ITAR § 120.4(d) to reflect the policy and provide instruction on applying the terms “form,” “fit,” “function,” and “performance capability.”
Pursuant to amendment to Executive Order 13222 and upon agreement of the Secretaries of State and Commerce, the Department amended ITAR § 120.5 to provide for ITAR licensing of items subject to the EAR, provided these items meet certain criteria provided in amended ITAR § 123.1. In addition, a definition for the term “subject to the EAR” is established in § 120.42.
With the adoption of the new definition of specially designed, the Department has revised USML Category XXI and ITAR § 121.8(g) to remove the phrases, “specifically designed, developed, configured, adapted, or modified for military purposes” and “specifically designed, modified or adapted.”
The Department has revised ITAR § 121.1 to incorporate a portion of the instruction included in the specially designed definition included in the proposed rule in a revised introduction to the USML. The revised introduction also includes further guidance on use of the USML.
The Department has revised ITAR § 121.10 for forgings, castings, and machined bodies for consistency with the CCL and the Wassenaar Arrangement.
Sections 120.29 and 121.1(c) are revised to update the information provided on the Missile Technology Control Regime (MTCR) Annex and to introduce the new method of identifying articles common to the MTCR Annex and the USML. Section 121.2 is revised to remove reference to ITAR § 121.16. Once all revised USML categories are published as final rules, ITAR § 121.16 will be placed in reserve, and the parenthetical “(MT)” will be used at the end of each USML section containing such articles.
The Department has revised ITAR § 123.9(b) to update the destination control statement to require the inclusion of the license number or exemption citation and clarify the need for all parties to the transaction to obtain this information. As well, it requires applicants using paragraph (x) of the revised USML categories to provide additional information to the foreign parties regarding the jurisdiction of items exported pursuant to paragraph (x). These changes are necessary to ensure industry compliance with the correct licensing authority.
Adoption of Proposed Rules and Other Changes Back to Top
List of Subjects in 22 CFR Parts 120, 121, and 123 Back to Top
1.The authority citation for part continues to read as follows: Authority:
Sections 2, 38, and 71, 90, 90 Stat. 744 (22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; 22 U.S.C. 2651a; Pub. L. 105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L. 112-239; E.O. 13637, 78 FR 16129.
2.Section 120.2 is revised to read as follows: § 120.2 Designation of defense articles and defense services.
The Arms Export Control Act (22 U.S.C. 2778(a) and 2794(7)) provides that the President shall designate the articles and services deemed to be defense articles and defense services for purposes of import or export controls. The President has delegated to the Secretary of State the authority to control the export and temporary import of defense articles and services. The items designated by the Secretary of State for purposes of export and temporary import control constitute the U.S. Munitions List specified in part 121 of this subchapter. Defense articles on the U.S. Munitions List specified in part 121 of this subchapter that are also subject to permanent import control by the Attorney General on the U.S. Munitions Import List enumerated in 27 CFR part 447 are subject to temporary import controls administered by the Secretary of State. Designations of defense articles and defense services are made by the Department of State with the concurrence of the Department of Defense. The scope of the U.S. Munitions List shall be changed only by amendments made pursuant to section 38 of the Arms Export Control Act (22 U.S.C. 2778). For a designation or determination on whether a particular item is enumerated on the U.S. Munitions List, see§ 120.4 of this subchapter.
3.Section 120.3 is revised to read as follows: § 120.3 Policy on designating or determining defense articles and services on the U.S. Munitions List.
(a) For purposes of this subchapter, a specific article or service may be designated a defense article (see§ 120.6 of this subchapter) or defense service (see§ 120.9 of this subchapter) if it:
(1) Is determined to be under the jurisdiction of another department or agency of the U.S. Government (see§ 120.5 of this subchapter) pursuant to a commodity jurisdiction determination (see§ 120.4 of this subchapter) unless superseded by changes to the U.S. Munitions List or by a subsequent commodity jurisdiction determination; or
(2) Meets one of the criteria of § 120.41(b) of this subchapter when the article is used in or with a defense article and specially designed is used as a control criteria (see§ 120.41 of this subchapter).
Note to § 120.3:
4.Section 120.4 is amended by revising paragraph (d) to read as follows: § 120.4 Commodity jurisdiction.
5.Section 120.5 is revised to read as follows: § 120.5 Relation to regulations of other agencies.
(a) If a defense article or service is covered by the U.S. Munitions List set forth in this subchapter, its export and temporary import is regulated by the Department of State (see also § 120.2 of this subchapter). The President has delegated the authority to control defense articles and services for purposes of permanent import to the Attorney General. The defense articles and services controlled by the Secretary of State and the Attorney General collectively comprise the U.S. Munitions List under the Arms Export Control Act (AECA). As the Attorney General exercises independent delegated authority to designate defense articles and services for purposes of permanent import controls, the permanent import control list administered by the Department of Justice has been separately labeled the U.S. Munitions Import List (27 CFR part 447) to distinguish it from the list set out in this subchapter. In carrying out the functions delegated to the Attorney General pursuant to the AECA, the Attorney General shall be guided by the views of the Secretary of State on matters affecting world peace and the external security, and foreign policy of the United States. The Department of Commerce regulates the export, reexport, and in-country transfer of items on the Commerce Control List (CCL) and other items subject to its jurisdiction, as well as the provision of certain proliferation activities, under the Export Administration Regulations (EAR) (15 CFR parts 730 through 774). For the relationship of this subchapter to regulations of the Department of Energy and the Nuclear Regulatory Commission, see§ 123.20 of this subchapter.
(b) A license or other approval from the Department of State granted in accordance with this subchapter may also authorize the export of items subject to the EAR (see§ 120.42 of this subchapter). Separate approval from the Department of Commerce is not required for these items when approved for export under a Department of State license or other approval. Those items subject to the EAR exported pursuant to a Department of State license or other approval would remain under the jurisdiction of the Department of Commerce for any subsequent transactions. The inclusion of items subject to the EAR on a Department of State license or approval does not change the jurisdiction of the items. (See§ 123.1(b) of this subchapter for guidance on identifying items subject to the EAR in a license application to the Department of State.)
6.Section 120.10 is amended by revising paragraphs (a)(2) through (4) and re-designating paragraph (a)(5) as paragraph (b) and revising it to read as follows: § 120.10 Technical data.
(4) Software as defined in § 121.8(f) of this subchapter directly related to defense articles.
(b) The definition in paragraph (a) of this section does not include information concerning general scientific, mathematical or engineering principles commonly taught in schools, colleges and universities or information in the public domain as defined in § 120.11. It also does not include basic marketing information on function or purpose or general system descriptions of defense articles.
7.Section 120.29 is revised to read as follows: § 120.29 Missile Technology Control Regime.
(c) List of all items on the MTCR Annex. Section 71(a) of the Arms Export Control Act (22 U.S.C. 2797) refers to the establishment as part of the U.S. Munitions List of a list of all items on the MTCR Annex, the export of which is not controlled under Section 6(1) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(1)), as amended. MTCR Annex items specified in the U.S. Munitions List shall be identified in § 121.16 of this subchapter or annotated by the parenthetical “(MT)” at the end of each applicable paragraph.
8.Section 120.41 is added to read as follows: § 120.41 Specially designed.
(a) Except for commodities or software described in paragraph (b) of this section, a commodity or software (see§ 121.8(f) of this subchapter) is “specially designed” if it:
(2) Is a part (see§ 121.8(d) of this subchapter), component (see§ 121.8(b) of this subchapter), accessory (see§ 121.8(c) of this subchapter), attachment (see§ 121.8(c) of this subchapter), or software for use in or with a defense article.
For the purpose of this definition, “knowledge” includes not only the positive knowledge a circumstance exists or is substantially certain to occur, but also an awareness of a high probability of its existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person and is also inferred from a person's willful avoidance of facts.
9.Section 120.42 is added to read as follows: § 120.42 Subject to the Export Administration Regulations (EAR).
Items “subject to the EAR” are those items listed on the Commerce Control List in part 774 of the EAR and all other items that meet the definition of that term in accordance with § 734.3 of the EAR. The EAR is found at 15 CFR parts 730 through 774.
10.The authority citation for part 121 is revised to read as follows: Authority:
11.Section 121.1 is amended by revising paragraphs (a) through (c), U.S. Munitions List Category VIII, Category XVII, Category XIX, and Category XXI, and adding paragraphs (d) and (e), to read as follows: § 121.1 General. The United States Munitions List.
(2) Composition of an entry. Within each U.S. Munitions List category, defense articles are enumerated by an alpha paragraph designation. These designations may include subparagraph(s) to further define the enumerated defense article. Each U.S. Munitions List category starts with end-platform designations followed by major systems and equipment, and parts, components, accessories, and attachments. Most U.S. Munitions List categories contain an entry on technical data (see§ 120.10 of this subchapter) and defense services (see§ 120.9 of this subchapter) related to the enumerated defense articles of that U.S. Munitions List category.
(3) Significant Military Equipment. An asterisk may precede an entry in a U.S. Munitions List category. The asterisk means the enumerated defense article is deemed to be “Significant Military Equipment” to the extent specified in § 120.7 of this subchapter. The asterisk is placed as a convenience to help identify such defense articles. Note that technical data directly related to the manufacture or production of any defense articles enumerated in any category designated as Significant Military Equipment (SME) is also designated as SME.
(c) Missile Technology Control Regime (MTCR) Annex. Inclusion in § 121.16 of this subchapter, or annotation with the parenthetical “(MT)” at the end of a U.S. Munitions List paragraph, indicates those defense articles and defense services that are on the MTCR Annex. See§ 120.29 of this subchapter.
(d) Specially Designed. When applying the definition of specially designed (see§ 120.41 of this subchapter), follow the sequential analysis set forth as follows:
(2) if your commodity or software is not enumerated on the U.S. Munitions List, it may be controlled because of a specially designed control parameter. If so, begin any analysis with § 120.41(a) and proceed through each subsequent paragraph. If a commodity or software would not be controlled as a result of the application of the standards in § 120.41(a), then it is not necessary to work through § 120.41(b).
(3) if a commodity or software is controlled as a result of § 120.41(a), then it is necessary to continue the analysis and to work through each of the elements of § 120.41(b).
(4) commodities or software described in any § 120.41(b) subparagraph are not specially designed commodities or software controlled on the U.S. Munitions List, but may be subject to the jurisdiction of another U.S. Government regulatory agency (see§ 120.5 of this subchapter).
(a) Aircraft (see§ 121.3 of this subchapter) as follows:
Paragraph VIII(f) does not control developmental aircraft and specially designed parts, components, accessories, and attachments therefor (a) determined to be subject to the EAR via a commodity jurisdiction determination (see§ 120.4 of this subchapter) or (b) identified in the relevant Department of Defense contract as being developed for both civil and military applications.
(vi) maintain structural integrity at stagnation pressures greater than 6,000 pounds per square foot; or (vii) withstand a combined thermal shock greater than 4.184 x 10
accompanied by a peak overpressure of greater than 50 kPa (MT for radomes meeting this criteria);
(i) Technical data (see§ 120.10 of this subchapter) and defense services (see§ 120.9 of this subchapter) directly related to the defense articles enumerated in paragraphs (a) through (h) of this category and classified technical data directly related to items controlled in ECCNs 9A610, 9B610, 9C610, and 9D610 and defense services using classified technical data. (See§ 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)
Category XVII—Classified Articles, Technical Data, and Defense Services Not Otherwise Enumerated Back to Top
*(a) All articles, and technical data (see§ 120.10 of this subchapter) and defense services (see§ 120.9 of this subchapter) relating thereto, that are classified in the interests of national security and that are not otherwise enumerated on the U.S. Munitions List.
(g) Technical data (see§ 120.10 of this subchapter) and defense services (see§ 120.9 of this subchapter) directly related to the defense articles enumerated in paragraphs (a) through (f) of this category and classified technical data directly related to items controlled in ECCNs 9A619, 9B619, 9C619, and 9D619 and defense services using the classified technical data. (See§ 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)
Category XXI—Articles, Technical Data, and Defense Services Not Otherwise Enumerated Back to Top
*(a) Any article not enumerated on the U.S. Munitions List may be included in this category until such time as the appropriate U.S. Munitions List category is amended. The decision on whether any article may be included in this category, and the designation of the defense article as not Significant Military Equipment (see§ 120.7 of this subchapter), shall be made by the Director, Office of Defense Trade Controls Policy.
(b) Technical data (see§ 120.10 of this subchapter) and defense services (see§ 120.9 of this subchapter) directly related to the defense articles covered in paragraph (a) of this category.
12.Section 121.2 is revised to read as follows: § 121.2 Interpretations of the U.S. Munitions List
13.Section 121.3 is revised to read as follows: § 121.3 Aircraft.
(6) Incorporate any “mission system” controlled under this subchapter. “Mission system” is defined as a “system” (see§ 121.8(g) of this subchapter) that is a defense article that performs specific military functions beyond airworthiness, such as by providing military communication, radar, active missile counter measures, target designation, surveillance, or sensor capabilities; or
14.Section 121.8 is amended by revising the section heading and paragraph (g) to read as follows: § 121.8 End-items, components, accessories, attachments, parts, firmware, software, and systems.
15.Section 121.10 is revised to read as follows: § 121.10 Forgings, castings, and machined bodies.
PART 123—LICENSES FOR THE EXPORT AND TEMPORARY IMPORT OF DEFENSE ARTICLES Back to Top
16.The authority citation for part 123 is revised to read as follows: Authority:
17.The heading for part 123 is revised to read as set forth above. 18.Section 123.1 is amended by revising paragraphs (a), (b), and (c) to read as follows: § 123.1 Requirement for export or temporary import licenses.
(b) Applications for Department of State export or temporary import licenses for proposed exports or temporary imports of defense articles, including technical data, may include commodities, software, and technical data subject to the EAR (see§ 120.42 of this subchapter) if:
(3) Certification by an empowered official must accompany all application submissions (see§ 126.13 of this subchapter);
(5) Form DSP-83, duly executed, must accompany all license applications for the permanent export of significant military equipment, including classified defense articles or classified technical data (see§§ 123.10 and 125.3 of this subchapter); and
19.Section 123.9 is amended by revising paragraph (b) to read as follows: § 123.9 Country of ultimate destination and approval of reexports or retransfers.
(2) When exporting items subject to the EAR (see§§ 120.42 and 123.1(b)) on a Department of State license or other approval, the U.S. exporter must provide to the end-user and consignees in the purchase documentation or other support documentation the appropriate EAR classification information for each item exported pursuant to a U.S. Munitions List “(x)” paragraph. This includes the appropriate ECCN or EAR99 designation.