80 FR 30001 - Amendment to the International Traffic in Arms Regulations: Registration and Licensing of U.S. Persons Employed by Foreign Persons, and Other Changes

DEPARTMENT OF STATE

Federal Register Volume 80, Issue 100 (May 26, 2015)

Page Range		30001-30004
FR Document		2015-12643
The Department of State proposes to amend the International Traffic in Arms Regulations (ITAR) to clarify requirements for the licensing and registration of U.S. persons providing defense services while in the employ of foreign persons. This amendment is pursuant to the President's Export Control Reform effort, as part of the Department of State's retrospective plan under Executive Order 13563 completed on August 17, 2011. The Department of State's full plan can be accessed at http://www.state.gov/documents/organization/181028.pdf.
Federal Register, Volume 80 Issue 100 (Tuesday, May 26, 2015)
[Federal Register Volume 80, Number 100 (Tuesday, May 26, 2015)]
[Proposed Rules]
[Pages 30001-30004]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12643]


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DEPARTMENT OF STATE

22 CFR Parts 120, 122, 124, 125, and 126

[Public Notice 9136]
RIN 1400-AD79


Amendment to the International Traffic in Arms Regulations: 
Registration and Licensing of U.S. Persons Employed by Foreign Persons, 
and Other Changes

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State proposes to amend the International 
Traffic in Arms Regulations (ITAR) to clarify requirements for the 
licensing and registration of U.S. persons providing defense services 
while in the employ of foreign persons. This amendment is pursuant to 
the President's Export Control Reform effort, as part of the Department 
of State's retrospective plan under Executive Order 13563 completed on 
August 17, 2011. The Department of State's full plan can be accessed at 
http://www.state.gov/documents/organization/181028.pdf.

DATES: The Department of State will accept comments on this proposed 
rule until July 27, 2015.

ADDRESSES: Interested parties may submit comments within 60 days of the 
date of publication by one of the following methods:
     Email: DDTCPublicComments@state.gov with the subject line, 
``ITAR Amendment--U.S. Persons Employed by Foreign Persons.''
     Internet: At www.regulations.gov, search for this proposed 
rule by using its RIN (1400-AD79).
    Comments received after that date will be considered if feasible, 
but consideration cannot be assured. Those submitting comments should 
not include any personally identifying information they do not desire 
to be made public or any information for which a claim of 
confidentiality is asserted. All comments and transmittal emails will 
be made available for public inspection and copying after the close of 
the comment period via the Directorate of Defense Trade Controls (DDTC) 
Web site at www.pmddtc.state.gov. Parties who wish to comment 
anonymously may do so by submitting their comments via 
www.regulations.gov, leaving the fields that would identify the 
commenter blank and including no identifying information in the comment 
itself. Comments submitted via www.regulations.gov are immediately 
available for public inspection.

FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, 
Office of Defense Trade Controls Policy, Department of State, telephone 
(202) 663-1282; email DDTCResponseTeam@state.gov. ATTN: Regulatory 
Change, U.S. Persons Employed by Foreign Persons.

SUPPLEMENTARY INFORMATION: 

Changes in This Rule Related to Registration and Licensing of U.S. 
Persons Employed by Foreign Persons

    DDTC seeks to clarify the registration and licensing requirements 
for U.S. persons located in the United States or abroad who are engaged 
in the business of furnishing defense services to their foreign person 
employers. Similarly, DDTC seeks to clarify when these same persons may 
be covered under existing DDTC authorizations previously issued to 
their employers and affiliates, and when they are instead obligated to 
apply for their own license or agreement prior to engaging in the 
provisions of defense services.
    The Department proposes to modify 22 CFR 120.40 Affiliate, add a 
definition for ``natural persons'' in 22 CFR 120.43, effect changes to 
22 CFR 122.1 Registration Requirements and 22 CFR 122.4 Notification of 
Changes in Information Furnished by Registrants, and add an exemption 
for natural U.S. persons employed by foreign persons in 22 CFR 124.17, 
to better account for these persons and their services to their foreign 
person employers.
    Scenarios impacted by these changes include but are not limited to 
the following:
    (1) U.S. persons employed as regular employees of a U.S. company 
but working at a foreign branch of that company; (2) U.S. persons 
employed as regular employees of a U.S. company's foreign subsidiary or 
affiliate where the U.S. company is actively participating in the 
provision of services to the foreign subsidiary or affiliate; (3) U.S. 
persons employed as regular employees of a U.S. company's foreign 
subsidiary or affiliate where the U.S. company is not actively 
participating in the provision of services to the foreign subsidiary or 
affiliate; (4) U.S. persons employed outside the United States as 
independent contractors who do not meet the definition of a regular 
employee; and (5) U.S. persons employed as regular employees of a 
foreign company with no U.S. affiliation.
    The following are the proposed changes:

[[Page 30002]]

    (1) The note to 22 CFR 120.40 is redesignated as note 1;
    (2) A second note is added to 22 CFR 120.40 to clarify that under 
specified circumstances, minority owners of a firm may list that 
company on their registration;
    (3) 22 CFR 120.43 is added to provide a definition of ``natural 
person'';
    (4) 22 CFR 122.1 is revised to clarify the existing requirement 
that U.S. persons performing defense services abroad are required to be 
registered pursuant to 22 CFR 122.2;
    (5) A note is added to 22 CFR 122.1 to clarify that natural persons 
employed by affiliates or subsidiaries of and listed on a U.S. person's 
registration are deemed to be registered as well;
    (6) A minor revision is made to 22 CFR 122.2 to clarify that 
subsidiaries and affiliates controlled by a registrant pursuant to 22 
CFR 120.40 may be included on the registrant's Statement of 
Registration;
    (7) 22 CFR 124.1(a) is revised to clarify that defense services 
performed by natural U.S. persons may be authorized via a DSP-5;
    (8) 22 CFR 124.1(b) is revised to clarify that applicants will 
forward copies of approved agreements involving classified defense 
articles to the Department of Defense;
    (9) An exemption for natural U.S. persons employed by foreign 
persons located in NATO countries and other specified nations is added 
in 22 CFR 124.17; and
    (10) An exemption for natural U.S. persons employed by foreign 
persons engaged in FMS-related activities is added in 22 CFR 
126.6(c)(7).
    Regarding the addition of 22 CFR 124.17, the Department reiterates 
that the use of exemptions to authorize exports and/or temporary 
imports of defense articles and defense services to countries listed in 
22 CFR 126.1 is not allowed, as noted in paragraph (a) of the latter 
section.

Other Changes in This Rule

    The following are the proposed changes:
    (1) 22 CFR 120.39 is revised to clarify that the phrase ``long 
term'' denotes a period of at least 1 year;
    (2) 22 CFR 125.4(b)(2) and (b)(12) are removed to reserve status 
due to their redundancy with the exemptions in 22 CFR 124.3 and 22 CFR 
part 126;
    (3) 22 CFR 126.6(c) is amended to clarify that the exemption 
extends to classified as well as unclassified Foreign Military Sales 
(FMS) defense articles permanently or temporarily imported or exported, 
provided their transfer is made pursuant to a Letter of Offer and 
Acceptance; and
    (4) Administrative corrections are made to 22 CFR 126.6(c).

Request for Comments

    The Department welcomes public comment on any of the proposed 
changes set forth in this rule. In particular, we invite comments from 
foreign persons who currently employ or are contemplating engaging U.S. 
persons as regular employees or independent contractors, as well as 
from current or future employees and contractors themselves.
    In the context of Export Control Reform, as well as to accommodate 
the changes proposed in this rule, DDTC is considering modifying its 
registration fee structure. Of the many options being explored, one 
alternative involves providing a reduced base fee for individuals or 
natural U.S. persons, as defined in the proposed 22 CFR 120.43. The 
Department encourages the public to consider these proposed changes 
when reviewing this rule.

Regulatory Analysis and Notices

Administrative Procedure Act

    Controlling the import and export of defense articles and services 
is a foreign affairs function of the United States government and rules 
implementing this function are exempt from sections 553 (rulemaking) 
and 554 (adjudications) of the Administrative Procedure Act (APA). 
Although this rule is exempt from the rulemaking provisions of the APA, 
the Department is publishing this rule with a 60-day provision for 
public comment and without prejudice to its determination that 
controlling the import and export of defense services is a foreign 
affairs function.

Regulatory Flexibility Act

    Since this rule is exempt from the rulemaking provisions of 5 
U.S.C. 553, it does not require analysis under the Regulatory 
Flexibility Act.

Unfunded Mandates Reform Act of 1995

    These proposed amendments do 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 they will not significantly or uniquely affect small 
governments. Therefore, no actions were deemed necessary under the 
provisions of the Unfunded Mandates Reform Act of 1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    These proposed amendments have 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

    These proposed amendments 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 these proposed amendments 
do 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 these proposed amendments.

Executive Orders 12866 and 13563

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

Executive Order 12988

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

Executive Order 13175

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

[[Page 30003]]

Paperwork Reduction Act

    Notwithstanding any other provision of law, no person is required 
to respond to, nor is subject to a penalty for failure to comply with, 
a collection of information, subject to the requirements of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless 
that collection of information displays a currently valid OMB control 
number. This proposed rule would affect the following approved 
collections: (1) Statement of Registration, DS-2032, OMB No. 1405-0002; 
(2) Application/License for Permanent Export of Unclassified Defense 
Articles and Related Unclassified Technical Data, DSP-5, OMB No. 1405-
0003; (3) Nontransfer and Use Certificate, DSP-83, OMB No. 1405-0021; 
(4) Application/License for Permanent/Temporary Export or Temporary 
Import of Classified Defense Articles and Classified Technical Data, 
DSP-85, OMB No. 1405-0022; (5) Authority to Export Defense Articles and 
Services Sold Under the Foreign Military Sales (FMS) Program, DSP-94, 
OMB No. 1405-0051; (6) Application for Amendment to License for Export 
or Import of Classified or Unclassified Defense Articles and Related 
Technical Data, DSP-6, -62, -74, -119, OMB No. 1405-0092; (7) Request 
for Approval of Manufacturing License Agreements, Technical Assistance 
Agreements, and Other Agreements, DSP-5, OMB No. 1405-0093; (8) 
Maintenance of Records by Registrants, OMB No. 1405-0111; (9) Voluntary 
Disclosure, OMB No. 1405-0179; and (10) Technology Security/Clearance 
Plans, Screening Records, and Non-Disclosure Agreements Pursuant to 22 
CFR 126.18, OMB No. 1405-0195. The Department of State believes there 
will be minimal changes to these collections.

List of Subjects

22 CFR Part 120

    Arms and munitions, Exports.

22 CFR Part 122

    Arms and munitions, Exports.

22 CFR Part 124

    Arms and munitions, Exports, Technical assistance.

22 CFR Part 125

    Arms and munitions, Classified information, Exports.

22 CFR Part 126

    Arms and munitions, Exports.

    For the reasons set forth above, Title 22, Chapter I, Subchapter M, 
parts 120, 122, 124, 125 and 126 are proposed to be amended as follows:

PART 120--PURPOSE AND DEFINITIONS

0
1. The authority citation for part 120 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. 2794; 22 U.S.C. 2651a; Pub. L. 
105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L. 112-
239; E.O. 13637, 78 FR 16129.

0
2. Section 120.39 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  120.39  Regular employee.

    (a) * * *
    (2) An individual in a long term (i.e., 1 year or longer) 
contractual relationship with the company where the individual:
    (i) Works at the company's facilities;
    (ii) Works under the company's direction and control;
    (iii) Works full time and exclusively for the company;
    (iv) Executes nondisclosure certifications for the company; and
    (v) Where the staffing agency that has seconded the individual (if 
applicable) has no role in the work the individual performs (other than 
providing that individual for that work) and does not have access to 
any controlled technology (other than where specifically authorized by 
a license).
* * * * *
0
3. Section 120.40 is amended by removing the Note and adding Note 1 and 
Note 2 to read as follows:


Sec.  120.40  Affiliate.

* * * * *

    Note 1 to Sec.  120.40: For purposes of this section, 
``control'' means having the authority or ability to establish or 
direct the policies or operations of the firm with respect to 
compliance with this subchapter. Control is rebuttably presumed to 
exist where there is ownership of 25 percent or more of the 
outstanding voting securities if no other person controls an equal 
or larger percentage.


    Note 2 to Sec.  120.40: A registrant may establish a control 
relationship with another entity via written agreement such that the 
entity then becomes an affiliate in accordance with section. The 
registrant may include such an affiliate on its registration, in 
accordance with this subchapter and subject to DDTC's disallowance. 
If an affiliate listed on a registration ceases to meet the 
requirements of this section, the registrant must immediately remove 
the affiliate from its registration and notify DDTC pursuant to 
Sec.  122.4(a) of this subchapter.

0
4. Section 120.43 is added to read as follows:


Sec.  120.43  Natural person.

    Natural person means an individual human being, as distinguished 
from a corporation, business association, partnership, society, trust, 
or any other entity, organization or group.

PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS

0
5. The authority citation for part 122 continues to read as follows:

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

0
6. Section 122.1 is amended by revising paragraph (a) and adding a note 
to paragraph (a) to read as follows:


Sec.  122.1  Registration requirements.

    (a) Any person who engages in the United States in the business of 
manufacturing, exporting, or temporarily importing defense articles or 
furnishing defense services; and any U.S. person who engages in the 
business of furnishing defense services wherever located, is required 
to register with the Directorate of Defense Trade Controls under Sec.  
122.2. For the purpose of this subchapter, engaging in such a business 
requires only one occasion of manufacturing or exporting or temporarily 
importing a defense article or furnishing a defense service. A 
manufacturer who does not engage in exporting must nevertheless 
register. (See part 129 of this subchapter for requirements for 
registration of persons who engage in brokering activities.)

    Note to paragraph (a): Any natural person directly employed by a 
DDTC-registered person, or by a person listed on the registration as 
a subsidiary or affiliate of a DDTC-registered U.S. person, is 
deemed to be registered.

* * * * *


Sec.  122.2  [Amended]

0
7. Section 122.2(a) is amended by adding a comma between the words 
``registrant'' and ``or'' in the third sentence.
0
8. Section 122.4 is amended by revising paragraph (a)(2)(v) to read as 
follows:


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

    (a) * * *
    (2) * * *
    (v) The establishment, acquisition, or divestment of a U.S. or 
foreign subsidiary or other affiliate who is engaged in manufacturing 
defense articles, exporting defense articles or defense services, or 
the inability of an affiliate listed on the registration to

[[Page 30004]]

continue meeting the requirements in Sec.  120.40 of this subchapter; 
or
* * * * *

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

0
9. The authority citation for part 124 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. 2651a; 22 U.S.C. 2776; Pub. L. 
105-261; Section 1261, Pub. L. 112-239; E.O. 13637, 78 FR 16129.

0
10. Section 124.1 is amended as follows:
0
a. Add two sentences at the end of paragraph (a).
0
b. Revise paragraph (b).
    The addition and revision read as follows:


Sec.  124.1  Manufacturing license agreements and technical assistance 
agreements.

    (a) * * * The provision of defense services by a natural U.S. 
person may be authorized on a Form DSP-5. Natural U.S. persons employed 
as regular employees of a foreign subsidiary or affiliate listed on the 
registration of a U.S. person may receive authorization to provide 
defense services via an agreement between the registered U.S. person 
and the foreign subsidiary or affiliate, provided the registered U.S. 
person accepts responsibility for, and demonstrates ability to ensure, 
the natural U.S. person's compliance with the provisions of this 
subchapter.
    (b) Classified Articles. Copies of approved agreements involving 
the release of classified defense articles will be forwarded by the 
applicant to the Defense Security Service of the Department of Defense.
* * * * *
0
11. Section 124.17 is added to read as follows:


Sec.  124.17  Exemption for natural U.S. persons employed by foreign 
persons.

    (a) A natural U.S. person employed by a foreign person may furnish 
defense services to and on behalf of the foreign person employer 
without a license if all of the following conditions are met:
    (1) The employer is located within a NATO or EU country, Australia, 
Japan, New Zealand, and/or Switzerland, and the defense services are 
provided only in these countries;
    (2) The end user(s) of the associated defense article(s) are 
located within NATO, EU, Australia, Japan, New Zealand, and/or 
Switzerland;
    (3) No U.S.-origin defense articles, to include technical data, are 
transferred from the U.S. persons to the employer without separate 
authorization;
    (4) No classified, SME, or MT technical data is transferred (even 
if separately authorized) in connection with the furnishing of defense 
services; and
    (5) The U.S. person furnishing the defense services maintains 
records of such activities and complies with registration requirements 
in accordance with part 122 of this subchapter.
    (b) [Reserved]

PART 125--LICENSES FOR THE EXPORT OF TECHNICAL DATA AND CLASSIFIED 
DEFENSE ARTICLES

0
12. The authority citation for part 125 continues to read as follows:

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


Sec.  125.4  [Amended]

0
13. Section 125.4 is amended by removing and reserving paragraphs 
(b)(2) and (b)(12).

PART 126--GENERAL POLICIES AND PROVISIONS

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

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

    15. Section 126.6 is amended by revising paragraph (c) introductory 
text and adding paragraph (c)(7) to read as follows:


Sec.  126.6  Foreign-owned military aircraft and naval vessels, and the 
Foreign Military Sales program.

* * * * *
    (c) Foreign Military Sales Program. A license from the Directorate 
of Defense Trade Controls is not required if the classified or 
unclassified defense article or defense service to be transferred was 
sold, leased, or loaned by the Department of Defense to a foreign 
country or international organization under the Foreign Military Sales 
(FMS) Program of the Arms Export Control Act pursuant to a Letter of 
Offer and Acceptance (LOA) authorizing such transfer (permanent or 
temporary), which meets the criteria stated below:
* * * * *
    (7) Natural U.S. persons employed by foreign persons may provide 
defense services to and on behalf of their employers without a license 
if all of the following conditions are met:
    (i) The defense services are provided in support of an active FMS 
contract and are identified in an executed LOA;
    (ii) No U.S.-origin defense articles are transferred from the U.S. 
person to the employer, without separate authorization;
    (iii) The provision of defense services is not to a country 
identified in Sec.  126.1;
    (iv) No classified or SME technical data is disclosed (even if 
separately authorized) in connection with the furnishing of defense 
services; and
    (v) The U.S. person furnishing the defense services maintains 
records of such activities and complies with registration requirements 
in accordance with part 122 of this subchapter.

Rose E. Gottemoeller,
Under Secretary, Arms Control and International Security, Department of 
State.
[FR Doc. 2015-12643 Filed 5-22-15; 8:45 am]
 BILLING CODE 4710-25-P
30002 Federal Register / Vol. 80, No. 100 / Tuesday, May 26, 2015 / Proposed Rules

(1) The note to 22 CFR 120.40 is made pursuant to a Letter of Offer and Small Business Regulatory Enforcement
redesignated as note 1; Acceptance; and Fairness Act of 1996
(2) A second note is added to 22 CFR (4) Administrative corrections are
120.40 to clarify that under specified These proposed amendments have
made to 22 CFR 126.6(c). been found not to be a major rule within
circumstances, minority owners of a
firm may list that company on their Request for Comments the meaning of the Small Business
registration; Regulatory Enforcement Fairness Act of
The Department welcomes public 1996.
(3) 22 CFR 120.43 is added to provide
comment on any of the proposed
a definition of ‘‘natural person’’; Executive Orders 12372 and 13132
changes set forth in this rule. In
(4) 22 CFR 122.1 is revised to clarify
particular, we invite comments from These proposed amendments will not
the existing requirement that U.S.
foreign persons who currently employ have substantial direct effects on the
persons performing defense services
or are contemplating engaging U.S. States, on the relationship between the
abroad are required to be registered
persons as regular employees or national government and the States, or
pursuant to 22 CFR 122.2;
independent contractors, as well as from on the distribution of power and
(5) A note is added to 22 CFR 122.1
current or future employees and responsibilities among the various
to clarify that natural persons employed
contractors themselves. levels of government. Therefore, in
by affiliates or subsidiaries of and listed
on a U.S. person’s registration are In the context of Export Control accordance with Executive Order 13132,
deemed to be registered as well; Reform, as well as to accommodate the it is determined that these proposed
(6) A minor revision is made to 22 changes proposed in this rule, DDTC is amendments do not have sufficient
CFR 122.2 to clarify that subsidiaries considering modifying its registration federalism implications to require
and affiliates controlled by a registrant fee structure. Of the many options being consultations or warrant the preparation
pursuant to 22 CFR 120.40 may be explored, one alternative involves of a federalism summary impact
included on the registrant’s Statement of providing a reduced base fee for statement. The regulations
Registration; individuals or natural U.S. persons, as implementing Executive Order 12372
(7) 22 CFR 124.1(a) is revised to defined in the proposed 22 CFR 120.43. regarding intergovernmental
clarify that defense services performed The Department encourages the public consultation on Federal programs and
by natural U.S. persons may be to consider these proposed changes activities do not apply to these proposed
authorized via a DSP–5; when reviewing this rule. amendments.
(8) 22 CFR 124.1(b) is revised to Regulatory Analysis and Notices Executive Orders 12866 and 13563
clarify that applicants will forward
copies of approved agreements Administrative Procedure Act Executive Orders 13563 and 12866
involving classified defense articles to direct agencies to assess all costs and
Controlling the import and export of benefits of available regulatory
the Department of Defense;
defense articles and services is a foreign alternatives and, if regulation is
(9) An exemption for natural U.S.
affairs function of the United States necessary, to select regulatory
persons employed by foreign persons
government and rules implementing approaches that maximize net benefits
located in NATO countries and other
this function are exempt from sections (including potential economic,
specified nations is added in 22 CFR
553 (rulemaking) and 554 environmental, public health and safety
124.17; and
(adjudications) of the Administrative effects, distributed impacts, and equity).
(10) An exemption for natural U.S.
Procedure Act (APA). Although this rule Executive Order 13563 emphasizes the
persons employed by foreign persons
is exempt from the rulemaking importance of quantifying both costs
engaged in FMS-related activities is
provisions of the APA, the Department and benefits, of reducing costs, of
added in 22 CFR 126.6(c)(7).
is publishing this rule with a 60-day harmonizing rules, and of promoting
Regarding the addition of 22 CFR
provision for public comment and flexibility. This rule has not been
124.17, the Department reiterates that
without prejudice to its determination designated a ‘‘significant regulatory
the use of exemptions to authorize
that controlling the import and export of action,’’ under section 3(f) of Executive
exports and/or temporary imports of
defense services is a foreign affairs Order 12866. Accordingly, the rule has
defense articles and defense services to
function. not been reviewed by the Office of
countries listed in 22 CFR 126.1 is not
allowed, as noted in paragraph (a) of the Regulatory Flexibility Act Management and Budget (OMB).
latter section. Executive Order 12988
Since this rule is exempt from the
Other Changes in This Rule rulemaking provisions of 5 U.S.C. 553, The Department of State has reviewed
The following are the proposed it does not require analysis under the the proposed amendments in light of
changes: Regulatory Flexibility Act. sections 3(a) and 3(b)(2) of Executive
(1) 22 CFR 120.39 is revised to clarify Unfunded Mandates Reform Act of 1995 Order 12988 to eliminate ambiguity,
that the phrase ‘‘long term’’ denotes a minimize litigation, establish clear legal
period of at least 1 year; These proposed amendments do not standards, and reduce burden.
(2) 22 CFR 125.4(b)(2) and (b)(12) are involve a mandate that will result in the Executive Order 13175
wreier-aviles on DSK5TPTVN1PROD with PROPOSALS

removed to reserve status due to their expenditure by State, local, and tribal
redundancy with the exemptions in 22 governments, in the aggregate, or by the The Department of State has
CFR 124.3 and 22 CFR part 126; private sector, of $100 million or more determined that this rulemaking will
(3) 22 CFR 126.6(c) is amended to in any year and they will not not have tribal implications, will not
clarify that the exemption extends to significantly or uniquely affect small impose substantial direct compliance
classified as well as unclassified Foreign governments. Therefore, no actions were costs on Indian tribal governments, and
Military Sales (FMS) defense articles deemed necessary under the provisions will not preempt tribal law.
permanently or temporarily imported or of the Unfunded Mandates Reform Act Accordingly, Executive Order 13175
exported, provided their transfer is of 1995. does not apply to this rulemaking.

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Federal Register / Vol. 80, No. 100 / Tuesday, May 26, 2015 / Proposed Rules 30003

Paperwork Reduction Act 122, 124, 125 and 126 are proposed to § 120.43 Natural person.
be amended as follows: Natural person means an individual
Notwithstanding any other provision
of law, no person is required to respond human being, as distinguished from a
PART 120—PURPOSE AND corporation, business association,
to, nor is subject to a penalty for failure DEFINITIONS
to comply with, a collection of partnership, society, trust, or any other
information, subject to the requirements ■ 1. The authority citation for part 120 entity, organization or group.
of the Paperwork Reduction Act of 1995 continues to read as follows: PART 122—REGISTRATION OF
(44 U.S.C. 3501 et seq.) (PRA), unless Authority: Secs. 2, 38, and 71, Pub. L. 90– MANUFACTURERS AND EXPORTERS
that collection of information displays a 629, 90 Stat. 744 (22 U.S.C. 2752, 2778,
currently valid OMB control number. 2797); 22 U.S.C. 2794; 22 U.S.C. 2651a; Pub. ■ 5. The authority citation for part 122
This proposed rule would affect the L. 105–261, 112 Stat. 1920; Pub. L. 111–266; continues to read as follows:
following approved collections: (1) Section 1261, Pub. L. 112–239; E.O. 13637,
Authority: Sections 2 and 38, Pub. L. 90–
Statement of Registration, DS–2032, 78 FR 16129.
629, 90 Stat. 744 (22 U.S.C. 2752, 2778); 22
OMB No. 1405–0002; (2) Application/ ■ 2. Section 120.39 is amended by U.S.C. 2651a; E.O. 13637, 78 FR 16129.
License for Permanent Export of revising paragraph (a)(2) to read as
Unclassified Defense Articles and follows: ■ 6. Section 122.1 is amended by
Related Unclassified Technical Data, revising paragraph (a) and adding a note
DSP–5, OMB No. 1405–0003; (3) § 120.39 Regular employee. to paragraph (a) to read as follows:
Nontransfer and Use Certificate, DSP– (a) * * *
(2) An individual in a long term (i.e., § 122.1 Registration requirements.
83, OMB No. 1405–0021; (4)
Application/License for Permanent/ 1 year or longer) contractual (a) Any person who engages in the
Temporary Export or Temporary Import relationship with the company where United States in the business of
of Classified Defense Articles and the individual: manufacturing, exporting, or
Classified Technical Data, DSP–85, (i) Works at the company’s facilities; temporarily importing defense articles
OMB No. 1405–0022; (5) Authority to (ii) Works under the company’s or furnishing defense services; and any
Export Defense Articles and Services direction and control; U.S. person who engages in the business
(iii) Works full time and exclusively of furnishing defense services wherever
Sold Under the Foreign Military Sales
for the company; located, is required to register with the
(FMS) Program, DSP–94, OMB No.
(iv) Executes nondisclosure Directorate of Defense Trade Controls
1405–0051; (6) Application for
certifications for the company; and under § 122.2. For the purpose of this
Amendment to License for Export or (v) Where the staffing agency that has
Import of Classified or Unclassified subchapter, engaging in such a business
seconded the individual (if applicable) requires only one occasion of
Defense Articles and Related Technical has no role in the work the individual
Data, DSP–6, –62, –74, –119, OMB No. manufacturing or exporting or
performs (other than providing that temporarily importing a defense article
1405–0092; (7) Request for Approval of individual for that work) and does not
Manufacturing License Agreements, or furnishing a defense service. A
have access to any controlled manufacturer who does not engage in
Technical Assistance Agreements, and technology (other than where
Other Agreements, DSP–5, OMB No. exporting must nevertheless register.
specifically authorized by a license). (See part 129 of this subchapter for
1405–0093; (8) Maintenance of Records
by Registrants, OMB No. 1405–0111; (9) * * * * * requirements for registration of persons
Voluntary Disclosure, OMB No. 1405– ■ 3. Section 120.40 is amended by who engage in brokering activities.)
0179; and (10) Technology Security/ removing the Note and adding Note 1 Note to paragraph (a): Any natural person
Clearance Plans, Screening Records, and and Note 2 to read as follows: directly employed by a DDTC-registered
Non-Disclosure Agreements Pursuant to person, or by a person listed on the
§ 120.40 Affiliate. registration as a subsidiary or affiliate of a
22 CFR 126.18, OMB No. 1405–0195. * * * * * DDTC-registered U.S. person, is deemed to be
The Department of State believes there registered.
will be minimal changes to these Note 1 to § 120.40: For purposes of this
section, ‘‘control’’ means having the * * * * *
collections.
authority or ability to establish or direct the
List of Subjects policies or operations of the firm with respect § 122.2 [Amended]
to compliance with this subchapter. Control
22 CFR Part 120 is rebuttably presumed to exist where there ■ 7. Section 122.2(a) is amended by
is ownership of 25 percent or more of the adding a comma between the words
Arms and munitions, Exports. ‘‘registrant’’ and ‘‘or’’ in the third
outstanding voting securities if no other
22 CFR Part 122 person controls an equal or larger percentage. sentence.
■ 8. Section 122.4 is amended by
Arms and munitions, Exports. Note 2 to § 120.40: A registrant may revising paragraph (a)(2)(v) to read as
establish a control relationship with another follows:
22 CFR Part 124 entity via written agreement such that the
Arms and munitions, Exports, entity then becomes an affiliate in § 122.4 Notification of changes in
Technical assistance. accordance with section. The registrant may information furnished by registrants.
include such an affiliate on its registration,
wreier-aviles on DSK5TPTVN1PROD with PROPOSALS

22 CFR Part 125 in accordance with this subchapter and (a) * * *
subject to DDTC’s disallowance. If an affiliate (2) * * *
Arms and munitions, Classified listed on a registration ceases to meet the (v) The establishment, acquisition, or
information, Exports. requirements of this section, the registrant divestment of a U.S. or foreign
22 CFR Part 126 must immediately remove the affiliate from subsidiary or other affiliate who is
its registration and notify DDTC pursuant to engaged in manufacturing defense
Arms and munitions, Exports. § 122.4(a) of this subchapter. articles, exporting defense articles or
For the reasons set forth above, Title ■ 4. Section 120.43 is added to read as defense services, or the inability of an
22, Chapter I, Subchapter M, parts 120, follows: affiliate listed on the registration to

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30004 Federal Register / Vol. 80, No. 100 / Tuesday, May 26, 2015 / Proposed Rules

continue meeting the requirements in (4) No classified, SME, or MT (i) The defense services are provided
§ 120.40 of this subchapter; or technical data is transferred (even if in support of an active FMS contract
* * * * * separately authorized) in connection and are identified in an executed LOA;
with the furnishing of defense services; (ii) No U.S.-origin defense articles are
PART 124—AGREEMENTS, OFF- and transferred from the U.S. person to the
SHORE PROCUREMENT, AND OTHER (5) The U.S. person furnishing the employer, without separate
DEFENSE SERVICES defense services maintains records of authorization;
such activities and complies with (iii) The provision of defense services
■ 9. The authority citation for part 124
continues to read as follows: registration requirements in accordance is not to a country identified in § 126.1;
with part 122 of this subchapter. (iv) No classified or SME technical
Authority: Secs. 2, 38, and 71, Pub. L. 90– data is disclosed (even if separately
629, 90 Stat. 744 (22 U.S.C. 2752, 2778,
(b) [Reserved]
authorized) in connection with the
2797); 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub.
L. 105–261; Section 1261, Pub. L. 112–239; PART 125—LICENSES FOR THE furnishing of defense services; and
E.O. 13637, 78 FR 16129. EXPORT OF TECHNICAL DATA AND (v) The U.S. person furnishing the
CLASSIFIED DEFENSE ARTICLES defense services maintains records of
■ 10. Section 124.1 is amended as such activities and complies with
follows: ■ 12. The authority citation for part 125 registration requirements in accordance
■ a. Add two sentences at the end of continues to read as follows: with part 122 of this subchapter.
paragraph (a).
Authority: Secs. 2 and 38, Pub. L. 90–629,
■ b. Revise paragraph (b). Rose E. Gottemoeller,
90 Stat. 744 (22 U.S.C. 2752, 2778); 22 U.S.C.
The addition and revision read as Under Secretary, Arms Control and
2651a; E.O. 13637, 78 FR 16129.
follows: International Security, Department of State.
§ 125.4 [Amended] [FR Doc. 2015–12643 Filed 5–22–15; 8:45 am]
§ 124.1 Manufacturing license agreements
and technical assistance agreements. ■ 13. Section 125.4 is amended by BILLING CODE 4710–25–P
(a) * * * The provision of defense removing and reserving paragraphs
services by a natural U.S. person may be (b)(2) and (b)(12).
authorized on a Form DSP–5. Natural DEPARTMENT OF HOUSING AND
U.S. persons employed as regular PART 126—GENERAL POLICIES AND
URBAN DEVELOPMENT
employees of a foreign subsidiary or PROVISIONS
affiliate listed on the registration of a ■ 14. The authority citation for part 126 24 CFR Chapter IX
U.S. person may receive authorization continues to read as follows: [Docket No. FR–5650–N–09]
to provide defense services via an
agreement between the registered U.S. Authority: Secs. 2, 38, 40, 42, and 71, Pub.
L. 90–629, 90 Stat. 744 (22 U.S.C. 2752, 2778, Native American Housing Assistance
person and the foreign subsidiary or 2780, 2791, and 2797); 22 U.S.C. 2651a; 22 and Self-Determination Act of 1996:
affiliate, provided the registered U.S. U.S.C. 287c; E.O. 12918, 59 FR 28205; 3 CFR, Negotiated Rulemaking Committee;
person accepts responsibility for, and 1994 Comp., p. 899; Sec. 1225, Pub. L. 108– Notice of Seventh Meeting
demonstrates ability to ensure, the 375; Sec. 7089, Pub. L. 111–117; Pub. L. 111–
natural U.S. person’s compliance with 266; Sections 7045 and 7046, Pub. L. 112–74; AGENCY: Office of Assistant Secretary for
the provisions of this subchapter. E.O. 13637, 78 FR 16129. Public and Indian Housing, HUD.
(b) Classified Articles. Copies of ACTION: Notice of meetings of negotiated
15. Section 126.6 is amended by
approved agreements involving the rulemaking committee.
revising paragraph (c) introductory text
release of classified defense articles will
and adding paragraph (c)(7) to read as SUMMARY: This notice announces the
be forwarded by the applicant to the
follows: seventh meeting of the Indian Housing
Defense Security Service of the
Department of Defense. § 126.6 Foreign-owned military aircraft and Block Grant (IHBG) program negotiated
* * * * * naval vessels, and the Foreign Military rulemaking committee.
■ 11. Section 124.17 is added to read as Sales program. DATES: The seventh meeting will be held
follows: * * * * * on Tuesday, August 11, 2015,
(c) Foreign Military Sales Program. A Wednesday, August 12, 2015, and
§ 124.17 Exemption for natural U.S. Thursday, August 13, 2015. On each
persons employed by foreign persons.
license from the Directorate of Defense
Trade Controls is not required if the day, the session will begin at
(a) A natural U.S. person employed by approximately 8:30 a.m., and adjourn at
classified or unclassified defense article
a foreign person may furnish defense approximately 5:30 p.m.
or defense service to be transferred was
services to and on behalf of the foreign
sold, leased, or loaned by the ADDRESSES: The meeting will take place
person employer without a license if all
Department of Defense to a foreign at the Double-Tree-Scottsdale, 6333
of the following conditions are met:
(1) The employer is located within a country or international organization North Scottsdale Road, Scottsdale,
NATO or EU country, Australia, Japan, under the Foreign Military Sales (FMS) Arizona 85250–7090.
New Zealand, and/or Switzerland, and Program of the Arms Export Control Act FOR FURTHER INFORMATION CONTACT:
the defense services are provided only pursuant to a Letter of Offer and Rodger J. Boyd, Deputy Assistant
wreier-aviles on DSK5TPTVN1PROD with PROPOSALS

in these countries; Acceptance (LOA) authorizing such Secretary for Native American
(2) The end user(s) of the associated transfer (permanent or temporary), Programs, Office of Public and Indian
defense article(s) are located within which meets the criteria stated below: Housing, Department of Housing and
NATO, EU, Australia, Japan, New * * * * * Urban Development, 451 Seventh Street
Zealand, and/or Switzerland; (7) Natural U.S. persons employed by SW., Room 4126, Washington, DC
(3) No U.S.-origin defense articles, to foreign persons may provide defense 20410, telephone number 202–401–7914
include technical data, are transferred services to and on behalf of their (this is not a toll-free number). Hearing-
from the U.S. persons to the employer employers without a license if all of the or speech-impaired individuals may
without separate authorization; following conditions are met: access this number via TTY by calling

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Document Created: 2018-02-21 10:31:29
Document Modified: 2018-02-21 10:31:29
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		The Department of State will accept comments on this proposed rule until July 27, 2015.
Contact		Mr. C. Edward Peartree, Director, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-1282; email [email protected] ATTN: Regulatory Change, U.S. Persons Employed by Foreign Persons.
FR Citation		80 FR 30001
RIN Number		1400-AD79
CFR Citation		22 CFR 120 22 CFR 122 22 CFR 124 22 CFR 125 22 CFR 126
CFR Associated		Arms and Munitions; Exports; Technical Assistance and Classified Information