[Federal Register Volume 65, Number 141 (Friday, July 21, 2000)]
[Rules and Regulations]
[Pages 45282-45286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18530]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF STATE

Bureau of Political-Military Affairs

22 CFR Parts 124, 125 126

[Public Notice 3365]


Amendments to the International Traffic in Arms Regulation: NATO 
Countries, Australia and Japan

AGENCY: Bureau of Political-Military Affairs, Department of State.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule amends the International Traffic In Arms Regulations 
to implement reforms announced by the Secretary of State at the NATO 
Ministerial in Florence, Italy on May 24, 2000. The reforms of the U.S. 
export controls system are available to NATO Allies, Japan and 
Australia and are intended to streamline the U.S. defense export 
control licensing process and forge closer industrial linkage between 
the U.S. and allied defense suppliers. It is contemplated that it will 
increase our mutual security by enhancing NATO member defense 
capabilities, promoting interoperability with our allies and friends 
and promoting trans-Atlantic defense industrial cooperation. Part 124 
of the International Traffic In Arms Regulations is being amended to 
permit U.S. companies to perform, using an exemption, certain 
maintenance and maintenance training for NATO government, Australia and 
Japan on US-origin inventoried defense articles. Part 125 is amended to 
provide authorization, without a license, to transfer technical data to 
support procurement of defense articles from defense firms in NATO 
countries,

[[Page 45283]]

Australia and Japan for use in the United States. This amendment also 
establishes four comprehensive export authorizations for use in 
circumstances where the full parameters of a commercial export 
endeavor, including the needed defense exports, can be well anticipated 
and described in advance.

EFFECTIVE DATE: September 1, 2000.

FOR FURTHER INFORMATION CONTACT: Rose Biancaniello, Office of Defense 
Trade Controls, Bureau of Political-Military Affairs, Department of 
State ATTN: Regulatory Change NATO, Australia and Japan at (202) 663-
2862 or FAX (202) 261-8264.

SUPPLEMENTARY INFORMATION: In implementing the Secretary of State's 
announcement at the NATO Ministerial, May 24, 2000, in Florence, Italy, 
the International Traffic In Arms Regulations is being amended. Section 
124.2 is amended to add a new paragraph (c) to permit U.S. companies to 
provide, without a license, defense services necessary to perform 
maintenance on and maintenance training for inventoried US-origin 
equipment of NATO countries, Australia and Japan, provided the 
maintenance and maintenance training does not result in any 
modification, enhancement, upgrade or other form of alteration or 
improvement that enhances the performance or capability of the defense 
article. Also, the export must not include the transfer of certain 
technologies; such as, design methodology, engineering analysis and 
manufacturing know-how. Section 125.4 is amended to add a new paragraph 
(c) to permit the transfer of technical data to NATO countries, 
Australia and Japan of technical data necessary to support offshore 
procurement of defense articles for use in the United States. In 
addition, Part 126 is amended to add, in Sec. 126.9, a new paragraph 
(b) and a new Sec. 126.14. These additions are being made to create 
four new comprehensive authorizations developed to limit the number of 
export approvals necessary to authorize the export of U.S. technology 
to NATO countries, Australia and Japan that will encourage government-
to-government cooperative research and development, support joint 
ventures and teaming arrangements and facilitate a U.S. company's role 
in a cooperative project when covered by a government-to-government 
Memorandum of Understanding (MOU).
    In implementing these initiatives, Part 124, 125, and 126 are being 
amended.
    This amendment involves a foreign affairs function of the United 
States and therefore, is not subject to the procedures required by 5 
U.S.C. 553 and 554. It is exempt from review under Executive Order 
12866 but has been reviewed internally by the Department of State to 
ensure consistency with the purposes thereof. This rule does not 
require analysis under the Regulatory Flexibility Act or the Unfunded 
Mandates Reform Act. It has been found not to be a major rule within 
the meaning of the Small Business Regulatory Enforcement Act of 1966. 
It will not have substantial direct effects on the States, 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 Sec. 6 of Executive Order 
13132, it is determined that this rule does not have sufficient 
federalism implications to warrant application of Executive Order Nos. 
12372 and 13123. However, interested parties are invited to submit 
written comments to the Department of State, Office of Defense Trade 
Controls, ATTN: Regulatory Change, NATO, Australia and Japan, 13th 
Floor, H1304, 2401 E Street, NW., Washington, DC 20037. Such persons 
must be so registered with the Department of State's Office of Defense 
Trade Controls (DTC) pursuant to the registration requirements of 
Sec. 38 of the Arms Export Control Act.

List of Subjects

22 CFR Part 124

    Arms and munitions, Exports, Technical assistance.

22 CFR Part 125

    Arms and munitions, Exports.

22 CFR Part 126

    Arms and munitions, Exports.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, Part 124, 125 and 126, are being amended as follows:

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

    1. The authority citation for part 124 continues to read as 
follows:

    Authority: Sec. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311, 3 CFR 1977 Comp. 
p. 79; 22 U.S.C. 2658; Pub L. 105-261.

    2. Section 124.2 is amended by adding paragraph (c) to read as 
follows:


Sec. 124.2  Exemptions for training and military service.

* * * * *
    (c) NATO countries, Australia and Japan, in addition to the basic 
maintenance training exemption provided in Sec. 124.2(a) and basic 
maintenance information exemption in Sec. 125.4(b)(5), no technical 
assistance agreement is required for maintenance training or the 
performance of maintenance, including the export of supporting 
technical data, when the following criteria can be met:
    (1) Defense services are for unclassified U.S.-origin defense 
articles lawfully exported or authorized for export and owned or 
operated by and in the inventory of NATO or the Federal Governments of 
NATO countries, Australia or Japan;
    (2) This defense service exemption does not apply to any 
transaction involving defense services for which congressional 
notification is required in accordance with Sec. 123.15 and Sec. 124.11 
of this subchapter.
    (3) Maintenance training or the performance of maintenance must be 
limited to inspection, testing, calibration or repair, including 
overhaul, reconditioning and one-to-one replacement of any defective 
items, parts or components; and excluding any modification, 
enhancement, upgrade or other form of alteration or improvement that 
enhances the performance or capability of the defense article. This 
does not preclude maintenance training or the performance of 
maintenance that would result in enhancements or improvements only in 
the reliability or maintainability of the defense article, such as an 
increased mean time between failure (MTBF).
    (4) Supporting technical data must be unclassified and must not 
include software documentation on the design or details of the computer 
software, software source code, design methodology, engineering 
analysis or manufacturing know-how such as that described in paragraphs 
(c)4)(i) through (c)(4)(iii) as follows:
    (i) Design Methodology, such as: The underlying engineering methods 
and design philosophy utilized (i.e., the ``why'' or information that 
explains the rationale for particular design decision, engineering 
feature, or performance requirement); engineering experience (e.g. 
lessons learned); and the rationale and associated databases (e.g. 
design allowables, factors of safety, component life predictions, 
failure analysis criteria) that establish the operational requirements 
(e.g., performance, mechanical, electrical, electronic, reliability and 
maintainability) of a defense article.
    (ii) Engineering Analysis, such as: Analytical methods and tools 
used to design or evaluate a defense article's performance against the 
operational requirements. Analytical methods and

[[Page 45284]]

tools include the development and/or use of mockups, computer models 
and simulations, and test facilities.
    (iii) Manufacturing Know-how, such as: Information that provides 
detailed manufacturing processes and techniques needed to translate a 
detailed design into a qualified, finished defense article.
    (5) This defense service exemption does not apply to maintenance 
training or the performance of maintenance and service or the transfer 
of supporting technical data for the following defense articles:
    (i) All Missile Technology Control Regime Annex Items;
    (ii) Firearms listed in Category I; and ammunition listed in 
Category III for the firearms in Category I;
    (iii) Nuclear weapons strategic delivery systems and all 
components, parts, accessories and attachments specifically designed 
for such systems and associated equipment;
    (iv) Naval nuclear propulsion equipment listed in Category VI(e);
    (v) Gas turbine engine hot sections covered by Categories VI(f) and 
VIII(b);
    (vi) Category VIII(f);
    (vii) Category XII(c);
    (viii) Chemical agents listed in Category XIV (a), biological 
agents in Category XIV (b), and equipment listed in Category XIV (c) 
for dissemination of the chemical agents and biological agents listed 
in Categories XIV (a) and (b);
    (ix) Nuclear radiation measuring devices manufactured to military 
specifications listed in Category XIV(d);
    (x) Category XV;
    (xi) Nuclear weapons design and test equipment listed in Category 
XVI;
    (xii) Submersible and oceanographic vessels and related articles 
listed in Category XX(a) through (d);
    (xiii) Miscellaneous articles covered by Category XXI.
    (6) Eligibility Criteria for Foreign Persons. Foreign persons 
eligible to receive technical data or maintenance training under this 
exemption are limited to nationals of the NATO countries, Australia or 
Japan.

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

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

    Authority: Sections 2 and 38, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778); E.O. 11958, 42 FR 4311, 3 CFR, 1977 Comp. p. 79; 
22 U.S.C. 2658.

    4. Section 125.4 is amended by revising paragraph (a) and by adding 
paragraph (c) to read as follows:


Sec. 125.4  Exemptions of general applicability.

    (a) The following exemptions apply to exports of technical data for 
which approval is not needed from the Office of Defense Trade Controls. 
These exemptions, except for paragraph (b)(13) of this section, do not 
apply to exports to proscribed destinations under Sec. 126.1 of this 
subchapter or for persons considered generally ineligible under 
Sec. 120.1(c) of this subchapter. The exemptions are also not 
applicable for purposes of establishing offshore procurement 
arrangements or producing defense articles offshore (see Sec. 124.13), 
except as authorized under Sec. 125.4 (c). If Sec. 126.8 of this 
subchapter requirements are applicable, they must be met before an 
exemption under this section may be used. Transmission of classified 
information must comply with the requirements of the National 
Industrial Security Program Operating Manual and the exporter must 
certify to the transmittal authority that the technical data does not 
exceed the technical limitation of the authorized export.
    (b) * * *
    (c) Defense services and related unclassified technical data are 
exempt from the licensing requirements of this subchapter, to nationals 
of NATO countries, Australia and Japan, for the purposes of responding 
to a written request from the Department of Defense for a quote or bid 
proposal. Such exports must be pursuant to an official written request 
or directive from an authorized official of the U.S. Department of 
Defense. The defense services and technical data are limited to those 
listed in paragraphs (c)(1), (c)(2), and (c)(3) and must not include 
those listed in paragraphs (c)(4), (c)(5), and (c)(6) which follow:
    (1) Build-to-Print. ``Build-to-Print'' means that a foreign 
consignee can produce a defense article from engineering drawings 
without any technical assistance from a U.S. exporter. This transaction 
is based strictly on a ``hands-off'' approach since the foreign 
consignee is understood to have the inherent capability to produce the 
defense article and only lacks the necessary drawings. Supporting 
documentation such as acceptance criteria, and specifications, may be 
released on an as-required basis (i.e. ``must have'') such that the 
foreign consignee would not be able to produce an acceptable defense 
article without this additional supporting documentation. Documentation 
which is not absolutely necessary to permit manufacture of an 
acceptable defense article (i.e. ``nice to have'') is not considered 
within the boundaries of a ``Build-to-Print'' data package;
    (2) Build/Design-to-Specification. ``Build/Design-to-
Specification'' means that a foreign consignee can design and produce a 
defense article from requirement specifications without any technical 
assistance from the U.S. exporter. This transaction is based strictly 
on a ``hands-off'' approach since the foreign consignee is understood 
to have the inherent capability to both design and produce the defense 
article and only lacks the necessary requirement information;
    (3) Basic Research. ``Basic Research'' means a systemic study 
directed toward greater knowledge or understanding of the fundamental 
aspects of phenomena and observable facts without specific applications 
towards processes or products in mind. It does not include ``Applied 
Research'' (i.e. a systemic study to gain knowledge or understanding 
necessary to determine the means by which a recognized and specific 
need may be met. It is a systematic application of knowledge toward the 
production of useful materials, devices, and systems or methods, 
including design, development, and improvement of prototypes and new 
processes to meet specific requirements.);
    (4) Design Methodology, such as: The underlying engineering methods 
and design philosophy utilized (i.e., the ``why'' or information that 
explains the rationale for particular design decision, engineering 
feature, or performance requirement); engineering experience (e.g. 
lessons learned); and the rationale and associated databases (e.g. 
design allowables, factors of safety, component life predictions, 
failure analysis criteria) that establish the operational requirements 
(e.g., performance, mechanical, electrical, electronic, reliability and 
maintainability) of a defense article. (Final analytical results and 
the initial conditions and parameters may be provided.)
    (5) Engineering Analysis, such as: Analytical methods and tools 
used to design or evaluate a defense article's performance against the 
operational requirements. Analytical methods and tools include the 
development and/or use of mockups, computer models and simulations, and 
test facilities. (Final analytical results and the initial conditions 
and parameters may be provided.)
    (6) Manufacturing Know-how, such as: information that provides 
detailed manufacturing processes and techniques needed to translate a 
detailed design into a qualified, finished defense article. 
(Information may be provided in a

[[Page 45285]]

build-to-print package that is necessary in order to produce an 
acceptable defense article.)

PART 126--GENERAL POLICIES AND PROVISIONS

    5. 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. 2778; 
E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp., p.79; 22 U.S.C. 2658; 22 
U.S.C. 287c; E.O. 12918, 59 FR 28205, 3 CFR 1994 Comp., p 899.

    6. Section 126.9 is revised to read as follows:


Sec. 126.9  Advisory opinions and related authorizations.

    (a) Any person desiring information as to whether the Office of 
Defense Trade controls would be likely to grant a license or other 
approval for the export or approval of a particular defense article or 
defense service to a particular country may request an advisory opinion 
from the Office of Defense Trade Controls. These opinions are not 
binding on the Department of State and are revocable. A request for an 
advisory opinion must be made in writing and must outline in detail the 
equipment, its usage, the security classification (if any) of the 
articles or related technical data, and the country or countries 
involved. An original and seven copies of the letter must be provided 
along with seven copies of suitable descriptive information concerning 
the defense article or defense service
    (b) Related authorizations. The Office of Defense Trade Controls 
may, as appropriate, in accordance with the procedures set forth in 
paragraph (a) of this section, provide export authorization, subject to 
all other relevant requirements of this subchapter, both for 
transactions that have been the subject of advisory opinions requested 
by prospective U.S. exporters, or for the Office's own initiatives. 
Such initiatives may cover pilot programs, or specifically anticipated 
circumstances for which the Office considers special authorizations 
appropriate.

    7. Section 126.14 is added to read as follows:


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

    (a) With respect to NATO members, Australia, and Japan, the Office 
of Defense Trade Controls may provide the comprehensive authorizations 
described below for circumstances where the full parameters of a 
commercial export endeavor including the needed defense exports can be 
well anticipated and described in advance, thereby making use of such 
comprehensive authorizations appropriate.
    (1) Major Project Authorization. With respect to NATO members, 
Australia, and Japan, the Office of Defense Trade Controls may provide 
comprehensive authorizations for well circumscribed commercially 
developed ``major projects'', where a principal registered U.S. 
exporter/prime contractor identifies in advance the broad parameters of 
a commercial project including defense exports needed, other 
participants (e.g., exporters with whom they have ``teamed up'', 
subcontractors), and foreign government end users. Projects eligible 
for such authorization may include a commercial export of a major 
weapons system for a foreign government involving, for example, 
multiple U.S. suppliers under a commercial teaming agreement to design, 
develop and manufacture defense articles to meet a foreign government's 
requirements. U.S. exporters seeking such authorization must provide 
detailed information concerning the scope of the project, including 
other exporters, U.S. subcontractors, and planned exports (including 
re-exports) of defense articles, defense services, and technical data, 
and meet the other requirements set forth in paragraph (b) of this 
section.
    (2) Major Program Authorization. With respect to NATO members, 
Australia, and Japan, the Office of Defense Trade Controls may provide 
comprehensive authorizations for well circumscribed commercially 
developed ``major program''. This variant would be available where a 
single registered U.S. exporter defines in advance the parameters of a 
broad commercial program for which the registrant will be providing all 
phases of the necessary support (including the needed hardware, tech 
data, defense services, development, manufacturing, and logistic 
support). U.S. exporters seeking such authorization must provide 
detailed information concerning the scope of the program, including 
planned exports (including re-exports) of defense articles, defense 
services, and technical data, and meet the other requirements set forth 
below in paragraph (b) of this section.
    (3)(i) Global Project Authorization. With respect to NATO members, 
Australia and Japan, the Office of Defense Trade Controls may provide a 
comprehensive ``Global Project Authorization'' to registered U.S. 
exporters for exports of defense articles, technical data or defense 
services in support of government to government cooperative projects 
(covering research and development or production) with one of these 
countries undertaken pursuant to an agreement between the USG and the 
government of such country, or a memorandum of understanding between 
the Department of Defense and the country's Ministry of Defense.
    (ii) A set of standard terms and conditions derived from and 
corresponding to the breadth of the activities and phases covered in 
such a cooperative MOU will provide the basis for this comprehensive 
authorization for all U.S. exporters (and foreign end users) identified 
by DoD as participating in such cooperative project. Such 
authorizations may cover a broad range of defined activities in support 
of such programs including multiple shipments of defense articles and 
technical data and performance of defense services for extended 
periods, and re-exports to approved end users.
    (iii) Eligible end users will be limited to ministries of defense 
of MOU signatory countries and foreign companies serving as contractors 
of such countries.
    (iv) Any requirement for non-transfer and use assurances from a 
foreign government may be deemed satisfied by the signature by such 
government of a cooperative agreement or by its ministry of defense of 
a cooperative MOU where the agreement or MOU contains assurances that 
are comparable to that required by a DSP-83 with respect to foreign 
governments and that clarifies that the government is undertaking 
responsibility for all its participating companies. The authorized non-
government participants or end users (e.g., the participating 
government's contractors) will still be required to execute DSP-83's.
    (4) Technical Data Supporting an Acquisition, Teaming Arrangement, 
Merger, Joint Venture Authorization. With respect to NATO member 
countries, Australia and Japan, the Office of Defense Trade Controls 
may provide a registered U.S. defense company a comprehensive 
authorization to export technical data in support of the U.S. 
exporter's consideration of entering into a teaming arrangement, joint 
venture, merger, acquisition, or similar arrangement with prospective 
foreign partners. Specifically the authorization is designed to permit 
the export of a broadly defined set of technical data to qualifying 
well established foreign defense firms in NATO countries, Australia or 
Japan in order to better facilitate a sufficiently in depth

[[Page 45286]]

assessment of the benefits, opportunities and other relevant 
considerations presented by such prospective arrangements. U.S 
exporters seeking such authorization must provide detailed information 
concerning the arrangement, joint venture, merger or acquisition, 
including any planned exports of defense articles, defense services, 
and technical data, and meet the other requirements set forth in 
paragraph (b) of this section.
    (b) Provisions and Requirements for Comprehensive Authorizations. 
Requests for the special comprehensive authorizations set forth in 
paragraph (a) of this section should be by letter addressed to the 
Office of Defense Trade Control. With regard to a commercial major 
program or project authorization, or technical data supporting a 
teaming arrangement, merger, joint venture or acquisition, registered 
U.S. exporters may consult the Director of the Office of Defense Trade 
Controls about eligibility for and obtaining available comprehensive 
authorizations set forth in paragraph (a) of this section or pursuant 
to Sec. 126.9(b).
    (1) Requests for consideration of all such authorizations should be 
formulated to correspond to one of the authorizations set out in 
paragraph (a) of this section, and should include:
    (i) A description of the proposed program or project, including 
where appropriate a comprehensive description of all phases or stages; 
and
    (ii) Its value; and
    (iii) Types of exports needed in support of the program or project; 
and
    (iv) Projected duration of same, within permissible limits; and
    (v) Description of the exporter's plan for record keeping and 
auditing of all phases of the program or project; and
    (vi) In the case of authorizations for exports in support of 
government to government cooperative projects, identification of the 
cooperative project.
    (2) Amendments to the requested authorization may be requested in 
writing as appropriate, and should include a detailed description of 
the aspects of the activities being proposed for amendment.
    (3) The comprehensive authorizations set forth in paragraph (a) of 
this section may be made valid for the duration of the major commercial 
program or project, or cooperative project, not to exceed 10 years.
    (4) Included among the criteria required for such authorizations 
are those set out in Part 124, e.g., Secs. 124.7, 124.8 and 124.9, as 
well as Secs. 125.4 (technical data exported in furtherance of an 
agreement) and 123.16 (hardware being included in an agreement). 
Provisions required will also take into account the congressional 
notification requirements in Secs. 123.15 and 124.11 of the ITAR. 
Specifically, comprehensive congressional notifications corresponding 
to the comprehensive parameters for the major program or project or 
cooperative project should be possible, with additional notifications 
such as those required by law for changes in value or other significant 
modifications.
    (5) All authorizations will be consistent with all other applicable 
requirements of the ITAR, including requirements for non-transfer and 
use assurances (see Secs. 123.10 and 124.10), congressional 
notifications (e.g., Secs. 123.15 and 124.11), and other documentation 
(e.g., Secs. 123.9 and 126.13).
    (6) Special auditing and reporting requirements will also be 
required for these authorizations. Exporters using special 
authorizations are required to establish an electronic system for 
keeping records of all defense articles, defense services and technical 
data exported and comply with all applicable requirements for 
submitting shipping or export information within the allotted time.

    Dated: July 14, 2000.
Pamela L. Frazier,
Acting Assistant Secretary, Bureau of Political-Military Affairs, 
Department of State.
[FR Doc. 00-18530 Filed 7-20-00; 8:45 am]
BILLING CODE 4710-25-P