[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13928-13931]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5821]


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DEPARTMENT OF STATE

22 CFR Parts 123 and 126

[Public Notice 7258]
RIN 1400-AC70


Amendment to the International Traffic in Arms Regulations: 
Replacement Parts/Components and Incorporated Articles

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State is amending the International Traffic 
in Arms Regulations (ITAR) to update policies regarding replacement 
parts/components and incorporated articles.

DATES: The Department of State will accept comments on this proposed 
rule until April 14, 2011.

ADDRESSES: Interested parties may submit comments within 30 days of the

[[Page 13929]]

date of publication by any of the following methods:
     E-mail: [email protected] with an appropriate 
subject line.
     Mail: PM/DDTC, SA-1, 12th Floor, Directorate of Defense 
Trade Controls, Office of Defense Trade Controls Policy, Attn: 
Regulatory Changes--Replacement Parts/Components and Incorporated 
Articles, Bureau of Political Military Affairs, U.S. Department of 
State, Washington, DC 20522-0112.
     Persons with access to the Internet may also view this 
notice by searching for its RIN on the U.S. Government regulations Web 
site at http://regulations.gov/index.cfm.

FOR FURTHER INFORMATION CONTACT: Nicholas Memos, Office of Defense 
Trade Controls Policy, Department of State, by telephone: (202) 663-
2804; fax: (202) 261-8199; or e-mail: [email protected]. Attn: 
Regulatory Changes--Replacement Parts/Components and Incorporated 
Articles.

SUPPLEMENTARY INFORMATION: As a part of the President's Export Control 
Reform effort, the Department of State proposes to amend Parts 123 and 
126 of the ITAR to reflect new policies regarding coverage of 
replacement parts/components and incorporated articles.
    The Department's review of current ITAR treatment of replacement 
parts/components led to the proposed change to streamline the flow of 
parts and components and to eliminate redundancy in licensing. The 
current rule regarding parts and components imposes burdensome 
requirements for additional licenses for licensed end-users and end-
uses for systems and components already vetted in earlier licenses. The 
proposed rule adds a new section (Sec.  123.28) that facilitates the 
expeditious repair of U.S. supplied end-items abroad, enabling more 
timely response to coalition forces, as well as other allies and 
friends, by eliminating the requirement for a license for parts and 
components for systems approved in a previous license. This proposed 
exemption applies only to exporters specifically identified in a 
previously approved authorization to export the end-item in question. 
It would not apply to upgrades of capabilities of the original end-
item. The type, amount, and frequency of parts and components could not 
exceed the type, amount, and frequency consistent with normal 
logistical repair/replacement operations. Nor can the value of the 
purchase order exceed an amount that would require Congressional 
notification. The exporter must have in its possession a copy of the 
purchase order from the foreign government end-user and cite in its 
Automated Export System (AES) filing the license number for the 
original export. The exporter must use the U.S. Postal Service, freight 
forwarders registered with the Directorate of Defense Trade Controls 
(DDTC) and eligible, or licensed customs brokers that are subject to 
background investigation and have passed a comprehensive examination 
administered by U.S. Customs and Border Protection. Finally, this 
exemption does not apply to exporters who are otherwise ineligible.
    The Department's review of current ITAR treatment of incorporated 
articles led to the proposed change with a view to limit ITAR coverage 
to where diversion of the embedded defense article is a realistic and 
practical concern. To this end, the proposed new Sec.  126.19 sets out 
conditions under which a DDTC license is not required for the export or 
re-export of defense articles incorporated into an end-item that is 
``subject to the Export Administration Regulations (EAR).'' Those 
conditions include where the end-item would be ``rendered inoperable'' 
by the removal of the defense article, where no technical data for 
development or production are transferred with the defense article, and 
where the incorporation of the defense article does not provide (or is 
not related to) a military application. Additionally, no license is 
required for the export or re-export of a defense article when that 
article would be rendered inoperable by removal from the end-item. A 
license would be required for the export of defense articles that are 
spare or replacement parts when they are embedded into a larger 
assembly such that they can be removed without destroying the defense 
articles. The proposed new Sec.  126.19 would not go into effect until 
the Department of Commerce amends its regulations such that the ITAR 
and CCL provide complimentary coverage of the articles in question.
    The proposed rules were presented to the Defense Trade Advisory 
Group (DTAG), a Department of State advisory committee, for purposes of 
comment and evaluation. The DTAG commented favorably on most aspects of 
the proposed rules, but also recommended certain changes. Having 
thoroughly reviewed and evaluated the comments and the recommended 
changes, the Department has determined that it will proceed with the 
proposed rules per the Department's evaluation of the written comments 
and recommendations, as noted in the following paragraphs:
    The DTAG commented favorably on the addition of a new Sec.  123.28 
(replacement parts/components), with some recommended edits. We note 
that in the interim we changed the title of the section by removing the 
word ``special'' before exemption, removing the word ``spare'' before 
``parts/components'' and replacing it with the word ``replacement,'' to 
make clear that this exemption applies to the replacement of components 
for systems already authorized for export. The DTAG recommended 
elimination of the limitation that the exporter must be the 
manufacturer of the end-item. We concurred with the change and 
eliminated that condition.
    The DTAG also recommended expanding the wording that defines who is 
qualified to use the exemption from ``original exporter of the end-
item'' to ``applicant of a previously approved authorization.'' We 
concurred with that change with minor edits.
    The DTAG further suggested modifying the limitation regarding 
upgrades in capabilities to ensure that it does not preclude 
``replacement parts or components that would result in enhancements or 
improvements only in the reliability or maintainability * * *'' We 
concurred with that change in the form of a note.
    The DTAG suggested adding a requirement that the exporter use the 
U.S. Postal Service, registered freight forwarders, and licensed 
brokers. We concurred with that change.
    The DTAG recommended expanding the exemption to apply to a ``second 
exporter'' if they met the conditions of (a) and (b). We did not accept 
that change as the unclear terminology could potentially open up the 
exemption for unlimited sources. We are willing to explore the 
possibility of expansion of the exemption to include major 
subcontractor component suppliers, but the proposed ``second exporter'' 
language is too broad.
    The DTAG recommended adding a condition that the foreign government 
end-user is not subject to restrictions under Sec.  126.1. We concurred 
with that change.
    The DTAG commented favorably on the addition of a new Sec.  126.19 
(incorporated articles), with some recommended edits. The DTAG 
recommended changing the proposed rule to cover defense articles 
embedded into ``a higher level assembly that is not an end item. * * 
*'' We did not accept that recommendation. The recommendation would 
remove the assurance contained in the proposed rule that the ultimate 
end-item would be an article subject to the EAR. It is our

[[Page 13930]]

intent to avoid creating a means by which integrated defense articles 
could find their way into higher level militarily relevant assemblies.
    The DTAG proposed alternate models that added defense article 
exports ``solely for integration into and inclusion as an integral part 
of a higher level assembly * * *'' We did not accept that change 
because it effectively would allow for the export of non-embedded 
defense articles without a license and would pose too great a risk of 
diversion. The proposed rule requires that defense articles be pre-
embedded or pre-incorporated, which provides a measure of security.

Regulatory Analysis and Notices

Administrative Procedure Act

    These proposed amendments involve a foreign affairs function of the 
United States and, therefore, are not subject to the procedures 
contained in 5 U.S.C. 553 and 554. The Department of State has 
nevertheless determined that the public interest would be served by 
publishing this proposed rule and soliciting public comment.

Regulatory Flexibility Act

    Since these proposed amendments are not subject to 5 U.S.C. 553, 
they do 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 it will not significantly or uniquely affect small 
governments. Therefore, no actions were deemed necessary under the 
provisions of the Unfunded Mandates Reform Act of 1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    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 amendments.

Executive Order 12866

    These proposed amendments are exempt from review under Executive 
Order 12866, but has been reviewed internally by the Department of 
State to ensure consistency with the purposes thereof.

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 rule will not have 
tribal implications, will not impose substantial direct compliance 
costs on Indian tribal governments, and will not pre-empt tribal law. 
Accordingly, the requirement of Section 5 of Executive Order 13175 does 
not apply to this rule.

Paperwork Reduction Act

    This proposed rule does not impose any new reporting or 
recordkeeping requirements subject to the Paperwork Reduction Act, 44 
U.S.C. chapter 35.

List of Subjects in 22 CFR Parts 123 and 126

    Arms and munitions, Exports.

    Accordingly, for the reasons set forth above, Title 22, Chapter I, 
Subchapter M, parts 123 and 126 are proposed to be amended as follows:

PART 123--LICENSES FOR THE EXPORT OF DEFENSE ARTICLES

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

    Authority:  Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2753; E.O. 11958, 42 FR 
4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub. 
L. 105-261, 112 Stat. 1920; Sec 1205(a), Pub. L. 107-228.
    2. Part 123 is amended by adding Sec.  123.28 to read as follows:


Sec.  123.28  Exemption for the export of replacement parts or 
components in support of end-items previously exported from the U.S.

    (a) Port Directors of U.S. Customs and Border Protection shall 
permit the export without a license of parts or components of U.S.-
origin end-items, as defined in Sec.  121.8(a), held in the inventory 
of a foreign government when all of the following conditions are met:
    (1) The exporter is not subject to policy of denial (see Sec. Sec.  
126.7 and 127.7 of this subchapter), is not otherwise ineligible (see 
Sec.  120.1(c) of this subchapter), and the authority to claim the 
exemption has not been revoked in accordance with paragraph (c) of this 
section; and
    (2) The exporter was the applicant of a previously approved 
authorization to export the U.S.-origin end-item as defined in Sec.  
121.8(a); and
    (3) The replacement parts or components being exported do not 
upgrade the capability of the end item as originally exported. (Note: 
This does not preclude the export of replacement parts or components 
that would result in enhancements or improvements only in the 
reliability or maintainability of the U.S.-origin end-item, such as an 
increased mean time between failure (MTBF) when a part identical to 
that originally exported is not available); and
    (4) The type, amount, and frequency of the exports are consistent 
with repair and replacement in accordance with normal logistical 
support requirements for the number of end-items in the end-user 
inventory; and
    (5) The value of the purchase order or contract for the export does 
not exceed the requirements for congressional notification set forth in 
Sec.  123.15; and
    (6) The consignee of the shipment is the foreign government 
approved under the original export authorization; and
    (7) The foreign government end-user is not subject to restrictions 
under Sec.  126.1 of this subchapter; and
    (8) The replacement parts or components being exported meet all the 
restrictions, limitations, and provisos (including those on the 
handling or control of the replacement parts or components) in the 
original export authorization for the end-item; and
    (9) The replacement parts or components being exported are 
consistent with the U.S. Government authorized maintenance activities.
    (b) In order to claim the exemption, the exporter must:
    (1) Be in possession of a purchase order from the foreign 
government end-user; and
    (2) Cite in its Automated Export System (AES) filing at the time of 
export the license number authorizing the previously approved export of 
the U.S.-origin defense article as required under paragraph (a)(2) of 
this section; and
    (3) Provide, upon request of the Port Director, a copy of the 
license cited in paragraph (b)(2) of this section and a

[[Page 13931]]

copy of a purchase order required by paragraph (b)(1) of this section; 
and
    (4) If the replacement parts or components are shipped, the 
exporter must use the U. S. Postal Service, or only those freight 
forwarders registered with the Directorate of Defense Trade Controls 
and eligible, or licensed customs brokers that are subject to 
background investigation and have passed a comprehensive examination 
administered by U.S. Customs and Border Protection. If export is by 
hand carry, the exporter must ensure that the AES filing is completed 
at the time of export; and
    (5) Maintain records, to be provided on request to the Directorate 
of Defense Trade Controls, U.S. Immigration and Customs Enforcement, 
U.S. Customs and Border Protection, and other authorized U.S. law 
enforcement agencies, that support the exporter's authority to use the 
exemption in accordance with the requirements of paragraphs (a)(1) 
through (9) and (b)(1) and (2) of this section.
    (c) The authority to use this exemption may be revoked at any time 
by the Managing Director, Directorate of Defense Trade Controls, if the 
exporter is found to be not in compliance with the requirements listed 
in this section.

PART 126--GENERAL POLICIES AND PROVISIONS

    3. 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); E.O. 11958, 42 FR 
4311; 3 CFR, 1977 Comp., p.79; 22 U.S.C. 2651a; 22 U.S.C. 287c; E.O. 
12918, 59 FR 28205; 3 CFR, 1994 Comp., p.899; Sec. 1225, Pub. L. 
108-375.

    4. Part 126 is amended by adding and reserving Sec. Sec.  126.16-
126.18 to read as follows:


Sec.  126.16  [Reserved]


Sec.  126.17  [Reserved]


Sec.  126.18  [Reserved]

    5. Add Sec.  126.19 to read as follows:


Sec.  126.19  Policy on the export and re-export of defense articles 
incorporated into commodities ``subject to the EAR.''

    (a) A license or other approval from the Department of State is not 
required for the export or re-export of a defense article(s) that has/
have been incorporated into an end-item subject to the Export 
Administration Regulations (EAR) (see 15 CFR 734.3), when all of the 
following conditions are met:
    (1) The end-item would be rendered inoperable, for purposes of 
intended applications or enhanced capabilities for which the defense 
article was incorporated into the end-item, by the removal of the 
defense article(s); and
    (2) ``Technology'' subject to the EAR for the ``production,'' 
``development,'' or ``use'' (as defined in 15 CFR 772.1) of the end-
item does not include any technical data (as defined by Sec.  120.10) 
or ``technical assistance'' (as defined in 15 CFR 772.1) qualifying as 
defense services (as defined by Sec.  120.9) about the defense 
article(s) incorporated into the end-item; and
    (3) Incorporation of the defense article(s) does/do not provide, 
nor is it related to, a military application or ``military end-use'' 
(as defined in 15 CFR 744.21), or does not result in a ``military 
commodity'' (as defined in 15 CFR Sec.  772.1); and
    (4) The value of the defense articles is less than 1% of the value 
of the end-item.
    (b) A license or other approval from the Department of State is not 
required for the export or re-export of a defense article(s) that has/
have been incorporated into a component (as defined in ITAR Sec.  
121.8(b)) subject to the EAR or an end-item subject to the EAR, when 
all the following conditions are met:
    (1) The defense article would be destroyed (i.e., rendered useless 
beyond the possibility of restoration) by its removal from the 
component, major assembly or end-item;
    (2) ``Technology'' subject to the EAR for the ``production,'' 
``development,'' or ``use'' (as defined in 15 CFR 772.1) of the 
component, or major assembly does not include any technical data (as 
defined by Sec.  120.10) or ``technical assistance'' (as defined in 15 
CFR 772.1) qualifying as defense services (as defined by Sec.  120.9) 
about the defense article incorporated into the component or major 
assembly; and
    (3) Incorporation of the defense article does not provide, nor is 
it related to, a military application or ``military end-use'' (as 
defined in 15 CFR 744.21), or does not result in a ``military 
commodity'' (as defined in 15 CFR 772.1).
    (c) A license or other approval from the Department of State is 
required for the export or re-export of the defense article when 
exported or re-exported as a replacement part or component for a 
component, major assembly, or end-item subject to the EAR.

    Dated: March 4, 2011.
Ellen O. Tauscher,
Under Secretary, Arms Control and International Security, Department of 
State.
[FR Doc. 2011-5821 Filed 3-14-11; 8:45 am]
BILLING CODE 4710-25-P