[Federal Register Volume 76, Number 225 (Tuesday, November 22, 2011)]
[Proposed Rules]
[Pages 72246-72268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29328]



[[Page 72245]]

Vol. 76

Tuesday,

No. 225

November 22, 2011

Part II





Department of State





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





Implementation of Defense Trade Cooperation Treaties; Proposed Rule

  Federal Register / Vol. 76, No. 225 / Tuesday, November 22, 2011 / 
Proposed Rules  

[[Page 72246]]


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DEPARTMENT OF STATE

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

[Public Notice 7683]
RIN 1400-AC95


Implementation of Defense Trade Cooperation Treaties

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State is proposing to amend the 
International Traffic in Arms Regulations (ITAR) to implement the 
Defense Trade Cooperation Treaty between the United States and 
Australia and the Defense Trade Cooperation Treaty between the United 
States and the United Kingdom, and identify via a supplement the 
defense articles and defense services that may not be exported pursuant 
to the Treaties. Additionally, the Department of State proposes to 
amend the section pertaining to the Canadian exemption to reference the 
new supplement, and, with regard to Congressional certification, the 
Department of State proposes to add Israel to the list of countries and 
entities that have a shorter certification time period and a higher 
dollar value reporting threshold.

DATES: The Department of State will accept comments on this proposed 
rule until December 22, 2011.

ADDRESSES: Interested parties may submit comments within 30 days of the 
date of the publication by any of the following methods:
     Email: [email protected] with the subject line, 
Regulatory Change--Treaties.
     Persons with access to the Internet may also view and 
comment on this notice by searching for its RIN on the U.S. Government 
regulations Web site at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade 
Controls Policy, Department of State, Telephone (202) 663-2809; Fax 
(202) 261-8199; or Email [email protected]. ATTN: Regulatory 
Change--Treaties.

SUPPLEMENTARY INFORMATION:

------------------------------------------------------------------------
             ITAR Part                         Proposed change
------------------------------------------------------------------------
Part 120..........................  Section 120.19 revised to clarify
                                     meaning of reexport or retransfer;
                                     new Sec.  Sec.   120.33 and 120.34
                                     added to provide definitions of the
                                     Defense Trade Cooperation Treaties
                                     between the United States and
                                     Australia and the U.K.,
                                     respectively; new Sec.  Sec.
                                     120.35 and 120.36 added to define
                                     the implementing arrangements
                                     pursuant to the Treaties between
                                     the United States and Australia and
                                     the United States and the U.K.,
                                     respectively.
Part 123..........................  Clarifying edits made throughout
                                     section and references to new
                                     proposed Sec.  Sec.   126.16 and
                                     126.17 added; Israel added to Sec.
                                      123.9(e).
Part 124..........................  Sec.   124.11 revised to add Israel
                                     to the list of countries and
                                     entities subject to the 15-day time
                                     period regarding Congressional
                                     certification.
Part 126..........................  Clarifying edits made throughout
                                     section; Sec.   126.5(b) revised to
                                     reference the new supplement to
                                     part 126, consequently, Sec.  Sec.
                                      126.5(b)(1)-(21) are removed; Sec.
                                       126.16 added to describe the
                                     exemption pursuant to the Defense
                                     Trade Cooperation Treaty between
                                     the United States and Australia;
                                     Sec.   126.17 added to describe the
                                     exemption pursuant to the Defense
                                     Trade Cooperation Treaty between
                                     the United States and the United
                                     Kingdom; Supplement No. 1 to part
                                     126 added.
Part 127..........................  Clarifying edits made throughout
                                     section; revised to make reference
                                     to new proposed Sec.  Sec.   126.16
                                     and 126.17.
Part 129..........................  Sections 129.6(b)(2),
                                     129.7(a)(1)(vii), and 129.7(a)(2)
                                     revised to include Israel in the
                                     listing of countries and entities.
------------------------------------------------------------------------

These proposed amendments are pursuant to the Security Cooperation Act 
of 2010 (Pub. L. 111-266), with the inclusion of other proposed 
changes. Title I of the Security Cooperation Act, the Defense Trade 
Cooperation Treaties Implementation Act of 2010, implements the Defense 
Trade Cooperation Treaty between the United States and Australia, done 
at Sydney, Australia, on September 5, 2007; and the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom, 
done at Washington, DC and London on June 21 and 26, 2007, respectively 
(collectively referred to herein as the ``Treaties''). We propose a 
supplement to part 126 that will identify those defense articles and 
defense services exempt from the scope of the Treaties. These proposed 
amendments would affect parts 120, 123, 126, and 127, with new sections 
in part 126 describing the licensing exemptions pursuant to the 
Treaties.

    Title III of the Security Cooperation Act creates for Israel a 
status in law similar to the North Atlantic Treaty Organization (NATO), 
the member countries of NATO, Australia, Japan, New Zealand, and the 
Republic of Korea concerning certification to the Congress. Pursuant to 
the proposed change, we would require certification for transfers to 
Israel prior to granting any license or other approval for transactions 
of major defense equipment sold under a contract in the amount of 
$25,000,000 or more (currently required for amounts of $14,000,000 or 
more), or for defense articles and defense services sold under a 
contract in the amount of $100,000,000 or more (currently required for 
amounts of $50,000,000 or more), and provided the transfer does not 
include any other countries. The change would also shorten from thirty 
(30) to fifteen (15) calendar days the certification time period during 
which approval may not be granted. This proposed amendment would affect 
parts 123, 124, and 129.
    Additionally, we are revising Sec.  126.5, describing the Canadian 
exemption, to reference the proposed supplement to part 126. This 
proposed amendment would affect part 126. Section by section 
identification of the proposed changes follows.
    We are revising the authority citation for part 120 to include 
Public Law 111-266; section 120.1 to reference the Treaties as 
authorities; and section 120.19 to clarify the meaning of reexport or 
retransfer. In Sec.  120.28, we are correcting an outdated reference 
(Shipper's Export Declaration) to refer to the Electronic Export 
Information. We are proposing new Sec. Sec.  120.33 and 120.34 to 
provide definitions of the Defense Trade Cooperation Treaties between 
the United States and Australia and the U.K., respectively. Also, we 
are proposing new Sec. Sec.  120.35 and 120.36 to define the 
implementing arrangements pursuant to the Treaties between the United 
States and Australia and the United States and the U.K., respectively.
    The proposed change in Sec.  123.4 replaces the word ``export'' 
with the word ``exporter.'' In the last sentence in

[[Page 72247]]

Sec.  123.9(a), ``a person'' will replace ``exporters,'' and we are 
adding ``destination'' as an item that must be determined prior to the 
submission of an application or the claiming of an exemption. We are 
adding a note following this section. We are revising section 123.9(b) 
to expand the reference to documents, and to reference the new proposed 
Sec. Sec.  126.16 and 126.17. We are adding clarifying language to 
Sec. Sec.  123.9(c), (c)(1), and (c)(2); and adding the language of the 
current (c)(4) to (c)(3). New language pertaining to new Sec. Sec.  
126.16 and 126.17 will comprise a new (c)(4). We are removing and 
reserving section 123.9(d). We are adding Israel to the list of 
countries and entities in Sec.  123.9(e); citing the new Sec. Sec.  
126.16 and 126.17 in Sec.  123.9(e)(1); and adding clarifying language 
to Sec. Sec.  123.9(e)(3) and (e)(4). We are adding Israel to the list 
of countries and entities in Sec. Sec.  123.15(a)(1), (a)(2), and (b). 
We are adding Australia and the United Kingdom to Sec.  123.16(a), and 
reference to the Electronic Export Information replaces reference to 
the Shipper's Export Declaration in this section and in Sec.  
123.16(b)(1)(iii). We are clarifying documents in Sec.  
123.16(b)(2)(vi), and adding new Sec. Sec.  123.16(c) and (d) 
referencing the new Sec. Sec.  126.16 and 126.17. Section 123.22(b)(2) 
replaces references to the Shipper's Export Declaration with the 
Electronic Export Information. We are revising the title and text for 
Sec.  123.26.
    We are revising the authority citation for part 124 to include 
Public Law 111-266. We are revising section 124.11 to add Israel to the 
list of countries and entities subject to the 15-day time period 
regarding Congressional certification.
    We are revising the authority citation for part 126 to include 
Public Law 111-266, and revising section 126.1(e) for clarification. We 
are adding a section (e)(1), to contain the current requirement found 
in (e) to notify the Directorate of Defense Trade Controls of any 
transactions that contravene the prohibitions of Sec.  126.1(a). We are 
reserving section (e)(2). We are revising section 126.3 to change 
``Director'' to ``Managing Director'' and ``Office'' to 
``Directorate.'' We are replacing references to Shipper's Export 
Declaration with Electronic Export Information in Sec.  126.4(d). We 
are revising section 126.5(a) to change ``Port Director'' to ``Port 
Directors.'' We are revising section 126.5(b) to reference the new 
supplement to part 126; consequently, we are removing Sec. Sec.  
126.5(b)(1)-(21). We are removing and reserving section 126.5(c) 
(defense services not subject to exemption will be covered by the new 
supplement to part 126). We are revising Section 126.5(d) to change 
``re-transfer'' to ``retransfer,'' and revising Sec.  126.5(d)(2) Note 
2 to reference the proposed new supplement to part 126. We are adding 
the terms ``criminal complaint'' and ``other criminal charge'' to Sec.  
126.7(a)(3), and adding clarifying language to Sec.  126.7(a)(7). We 
are revising section 126.13(a) to include reference to Sec.  123.9; 
revising Sec.  126.13(a)(1) to add the terms ``criminal complaint'' and 
``other criminal charge''; and revising Sec.  126.13(a)(4) to include 
reference to Sec.  123.9. We are proposing section 126.16 to describe 
the exemption pursuant to the Defense Trade Cooperation Treaty between 
the United States and Australia, and proposing Sec.  126.17 to describe 
the exemption pursuant to the Defense Trade Cooperation Treaty between 
the United States and the United Kingdom. We are proposing the addition 
of Supplement No. 1 to part 126, and this provision will delineate 
those items of the U.S. Munitions List that are outside the scope of 
the exemptions established by the Treaties and the Canadian exemptions 
at Sec.  126.5.
    We are revising the authority citation for part 127 to include 
Public Law 111-266. We are revising section 127.1 to make reference, 
where appropriate, to new proposed Sec. Sec.  126.16 and 126.17, and we 
are providing clarifying language, leading to the inclusion of a new 
proposed Sec.  127.1(e). We are adding the words ``or attempt to use'' 
in Sec.  127.2(a); ``subchapter'' will replace ``section'' in Sec.  
127.2(b); we are adding ``reexport'' and ``retransfer to Sec.  
127.2(b)(1); adding ``Electronic Export Information filing'' to Sec.  
127.2(b)(2); and proposing a new Sec.  127.2(b)(14). We are adding 
clarifying language to Sec.  127.3(a); adding the words ``or by 
exemption'' to Sec.  127.4(a); adding the words ``or claim of an 
exemption'' to Sec.  127.4(c); and proposing new Sec.  127.4(d). We are 
revising section 127.7(a) to remove the words ``for which a license or 
approval is required by this subchapter.'' In Sec.  127.10(a), we are 
modifying the word ``approval'' with addition of the word ``written.'' 
We are proposing new Sec.  127.12(b)(5). We are revising the structure 
of Sec.  127.12(d), removing an unnecessary level, and expanding the 
example list for ``shipping documents''.
    We are revising sections 129.6(b)(2), 129.7(a)(1)(vii), and 
129.7(a)(2) to include Israel in the listing of countries and entities.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense services is a foreign affairs function of 
the United States Government and that rules implementing this function 
are exempt from Sec.  553 (Rulemaking) and Sec.  554 (Adjudications) of 
the Administrative Procedure Act. Although the Department is of the 
opinion that this proposed rule is exempt from the rulemaking 
provisions of the APA, the Department is publishing this proposed rule 
with a 30-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 proposed amendment is not subject to the notice-and-
comment procedures of 5 U.S.C. 553, it does not require analysis under 
the Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

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

Executive Order 13175

    The Department of State has determined that this proposed amendment 
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 Executive Order 13175 does 
not apply to this proposed amendment.

Small Business Regulatory Enforcement Fairness Act of 1996

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

Executive Orders 12372 and 13132

    This proposed amendment will not have substantial direct effects on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various

[[Page 72248]]

levels of government. Therefore, in accordance with Executive Order 
13132, it is determined that this proposed amendment does not have 
sufficient federalism implications to require consultations or warrant 
the preparation of a federalism summary impact statement. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this proposed amendment.

Executive Order 12866

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

Executive Order 12988

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

Executive Order 13563

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

Paperwork Reduction Act

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

List of Subjects

22 CFR Parts 120, 123, 124, and 126

    Arms and Munitions, Exports.

22 CFR Part 127

    Arms and Munitions, Crime, Exports, Penalties, Seizures and 
Forfeitures.

22 CFR Part 129

    Arms and Munitions, Exports, Brokering.

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

PART 120--PURPOSE AND DEFINITIONS

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

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

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


Sec.  120.1  General authorities and eligibility.

    (a) Section 38 of the Arms Export Control Act (22 U.S.C. 2778), as 
amended, authorizes the President to control the export and import of 
defense articles and defense services. The statutory authority of the 
President to promulgate regulations with respect to exports of defense 
articles and defense services was delegated to the Secretary of State 
by Executive Order 11958, as amended. This subchapter implements that 
authority. Portions of this subchapter also implement the Defense Trade 
Cooperation Treaty between the United States and Australia and the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom. (Note, however, that the Treaties are not the source of 
authority for the prohibitions in part 127, but instead are the source 
of one limitation on the scope of such prohibitions.) By virtue of 
delegations of authority by the Secretary of State, these regulations 
are primarily administered by the Deputy Assistant Secretary of State 
for Defense Trade and Regional Security and the Managing Director of 
Defense Trade Controls, Bureau of Political-Military Affairs.
* * * * *
    (c) Receipt of Licenses and Eligibility.
    (1) A U.S. person may receive a license or other approval pursuant 
to this subchapter. A foreign person may not receive such a license or 
other approval, except as follows:
    (i) A foreign governmental entity in the United States may receive 
an export license or other export approval;
    (ii) A foreign person may receive a reexport or retransfer 
approval; and
    (iii) A foreign person may receive a prior approval for brokering 
activities.
    Requests for a license or other approval other than by a person 
referred to in paragraphs (c)(1)(i) and (c)(1)(ii) will be considered 
only if the applicant has registered with the Directorate of Defense 
Trade Controls pursuant to part 122 or 129 of this subchapter, as 
appropriate.
    (2) Persons who have been convicted of violating the criminal 
statutes enumerated in Sec.  120.27 of this subchapter, who have been 
debarred pursuant to part 127 or 128 of this subchapter, who are 
subject to indictment or are otherwise charged (e.g., by information) 
for violating the criminal statutes enumerated in Sec.  120.27 of this 
subchapter, who are ineligible to contract with, or to receive a 
license or other form of authorization to import defense articles or 
defense services from any agency of the U.S. Government, who are 
ineligible to receive an export license or other approval from any 
other agency of the U.S. Government, or who are subject to a Department 
of State policy of denial, suspension or revocation under Sec.  
126.7(a) of this subchapter, or to interim suspension under Sec.  127.8 
of this subchapter, are generally ineligible to be involved in 
activities regulated under this subchapter.
    (d) The exemptions provided in this subchapter do not apply to 
transactions in which the exporter, any party to the export (as defined 
in Sec.  126.7(e) of this subchapter), any source or manufacturer, 
broker or other participant in the brokering activities, is generally 
ineligible as set forth above in paragraph (c) of this section, unless 
prior written authorization has been granted by the Directorate of 
Defense Trade Controls.
    3. Section 120.19 is revised to read as follows:


Sec.  120.19  Reexport or retransfer.

    Reexport or retransfer means the transfer of defense articles or 
defense services to an end-use, end-user, or destination not previously 
authorized by license, written approval, or exemption pursuant to this 
subchapter.
    4. Section 120.28 is amended by revising paragraph (b)(2) to read 
as follows:


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

* * * * *
    (b) * * *
    (2) Electronic Export Information filed via the Automated Export 
System.
* * * * *
    5. Section 120.33 is added to read as follows:


Sec.  120.33  Defense Trade Cooperation Treaty between the United 
States and Australia.

    Defense Trade Cooperation Treaty between the United States and 
Australia means the Treaty between the Government of the United States 
of America and the Government of

[[Page 72249]]

Australia Concerning Defense Trade Cooperation, done at Sydney, 
September 5, 2007. For additional information on making exports 
pursuant to this treaty, see Sec.  126.16 of this subchapter.
    6. Section 120.34 is added to read as follows:


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

    Defense Trade Cooperation Treaty between the United States and the 
United Kingdom means the Treaty between the Government of the United 
States of America and the Government of the United Kingdom of Great 
Britain and Northern Ireland Concerning Defense Trade Cooperation, done 
at Washington DC and London, June 21 and 26, 2007. For additional 
information on making exports pursuant to this treaty, see Sec.  126.17 
of this subchapter.
    7. Section 120.35 is added to read as follows:


Sec.  120.35  Australia Implementing Arrangement.

    Australia Implementing Arrangement means the Implementing 
Arrangement Pursuant to the Treaty between the Government of the United 
States of America and the Government of Australia Concerning Defense 
Trade Cooperation, done at Washington, March 14, 2008, as it may be 
amended.
    8. Section 120.36 is added to read as follows:


Sec.  120.36  United Kingdom Implementing Arrangement.

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

PART 123--LICENSES FOR THE EXPORT OF DEFENSE ARTICLES

    9. 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.

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


Sec.  123.4  Temporary import license exemptions.

* * * * *
    (d) Procedures. To the satisfaction of the Port Directors of U.S. 
Customs and Border Protection, the importer and exporter must comply 
with the following procedures:
* * * * *
    11. Section 123.9 is amended by revising paragraphs (a), (b), (c), 
(e), (e)(1), (e)(3), (e)(4), and removing and reserving paragraph (d), 
to read as follows:


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

    (a) The country designated as the country of ultimate destination 
on an application for an export license, or in an Electronic Export 
Information filing where an exemption is claimed under this subchapter, 
must be the country of ultimate end use. The written approval of the 
Directorate of Defense Trade Controls must be obtained before 
reselling, transferring, reexporting, retransferring, transshipping, or 
disposing of a defense article to any end-user, end-use, or destination 
other than as stated on the export license, or in the Electronic Export 
Information filing in cases where an exemption is claimed under this 
subchapter, except in accordance with the provisions of an exemption 
under this subchapter that explicitly authorizes the resell, transfer, 
reexport, retransfer, transshipment, or disposition of a defense 
article without such approval. A person must determine the specific 
end-user, end-use, and destination prior to submitting an application 
to the Directorate of Defense Trade Controls or claiming an exemption 
under this subchapter.

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

    (b) The exporter shall incorporate the following statement as an 
integral part of the bill of lading, airway bill, or other shipping 
documents and the invoice whenever defense articles or defense services 
are to be exported or transferred pursuant to a license, other written 
approval, or an exemption under this subchapter, other than the 
exemptions contained in Sec.  126.16 and Sec.  126.17 of this 
subchapter (Note: for exports made pursuant to Sec.  126.16 or Sec.  
126.17 of this subchapter, see Sec.  126.16(j)(5) or Sec.  
126.17(j)(5)): ``These commodities are authorized by the U.S. 
Government for export only to [country of ultimate destination] for use 
by [end-user]. They may not be transferred, transshipped on a non-
continuous voyage, or otherwise be disposed of, to any other country or 
end-user, either in their original form or after being incorporated 
into other end-items, without the prior written approval of the U.S. 
Department of State.''
    (c) Any person requesting written approval from the Directorate of 
Defense Trade Controls for the reexport, retransfer, other disposition, 
or change in end use, end user, or destination of a defense article or 
defense service initially exported or transferred pursuant to a license 
or other written approval, or an exemption under this subchapter, must 
submit all the documentation required for a permanent export license 
(see Sec.  123.1 of this subchapter) and shall also submit the 
following:
    (1) The license number, written authorization, or exemption under 
which the defense article or defense service was previously authorized 
for export from the United States (Note: For exports under exemptions 
at Sec.  126.16 or Sec.  126.17 of this subchapter, the original end-
use, program, project, or operation under which the item was exported 
must be identified.);
    (2) A precise description, quantity, and value of the defense 
article or defense service;
    (3) A description and identification of the new end-user, end-use, 
and destination; and
    (4) With regard to any request for such approval relating to a 
defense article or defense service initially exported pursuant to an 
exemption contained in Sec.  126.16 or Sec.  126.17 of this subchapter, 
written request for the prior approval of the transaction from the 
Directorate of Defense Trade Controls must be submitted:
    (i) By the original U.S. exporter, provided a written request is 
received from a member of the Australian Community, as identified in 
Sec.  126.16 of this subchapter, or the United Kingdom Community, as 
identified in Sec.  126.17 of this subchapter (where such a written 
request includes a written certification from the member of the 
Australian Community or the United Kingdom Community providing the 
information set forth in this subsection); or
    (ii) By a member of the Australian Community or the United Kingdom 
Community, where such request provides the information set forth in 
this section.
    (d) [Reserved]
    (e) Reexports or retransfers of U.S.-origin components incorporated 
into a foreign defense article to NATO, NATO agencies, a government of 
a NATO

[[Page 72250]]

country, or the governments of Australia, Israel, Japan, New Zealand, 
or the Republic of Korea are authorized without the prior written 
approval of the Directorate of Defense Trade Controls, provided:
    (1) The U.S.-origin components were previously authorized for 
export from the United States, either by a license, written 
authorization, or an exemption other than those described in either 
Sec.  126.16 or Sec.  126.17 of this subchapter;
* * * * *
    (3) The person reexporting the defense article provides written 
notification to the Directorate of Defense Trade Controls of the 
retransfer not later than 30 days following the reexport. The 
notification must state the articles being reexported and the recipient 
government.
    (4) The original license or other approval of the Directorate of 
Defense Trade Controls did not include retransfer or reexport 
restrictions prohibiting use of this exemption.
    12. Section 123.15 is amended by revising paragraphs (a)(1), 
(a)(2), and (b) to read as follows:


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

    (a) * * *
    (1) A license for the export of major defense equipment sold under 
a contract in the amount of $14,000,000 or more, or for defense 
articles and defense services sold under a contract in the amount of 
$50,000,000 or more, to any country that is not a member of the North 
Atlantic Treaty Organization (NATO), or Australia, Israel, Japan, New 
Zealand, or the Republic of Korea that does not authorize a new sales 
territory; or
    (2) A license for export to a country that is a member country of 
the North Atlantic Treaty Organization (NATO), or Australia, Israel, 
Japan, New Zealand, or the Republic of Korea, of major defense 
equipment sold under a contract in the amount in the amount of 
$25,000,000 or more, or for defense articles and defense services sold 
under a contract in the amount of $100,000,000 or more, and provided 
the transfer does not include any other countries; or
* * * * *
    (b) Unless an emergency exists which requires the proposed export 
in the national security interests of the United States, approval may 
not be granted for any transaction until at least 15 calendar days have 
elapsed after receipt by the Congress of the certification required by 
22 U.S.C. 2776(c)(1) involving the North Atlantic Treaty Organization, 
or Australia, Israel, Japan, New Zealand, or the Republic of Korea or 
at least 30 calendar days have elapsed for any other country; in the 
case of a license for an export of a commercial communications 
satellite for launch from, and by nationals of, the Russian Federation, 
Ukraine, or Kazakhstan, until at least 15 calendar days after the 
Congress receives such certification.
* * * * *
    13. Section 123.16 is amended by revising paragraphs (a) 
introductory text, (b)(1)(iii), (b)(2)(vi), and adding paragraphs (c) 
and (d), to read as follows:


Sec.  123.16  Exemptions of general applicability.

    (a) The following exemptions apply to exports of unclassified 
defense articles for which no approval is needed from the Directorate 
of Defense Trade Controls. These exemptions do not apply to: Proscribed 
destinations under Sec.  126.1 of this subchapter; exports for which 
Congressional notification is required (see Sec.  123.15 of this 
subchapter); MTCR articles; Significant Military Equipment (SME); and 
may not be used by persons who are generally ineligible as described in 
Sec.  120.1(c) of this subchapter. All shipments of defense articles, 
including but not limited to those to and from Australia, Canada, and 
the United Kingdom, require an Electronic Export Information (EEI) 
filing or notification letter. If the export of a defense article is 
exempt from licensing, the EEI filing must cite the exemption. Refer to 
Sec.  123.22 of this subchapter for EEI filing and letter notification 
requirements.
    (b) * * *
    (1) * * *
    (iii) The exporter certifies in the EEI filing that the export is 
exempt from the licensing requirements of this subchapter. This is done 
by writing, ``22 CFR 123.16(b)(1) and the agreement or arrangement 
(identify/state number) applicable''; and
* * * * *
    (2) * * *
    (vi) The exporter must certify on the invoice, the bill of lading, 
air waybill, or shipping documents and in the EEI filing that the 
export is exempt from the licensing requirements of this subchapter. 
This is done by writing ``22 CFR 123.16(b)(2) applicable''.
* * * * *
    (c) For exports to Australia pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia refer to 
Sec.  126.16 of this subchapter.
    (d) For exports to the United Kingdom pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom 
refer to Sec.  126.17 of this subchapter.
    14. Section 123.22 is amended by revising paragraph (b)(2) to read 
as follows:


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

* * * * *
    (b) * * *
    (2) Emergency shipments of hardware that cannot meet the pre-
departure filing requirements. U.S. Customs and Border Protection may 
permit an emergency export of hardware by truck (e.g., departures to 
Mexico or Canada) or air, by a U.S. registered person, when the 
exporter is unable to comply with the Electronic Export Information 
(EEI) filing timeline in paragraph (b)(1)(i) of this section. The 
applicant, or an agent acting on the applicant's behalf, in addition to 
providing the EEI using the AES, must provide documentation required by 
the U.S. Customs and Border Protection and this subchapter. The 
documentation provided to the U.S. Customs and Border Protection at the 
port of exit must include the External Transaction Number (XTN) or 
Internal Transaction Number (ITN) for the shipment and a copy of a 
notification to the Directorate of Defense Trade Controls stating that 
the shipment is urgent accompanied by an explanation for the urgency. 
The original of the notification must be immediately provided to the 
Directorate of Defense Trade Controls. The AES filing of the export 
information when the export is by air must be at least two hours prior 
to any departure from the United States; and, when a truck shipment, at 
the time when the exporter provides the articles to the carrier or at 
least one hour prior to departure from the United States, when the 
permanent export of the hardware has been authorized for export:
* * * * *
    15. Section 123.26 is revised to read as follows:


Sec.  123.26  Recordkeeping for exemptions.

    Any person engaging in any export, reexport, transfer, or 
retransfer of a defense article or defense service pursuant to an 
exemption must maintain records of each such export, reexport, 
transfer, or retransfer. The records shall include the following 
information: A description of the defense article, including technical 
data, or defense service; the name and address of the end-user and 
other available contact information (e.g., telephone number and 
electronic mail address); the name of the natural person

[[Page 72251]]

responsible for the transaction; the stated end-use of the defense 
article or defense service; the date and time of the transaction; the 
Electronic Export Information (EEI) Internal Transaction Number (ITN); 
and the method of transmission. The person using or acting in reliance 
upon the exemption shall also comply with any additional recordkeeping 
requirements enumerated in the text of the regulations concerning such 
exemption.
* * * * *

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

    16. 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); 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.

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


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

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

PART 126--GENERAL POLICIES AND PROVISIONS

    18. The authority citation for part 126 is revised to read as 
follows:

    Authority: Secs. 2, 38, 40, 42, and 71, Pub. L. 90-629, 90 Stat. 
744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); E.O. 11958, 42 FR 
4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; 22 U.S.C. 287c; E.O. 
12918, 59 FR 28205; 3 CFR, 1994 Comp. p. 899; Sec. 1225, Pub. L. 
108-375; Sec. 7089, Pub. L. 111-117; Pub. L. 111-266.

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


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

* * * * *
    (e) Proposed sales. No sale, export, transfer, reexport, or 
retransfer and no proposal to sell, export, transfer, reexport, or 
retransfer any defense articles or defense services subject to this 
subchapter may be made to any country referred to in this section 
(including the embassies or consulates of such a country), or to any 
person acting on its behalf, whether in the United States or abroad, 
without first obtaining a license or written approval of the 
Directorate of Defense Trade Controls. However, in accordance with 
paragraph (a) of this section, it is the policy of the Department of 
State to deny licenses and approvals in such cases.
    (1) Duty to Notify: Any person who knows or has reason to know of 
such a proposed or actual sale, export, transfer, reexport, or 
retransfer of such articles, services, or data must immediately inform 
the Directorate of Defense Trade Controls. Such notifications should be 
submitted to the Office of Defense Trade Controls Compliance, 
Directorate of Defense Trade Controls.
    (2) [Reserved]
* * * * *
    20. Section 126.3 is revised to read as follows:


Sec.  126.3  Exceptions.

    In a case of exceptional or undue hardship, or when it is otherwise 
in the interest of the United States Government, the Managing Director, 
Directorate of Defense Trade Controls, may make an exception to the 
provisions of this subchapter.
    21. Section 126.4 is amended by revising paragraph (d) to read as 
follows:


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

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


Sec.  126.5  Canadian exemptions.

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

[[Page 72252]]

request for reexport/retransfer may be made directly to the Directorate 
of Defense Trade Controls. All requests must include the information in 
Sec.  123.9(c) of this subchapter. Reexport/retransfer approval is 
acquired by:
* * * * *

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


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


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

    (a) * * *
    (3) An applicant is the subject of a criminal complaint, other 
criminal charge (e.g., an information), or indictment for a violation 
of any of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter; or
* * * * *
    (7) An applicant has failed to include any of the information or 
documentation expressly required to support a license application, 
exemption, or other request for approval under this subchapter, or as 
required in the instructions in the applicable Department of State form 
or has failed to provide notice or information as required under this 
subchapter; or
* * * * *
    (e) Special definition. For purposes of this subchapter, the term 
``Party to the Export'' means:
* * * * *
    24. Section 126.13 is amended by revising paragraphs (a) 
introductory text, (a)(1), and (a)(4) to read as follows:


Sec.  126.13  Required information.

    (a) All applications for licenses (DSP-5, DSP-61, DSP-73, and DSP-
85), all requests for approval of agreements and amendments thereto 
under part 124 of this subchapter, and all requests for other written 
authorizations (including requests for retransfer or reexport pursuant 
to Sec.  123.9 of this subchapter) must include a letter signed by a 
responsible official empowered by the applicant and addressed to the 
Directorate of Defense Trade Controls, stating whether:
    (1) The applicant or the chief executive officer, president, vice-
presidents, other senior officers or officials (e.g., comptroller, 
treasurer, general counsel) or any member of the board of directors is 
the subject of a criminal complaint, other criminal charge (e.g., an 
information), or indictment for or has been convicted of violating any 
of the U.S. criminal statutes enumerated in Sec.  120.27 of this 
subchapter since the effective date of the Arms Export Control Act, 
Public Law 94-329, 90 Stat. 729 (June 30, 1976);
* * * * *
    (4) The natural person signing the application, notification or 
other request for approval (including the statement required by this 
subsection) is a citizen or national of the United States, has been 
lawfully admitted to the United States for permanent residence (and 
maintains such lawful permanent residence status under the Immigration 
and Nationality Act, as amended (8 U.S.C. 1101(a), section 101(a)20, 60 
Stat. 163), or is an official of a foreign government entity in the 
United States, or is a foreign person making a request pursuant to 
Sec.  123.9 of this subchapter.
* * * * *
    25. Section 126.16 is added to read as follows:


Sec.  126.16  Exemption pursuant to the Defense Trade Cooperation 
Treaty between the United States and Australia.

    (a) Scope of exemption and required conditions.
    (1) Definitions.
    (i) An export means, for purposes of this section only, the initial 
movement of defense articles or defense services from the United States 
Community to the Australian Community.
    (ii) A transfer means, for purposes of this section only, the 
movement of a defense article or defense service, previously exported, 
by a member of the Australian Community within the Australian 
Community, or between a member of the United States Community and a 
member of the Australian Community.
    (iii) Retransfer and reexport have the meaning provided in Sec.  
120.19 of this subchapter.
    (iv) Intermediate consignee means, for purposes of this section, an 
entity or person who receives defense articles, including technical 
data, but who does not have access to such defense articles, for the 
sole purpose of effecting onward movement to members of the Approved 
Community.
    (2) Persons or entities exporting or transferring defense articles 
or defense services are exempt from the otherwise applicable licensing 
requirements if such persons or entities comply with the regulations 
set forth in this section. Except as provided in Supplement No. 1 to 
part 126 of this subchapter, Port Directors of U.S. Customs and Border 
Protection and postmasters shall permit the permanent and temporary 
export without a license to members of the Australian Community (see 
paragraph (d) of this section regarding the identification of members 
of the Australian Community) of defense articles and defense services 
not listed in Supplement No. 1 to part 126, for the end-uses 
specifically identified pursuant to paragraphs (e) and (f) of this 
section. The purpose of this section is to specify the requirements to 
export, transfer, reexport, retransfer, or otherwise dispose of a 
defense article or defense service pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia.
    (3) Export. In order for an exporter to export a defense article or 
defense service pursuant to the Defense Trade Cooperation Treaty 
between the United States and Australia, all of the following 
conditions must be met:
    (i) The exporter must be registered with the Directorate of Defense 
Trade Controls and must be eligible, according to the requirements and 
prohibitions of the Arms Export Control Act, this subchapter, and other 
provisions of United States law, to obtain an export license (or other 
forms of authorization to export) from any agency of the U.S. 
Government without restriction (see paragraphs (b) and (c) of this 
section for specific requirements);
    (ii) The recipient of the export must be a member of the Australian 
Community (see paragraph (d) of this section regarding the 
identification of members of the Australian Community). Australian 
entities and facilities that become ineligible for such membership will 
be removed from the Australian Community;
    (iii) Intermediate consignees involved in the export must be 
eligible, according to the requirements and prohibitions of the Arms 
Export Control Act, this subchapter, and other provisions of United 
States law, to handle or receive a defense article or defense service 
without restriction (see paragraph (k) of this section for specific 
requirements);
    (iv) The export must be for an end-use specified in the Defense 
Trade

[[Page 72253]]

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

[[Page 72254]]

prior written approval from the Directorate of Defense Trade Controls.
    (3) U.S.-origin classified defense articles or defense services may 
be exported only pursuant to a written request, directive, or contract 
from the U.S. Department of Defense that provides for the export of the 
classified defense article(s) or defense service(s).
    (4) Defense articles specific to developmental systems that have 
not obtained written Milestone B approval from the Department of 
Defense milestone approval authority are not eligible for export unless 
such export is pursuant to a written solicitation or contract issued or 
awarded by the Department of Defense for an end-use identified pursuant 
to paragraphs (e)(1), (2), or (4) of this section.
    (5) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category 
XI(a)(3) electronically scanned array radar) that are embedded in a 
larger system that is eligible to ship under this section (e.g., a ship 
or aircraft) must separately comply with any restrictions placed on 
that embedded defense article under this subsection. The exporter must 
obtain a license or other authorization from the Directorate of Defense 
Trade Controls for the export of such embedded defense articles (for 
example, USML Category XI(a)(3) electronically scanned array radar 
systems that are exempt from this section that are incorporated in an 
aircraft that is eligible to ship under the this section continue to 
require separate authorization from the Directorate of Defense Trade 
Controls for their export, transfer, reexport, or retransfer).
    (6) No liability shall be incurred by or attributed to the U.S. 
Government in connection with any possible infringement of privately 
owned patent or proprietary rights, either domestic or foreign, by 
reason of an export conducted pursuant to this section.
    (7) Sales by exporters made through the U.S. Government shall not 
include either charges for patent rights in which the U.S. Government 
holds a royalty-free license, or charges for information which the U.S. 
Government has a right to use and disclose to others, which is in the 
public domain, or which the U.S. Government has acquired or is entitled 
to acquire without restrictions upon its use and disclosure to others.
    (h) Transfers, Retransfers, and Reexports.
    (1) Any transfer of a defense article or defense service not 
exempted in Supplement No. 1 to part 126 of this subchapter by a member 
of the Australian Community (see paragraph (d) of this section for 
specific information on the identification of the Community) to another 
member of the Australian Community or the United States Community for 
an end-use that is authorized by this exemption (see paragraphs (e) and 
(f) of this section regarding authorized end-uses) is authorized under 
this exemption.
    (2) Any transfer or other provision of a defense article or defense 
service for an end-use that is not authorized by the exemption provided 
by this section is prohibited without a license or the prior written 
approval of the Directorate of Defense Trade Controls (see paragraphs 
(e) and (f) of this section regarding authorized end-uses).
    (3) Any retransfer or reexport, or other provision of a defense 
article or defense service by a member of the Australian Community to a 
foreign person that is not a member of the Australian Community, or to 
a U.S. person that is not a member of the United States Community, is 
prohibited without a license or the prior written approval of the 
Directorate of Defense Trade Controls (see paragraph (d) of this 
section for specific information on the identification of the 
Australian Community).
    (4) Any change in the use of a defense article or defense service 
previously exported, transferred, or obtained under this exemption by 
any foreign person, including a member of the Australian Community, to 
an end-use that is not authorized by this exemption is prohibited 
without a license or other written approval of the Directorate of 
Defense Trade Controls (see paragraphs (e) and (f) of this section 
regarding authorized end-uses).
    (5) Any retransfer, reexport, or change in end-use requiring such 
approval of the U.S. Government shall be made in accordance with Sec.  
123.9 of this subchapter.
    (6) Defense articles excluded by paragraph (g) of this section or 
Supplement No. 1 to part 126 of this subchapter (e.g., USML Category 
XI(a)(3) electronically scanned array radar) that are embedded in a 
larger system that is eligible to ship under this section (e.g., a ship 
or aircraft) must separately comply with any restrictions placed on 
that embedded defense article unless otherwise specified. A license or 
other authorization must be obtained from the Directorate of Defense 
Trade Controls for the retransfer, reexport or change in end-use of any 
such embedded defense article (for example, USML Category XI(a)(3) 
electronically scanned radar systems that are exempt from this section 
that are incorporated in an aircraft that is eligible to ship under the 
this section continue to require separate authorization from the 
Directorate of Defense Trade Controls for their export, transfer, 
reexport, or retransfer).
    (7) A license or prior approval from the Directorate of Defense 
Trade Controls is not required for a transfer, retransfer, or reexport 
of an exported defense article or defense service under this section, 
if:
    (i) The transfer of defense articles or defense services is made by 
a member of the United States Community to Australian Department of 
Defense (ADOD) elements deployed outside the Territory of Australia and 
engaged in an authorized end-use (see paragraphs (e) and (f) of this 
section regarding authorized end-uses) using ADOD transmission channels 
or the provisions of this section (Note: For purposes of paragraph 
(h)(7)(i)-(iv), per Section 9(9) of the Australia Implementing 
Arrangement, ``ADOD Transmission channels'' includes electronic 
transmission of a defense article and transmission of a defense article 
by an ADOD contracted carrier or freight forwarder that merely 
transports or arranges transport for the defense article in this 
instance.);
    (ii) The transfer of defense articles or defense services is made 
by a member of the United States Community to an Approved Community 
member (either U.S. or Australian) that is operating in direct support 
of Australian Department of Defense elements deployed outside the 
Territory of Australia and engaged in an authorized end-use (see 
paragraphs (e) and (f) of this section regarding authorized end-uses) 
using ADOD transmission channels or the provisions of this section;
    (iii) The reexport is made by a member of the Australian Community 
to Australian Department of Defense elements deployed outside the 
Territory of Australia engaged in an authorized end-use (see paragraphs 
(e) and (f) of this section regarding authorized end-uses) using ADOD 
transmission channels or the provisions of this section;
    (iv) The retransfer or reexport is made by a member of the 
Australian Community to an Approved Community member (either United 
States or Australian) that is operating in direct support of Australian 
Department of Defense elements deployed outside the Territory of 
Australia engaged in an authorized end-use (see paragraphs (e) and (f) 
of this section regarding authorized end-uses) using ADOD transmission 
channels or the provisions of this section; or

[[Page 72255]]

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

[[Page 72256]]

of all shipping documentation (airway bill, bill of lading, manifest, 
packing documents, delivery verification, invoice, etc.) whenever 
defense articles are to be exported:
    ``These commodities are authorized by the U.S. Government for 
export only to Australia for use in approved projects, programs or 
operations by members of the Australian Community. They may not be 
retransferred or reexported or used outside of an approved project, 
program or operation, either in their original form or after being 
incorporated into other end-items, without the prior written approval 
of the U.S. Department of State.''
    (k) Intermediate Consignees.
    (1) Unclassified exports under this section may only be handled by:
    (i) U.S. intermediate consignees who are:
    (A) Exporters registered with the Directorate of Defense Trade 
Controls and eligible;
    (B) Licensed customs brokers who are subject to background 
investigation and have passed a comprehensive examination administered 
by U.S. Customs and Border Protection; or
    (C) Commercial air freight and surface shipment carriers, freight 
forwarders, or other parties not exempt from registration under Sec.  
129.3(b)(3) of this subchapter that are identified at the time of 
export as being on the list of Authorized U.S. Intermediate Consignees, 
which is available on the Directorate of Defense Trade Controls' Web 
site.
    (ii) Australian intermediate consignees who are:
    (A) Members of the Australian Community; or
    (B) Freight forwarders, customs brokers, commercial air freight and 
surface shipment carriers, or other Australian parties that are 
identified at the time of export as being on the list of Authorized 
Australian Intermediate Consignees, which is available on the 
Directorate of Defense Trade Controls' Web site.
    (2) Classified exports must comply with the security requirements 
of the National Industrial Security Program Operating Manual (DoD 
5220.22-M and supplements or successors).
    (l) Records.
    (1) All exporters authorized pursuant to paragraph (b)(2) of this 
section who export pursuant to the Defense Trade Cooperation Treaty 
between the United States and Australia and this section shall maintain 
detailed records of all exports, imports, and transfers made by that 
exporter of defense articles or defense services subject to the Defense 
Trade Cooperation Treaty between the United States and Australia and 
the requirements of this section. Exporters shall also maintain 
detailed records of any reexports and retransfers approved or otherwise 
authorized by the Directorate of Defense Trade Controls of defense 
articles or defense services subject to the Defense Trade Cooperation 
Treaty between the United States and Australia and the requirements of 
this section. These records shall be maintained for a minimum of five 
years from the date of export, import, transfer, reexport, or 
retransfer and shall be made available upon request to the Directorate 
of Defense Trade Controls, U.S. Immigration and Customs Enforcement, or 
U.S. Customs and Border Protection, or any other authorized U.S. law 
enforcement officer. Records in an electronic format must be maintained 
using a process or system capable of reproducing all records on paper. 
Such records when displayed on a viewer, monitor, or reproduced on 
paper, must exhibit a high degree of legibility and readability. (For 
the purpose of this section, ``legible'' and ``legibility'' mean the 
quality of a letter or numeral that enables the observer to identify it 
positively and quickly to the exclusion of all other letters or 
numerals. ``Readable'' and ``readability'' means the quality of a group 
of letters or numerals being recognized as complete words or numbers.) 
These records shall consist of the following:
    (i) Port of entry/exit;
    (ii) Date/time of export/import;
    (iii) Method of export/import;
    (iv) Commodity code and description of the commodity, including 
technical data;
    (v) Value of export;
    (vi) Reference to this section and justification for export under 
the Treaty;
    (vii) End-user/end-use;
    (viii) Identification of all U.S. and foreign parties to the 
transaction;
    (ix) How the export was marked;
    (x) Classification of the export;
    (xi) All written correspondence with the U.S. Government on the 
export;
    (xii) All information relating to political contributions, fees, or 
commissions furnished or obtained, offered, solicited, or agreed upon 
as outlined in paragraph (m) of this section;
    (xiii) Purchase order or contract;
    (xiv) Technical data actually exported;
    (xv) The Internal Transaction Number for the Electronic Export 
Information filing in the Automated Export System;
    (xvi) All shipping documentation (airway bill, bill of lading, 
manifest, packing documents, delivery verification, invoice, etc.); and
    (xvii) Statement of Registration (Form DS-2032).
    (2) Filing of export information. All exporters of defense articles 
and defense services under the Defense Trade Cooperation Treaty between 
the United States and Australia and the requirements of this section 
must electronically file Electronic Export Information (EEI) using the 
Automated Export System citing one of the four below referenced codes 
in the appropriate field in the EEI for each shipment:
    (i) 126.16(e)(1): used for exports in support of United States and 
Australian combined military or counter-terrorism operations (the name 
or an appropriate description of the operation shall be placed in the 
appropriate field in the EEI, as well);
    (ii) 126.16(e)(2): used for exports in support of United States and 
Australian cooperative security and defense research, development, 
production, and support programs (the name or an appropriate 
description of the program shall be placed in the appropriate field in 
the EEI, as well);
    (iii) 126.16(e)(3): used for exports in support of mutually 
determined specific security and defense projects where the Government 
of Australia is the end-user (the name or an appropriate description of 
the project shall be placed in the appropriate field in the EEI, as 
well); or
    (iv) 126.16(e)(4): used for exports that will have a U.S. 
Government end-use (the U.S. Government contract number or solicitation 
number (e.g., ``U.S. Government contract number XXXXX'') shall be 
placed in the appropriate field in the EEI, as well).
    Such exports must meet the required export documentation and filing 
guidelines, including for defense services, of Sec.  123.22(a), (b)(1), 
and (b)(2) of this subchapter.
    (m) Fees and Commissions. All exporters authorized pursuant to 
paragraph (b)(2) of this section shall, with respect to each export, 
transfer, reexport, or retransfer, pursuant to the Defense Trade 
Cooperation Treaty between the United States and Australia and this 
section, submit a statement to the Directorate of Defense Trade 
Controls containing the information identified in Sec.  130.10 of this 
subchapter relating to fees, commissions, and political contributions 
on contracts or other instruments valued in an amount of $500,000 or 
more.
    (n) Violations and Enforcement.
    (1) Exports, transfers, reexports, and retransfers that do not 
comply with the conditions prescribed in this section will constitute 
violations of the Arms Export Control Act and this subchapter,

[[Page 72257]]

and are subject to all relevant criminal, civil, and administrative 
penalties (see Sec.  127.1 of this subchapter), and may also be subject 
to other statutes or regulations.
    (2) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers have the authority to investigate, detain, 
or seize any export or attempted export of defense articles that does 
not comply with this section or that is otherwise unlawful.
    (3) 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 officers may require the production of 
documents and information relating to any actual or attempted export, 
transfer, reexport, or retransfer pursuant to this section. Any foreign 
person refusing to provide such records within a reasonable period of 
time shall be suspended from the Australian Community and ineligible to 
receive defense articles or defense services pursuant to the exemption 
under this section or otherwise.
    (o) Procedures for Legislative Notification.
    (1) Exports pursuant to the Defense Trade Cooperation Treaty 
between the United States and Australia and this section by any person 
identified in paragraph (b)(2) of this section shall not take place 
until 30 days after the Directorate of Defense Trade Controls has 
acknowledged receipt of a Form DS-4048 (entitled, ``Projected Sales of 
Major Weapons in Support of Section 25(a)(1) of the Arms Export Control 
Act'') from the exporter notifying the Department of State if the 
export involves one or more of the following:
    (i) A contract or other instrument for the export of major defense 
equipment in the amount of $25,000,000 or more, or for defense articles 
and defense services in the amount of $100,000,000 or more;
    (ii) A contract or other instrument for the export of firearms 
controlled under Category I of the U.S. Munitions List of the 
International Traffic in Arms Regulations in an amount of $1,000,000 or 
more;
    (iii) A contract or other instrument, regardless of value, for the 
manufacturing abroad of any item of significant military equipment; or
    (iv) An amended contract or other instrument that meets the 
requirements of paragraphs (o)(1)(i)-(o)(1)(iii) of this section.
    (2) The Form DS-4048 required in paragraph (o)(1) of this section 
shall be accompanied by the following additional information:
    (i) The information identified in Sec.  130.10 and Sec.  130.11 of 
this subchapter;
    (ii) A statement regarding whether any offset agreement is proposed 
to be entered into in connection with the export and a description of 
any such offset agreement;
    (iii) A copy of the signed contract or other instrument; and
    (iv) If the notification is for paragraph (o)(1)(ii) of this 
section, a statement of what will happen to the weapons in their 
inventory (for example, whether the current inventory will be sold, 
reassigned to another service branch, destroyed, etc.).
    (3) The Department of State will notify the Congress of exports 
that meet the requirements of paragraph (o)(1) of this section.
    26. Section 126.17 is added to read as follows:


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

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

[[Page 72258]]

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

[[Page 72259]]

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

[[Page 72260]]

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

[[Page 72261]]

Community. They may not be retransferred or reexported or used outside 
of an approved project, program, or operation, either in their original 
form or after being incorporated into other end-items, without the 
prior written approval of the U.S. Department of State.''
    (k) Intermediate Consignees.
    (1) Unclassified exports under this section may only be handled by:
    (i) U.S. intermediate consignees who are:
    (A) Exporters registered with the Directorate of Defense Trade 
Controls and eligible;
    (B) Licensed customs brokers who are subject to background 
investigation and have passed a comprehensive examination administered 
by U.S. Customs and Border Protection; or
    (C) Commercial air freight and surface shipment carriers, freight 
forwarders, or other parties not exempt from registration under Sec.  
129.3(b)(3) of this subchapter that are identified at the time of 
export as being on the list of Authorized U.S. Intermediate Consignees, 
which is available on the Directorate of Defense Trade Controls' Web 
site.
    (ii) United Kingdom intermediate consignees who are:
    (A) Members of the United Kingdom Community; or
    (B) Freight forwarders, customs brokers, commercial air freight and 
surface shipment carriers, or other United Kingdom parties that are 
identified at the time of export as being on the list of Authorized 
United Kingdom Intermediate Consignees, which is available on the 
Directorate of Defense Trade Controls' Web site.
    (2) Classified exports must comply with the security requirements 
of the National Industrial Security Program Operating Manual (DoD 
5220.22-M and supplements or successors).
    (l) Records.
    (1) All exporters authorized pursuant to paragraph (b)(2) of this 
section who export pursuant to the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom and this section shall 
maintain detailed records of all exports, imports, and transfers made 
by that exporter of defense articles or defense services subject to the 
Defense Trade Cooperation Treaty between the United States and the 
United Kingdom and this section. Exporters shall also maintain detailed 
records of any reexports and retransfers approved or otherwise 
authorized by the Directorate of Defense Trade Controls of defense 
articles or defense services subject to the Defense Trade Cooperation 
Treaty between the United States and the United Kingdom and this 
section. These records shall be maintained for a minimum of five years 
from the date of export, import, transfer, reexport, or retransfer and 
shall be made available upon request to the Directorate of Defense 
Trade Controls, U.S. Immigration and Customs Enforcement, or U.S. 
Customs and Border Protection, or any other authorized U.S. law 
enforcement officer. Records in an electronic format must be maintained 
using a process or system capable of reproducing all records on paper. 
Such records when displayed on a viewer, monitor, or reproduced on 
paper, must exhibit a high degree of legibility and readability. (For 
the purpose of this section, ``legible'' and ``legibility'' mean the 
quality of a letter or numeral that enables the observer to identify it 
positively and quickly to the exclusion of all other letters or 
numerals. ``Readable'' and ``readability'' means the quality of a group 
of letters or numerals being recognized as complete words or numbers.) 
These records shall consist of the following:
    (i) Port of entry/exit;
    (ii) Date/time of export/import;
    (iii) Method of export/import;
    (iv) Commodity code and description of the commodity, including 
technical data;
    (v) Value of export;
    (vi) Reference to this section and justification for export under 
the Treaty;
    (vii) End-user/end-use;
    (viii) Identification of all U.S. and foreign parties to the 
transaction;
    (ix) How the export was marked;
    (x) Classification of the export;
    (xi) All written correspondence with the U.S. Government on the 
export;
    (xii) All information relating to political contributions, fees, or 
commissions furnished or obtained, offered, solicited, or agreed upon 
as outlined in subsection (m) below;
    (xiii) Purchase order or contract;
    (xiv) Technical data actually exported;
    (xv) The Internal Transaction Number for the Electronic Export 
Information filing in the Automated Export System;
    (xvi) All shipping documentation (airway bill, bill of lading, 
manifest, packing documents, delivery verification, invoice, etc.); and
    (xvii) Statement of Registration (Form DS-2032).
    (2) Filing of export information. All exporters of defense articles 
and defense services under the Defense Trade Cooperation Treaty between 
the United States and the United Kingdom and this section must 
electronically file Electronic Export Information (EEI) using the 
Automated Export System citing one of the four below referenced codes 
in the appropriate field in the EEI for each shipment:
    (i) 126.16(e)(1): Used for exports in support of United States and 
United Kingdom combined military or counter-terrorism operations (the 
name or an appropriate description of the operation shall be placed in 
the appropriate field in the EEI, as well);
    (ii) 126.16(e)(2): Used for exports in support of United States and 
United Kingdom cooperative security and defense research, development, 
production, and support programs (the name or an appropriate 
description of the program shall be placed in the appropriate field in 
the EEI, as well);
    (iii) 126.16(e)(3): Used for exports in support of mutually 
determined specific security and defense projects where the Government 
of the United Kingdom is the end-user (the name or an appropriate 
description of the project shall be placed in the appropriate field in 
the EEI, as well); or
    (iv) 126.16(e)(4): Used for exports that will have a U.S. 
Government end-use (the U.S. Government contract number or solicitation 
number (e.g., ``U.S. Government contract number XXXXX'') shall be 
placed in the appropriate field in the EEI, as well).
    Such exports must meet the required export documentation and filing 
guidelines, including for defense services, of Sec.  123.22(a), (b)(1), 
and (b)(2) of this subchapter.
    (m) Fees and Commissions. All exporters authorized pursuant to 
paragraph (b)(2) of this section shall, with respect to each export, 
transfer, reexport, or retransfer, pursuant to the Defense Trade 
Cooperation Treaty between the United States and the United Kingdom and 
this section, submit a statement to the Directorate of Defense Trade 
Controls containing the information identified in Sec.  130.10 of this 
subchapter relating to fees, commissions, and political contributions 
on contracts or other instruments valued in an amount of $500,000 or 
more.
    (n) Violations and Enforcement.
    (1) Exports, transfers, reexports, and retransfers that do not 
comply with the conditions prescribed in this section will constitute 
violations of the Arms Export Control Act and this subchapter, and are 
subject to all relevant criminal, civil, and administrative penalties 
(see Sec.  127.1 of this subchapter), and may also be subject to other 
statutes or regulations.
    (2) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers have the authority to investigate, detain, 
or seize

[[Page 72262]]

any export or attempted export of defense articles that does not comply 
with this section or that is otherwise unlawful.
    (3) 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 officers may require the production of 
documents and information relating to any actual or attempted export, 
transfer, reexport, or retransfer pursuant to this section. Any foreign 
person refusing to provide such records within a reasonable period of 
time shall be suspended from the United Kingdom Community and 
ineligible to receive defense articles or defense services pursuant to 
the exemption under this section or otherwise.
    (o) Procedures for Legislative Notification.
    (1) Exports pursuant to the Defense Trade Cooperation Treaty 
between the United States and the United Kingdom and this section by 
any person identified in paragraph (b)(2) of this section shall not 
take place until 30 days after the Directorate of Defense Trade 
Controls has acknowledged receipt of a Form DS-4048 (entitled, 
``Projected Sales of Major Weapons in Support of Section 25(a)(1) of 
the Arms Export Control Act'') from the exporter notifying the 
Department of State if the export involves one or more of the 
following:
    (i) A contract or other instrument for the export of major defense 
equipment in the amount of $25,000,000 or more, or for defense articles 
and defense services in the amount of $100,000,000 or more;
    (ii) A contract or other instrument for the export of firearms 
controlled under Category I of the U.S. Munitions List of the 
International Traffic in Arms Regulations in an amount of $1,000,000 or 
more;
    (iii) A contract or other instrument, regardless of value, for the 
manufacturing abroad of any item of significant military equipment; or
    (iv) An amended contract or other instrument that meets the 
requirements of paragraphs (o)(1)(i)-(o)(1)(iii) of this section.
    (2) The Form DS-4048 required in paragraph (o)(1) of this section 
shall be accompanied by the following additional information:
    (i) The information identified in Sec.  130.10 and Sec.  130.11 of 
this subchapter;
    (ii) A statement regarding whether any offset agreement is proposed 
to be entered into in connection with the export and a description of 
any such offset agreement;
    (iii) A copy of the signed contract or other instrument; and
    (iv) If the notification is for paragraph (o)(1)(ii) of this 
section, a statement of what will happen to the weapons in their 
inventory (for example, whether the current inventory will be sold, 
reassigned to another service branch, destroyed, etc.).
    (3) The Department of State will notify the Congress of exports 
that meet the requirements of paragraph (o)(1) of this section.
    27. Supplement No. 1 is added to Part 126 read as follows:

                                               Supplement No. 1 *
----------------------------------------------------------------------------------------------------------------
                                                                               (CA) Sec.   (AS) Sec.   (UK) Sec.
               USML category                            Exclusion                126.5       126.16      126.17
----------------------------------------------------------------------------------------------------------------
I-XXI......................................  Classified defense articles and          X           X           X
                                              services. See Note 1.
I-XXI......................................  Defense articles listed in the           X           X           X
                                              Missile Technology Control
                                              Regime (MTCR) Annex.
I-XXI......................................  U.S. origin defense articles     ..........          X           X
                                              and services used for
                                              marketing purposes and not
                                              previously licensed for export
                                              in accordance with this
                                              subchapter.
I-XXI......................................  Defense services for or                  X   ..........  ..........
                                              technical data related to
                                              defense articles identified in
                                              this supplement as excluded
                                              from the Canadian exemption.
I-XXI......................................  Any transaction involving the            X   ..........  ..........
                                              export of defense articles and
                                              services for which
                                              congressional notification is
                                              required in accordance with
                                              Sec.   123.15 and Sec.
                                              124.11 of this subchapter.
I-XXI......................................  U.S. origin defense articles     ..........          X           X
                                              and services specific to
                                              developmental systems that
                                              have not obtained written
                                              Milestone B approval from the
                                              U.S. Department of Defense
                                              milestone approval authority,
                                              unless such export is pursuant
                                              to a written solicitation or
                                              contract issued or awarded by
                                              the U.S. Department of Defense
                                              for an end use identified in
                                              subsections (e)(1), (2), or
                                              (4) of Sec.   126.16 or Sec.
                                              126.17 of this subchapter and
                                              is consistent with other
                                              exclusions of this supplement.
I-XXI......................................  Nuclear weapons strategic                X   ..........  ..........
                                              delivery systems and all
                                              components, parts,
                                              accessories, and attachments
                                              specifically designed for such
                                              systems and associated
                                              equipment.
I-XXI......................................  Defense articles and services    ..........          X           X
                                              specific to the existence or
                                              method of compliance with anti-
                                              tamper measures made at U.S.
                                              Government direction.
I-XXI......................................  Defense articles and services    ..........          X           X
                                              specific to reduced
                                              observables or counter low
                                              observables in any part of the
                                              spectrum. See Note 2.
I-XXI......................................  Defense articles and services    ..........          X           X
                                              specific to sensor fusion
                                              beyond that required for
                                              display or identification
                                              correlation. See Note 3.
I-XXI......................................  Defense articles and services    ..........          X           X
                                              specific to the automatic
                                              target acquisition or
                                              recognition and cueing of
                                              multiple autonomous unmanned
                                              systems.
I-XXI......................................  Nuclear power generating         ..........  ..........          X
                                              equipment or propulsion
                                              equipment (e.g. nuclear
                                              reactors), specifically
                                              designed for military use and
                                              components therefore,
                                              specifically designed for
                                              military use. See also Sec.
                                              123.20 of this subchapter.
I-XXI......................................  Libraries (parametric technical  ..........  ..........          X
                                              databases) specially designed
                                              for military use with
                                              equipment controlled on the
                                              USML.
I-XXI......................................  Defense services or technical            X   ..........  ..........
                                              data specific to applied
                                              research as defined in Sec.
                                              125.4(c)(3) of this
                                              subchapter, design methodology
                                              as defined in Sec.
                                              125.4(c)(4) of this
                                              subchapter, engineering
                                              analysis as defined in Sec.
                                              125.4(c)(5) of this
                                              subchapter, or manufacturing
                                              know-how as defined in Sec.
                                              125.4(c)(6) of this subchapter.

[[Page 72263]]

 
I-XXI......................................  Defense services that are not            X   ..........  ..........
                                              based on a written arrangement
                                              (between the U.S. exporter and
                                              the Canadian recipient) that
                                              includes a clause requiring
                                              that all documentation created
                                              from U.S. origin technical
                                              data contain the statement
                                              that ``This document contains
                                              technical data, the use of
                                              which is restricted by the
                                              U.S. Arms Export Control Act.
                                              This data has been provided in
                                              accordance with, and is
                                              subject to, the limitations
                                              specified in Sec.   126.5 of
                                              the International Traffic In
                                              Arms Regulations (ITAR). By
                                              accepting this data, the
                                              consignee agrees to honor the
                                              requirements of the ITAR''.
I..........................................  Defense articles and services            X   ..........  ..........
                                              related to firearms, close
                                              assault weapons, and combat
                                              shotguns.
II(k)......................................  Software source code related to  ..........          X           X
                                              Categories II(c), II(d), or
                                              II(i). See Note 4.
II(k)......................................  Manufacturing know-how related           X           X           X
                                              to Category II(d). See Note 5.
III........................................  Defense articles and services            X   ..........  ..........
                                              related to ammunition for
                                              firearms, close assault
                                              weapons, and combat shotguns
                                              listed in Category I.
III........................................  Defense articles and services    ..........  ..........          X
                                              specific to ammunition and
                                              fuse setting devices for guns
                                              and armament controlled in
                                              Category II.
III(e).....................................  Manufacturing know-how related           X           X           X
                                              to Categories III(d)(1) or
                                              III(d)(2) and their specially
                                              designed components. See Note
                                              5.
III(e).....................................  Software source code related to  ..........          X           X
                                              Categories III(d)(1) or
                                              III(d)(2). See Note 4.
IV.........................................  Defense articles and services            X           X           X
                                              specific to man-portable air
                                              defense systems (MANPADS). See
                                              Note 6.
IV.........................................  Defense articles and services    ..........  ..........          X
                                              specific to rockets, designed
                                              or modified for non-military
                                              applications that do not have
                                              a range of 300 km (i.e., not
                                              controlled on the MTCR Annex).
IV.........................................  Defense articles and services    ..........          X           X
                                              specific to torpedoes.
IV.........................................  Defense articles and services    ..........  ..........          X
                                              specific to anti-personnel
                                              landmines.
IV(i)......................................  Software source code related to  ..........          X           X
                                              Categories IV(a), IV(b),
                                              IV(c), or IV(g). See Note 4.
IV(i)......................................  Manufacturing know-how related           X           X           X
                                              to Categories IV(a), IV(b),
                                              IV(d), or IV(g) and their
                                              specially designed components.
                                              See Note 5.
V..........................................  The following energetic          ..........  ..........          X
                                              materials and related
                                              substances:.
                                             a. TATB
                                              (triaminotrinitrobenzene) (CAS
                                              3058-38-6)
                                             b. Explosives controlled in
                                              USML Category V(a)(32) or
                                              V(a)(33)
                                             c. Iron powder (CAS 7439-89-6)
                                              with particle size of 3
                                              micrometers or less produced
                                              by reduction of iron oxide
                                              with hydrogen
                                             d. BOBBA-8 (bis(2-
                                              methylaziridinyl)2-(2-
                                              hydroxypropanoxy) propylamino
                                              phosphine oxide), and other
                                              MAPO derivatives
                                             e. N-methyl-p-nitroaniline (CAS
                                              100-15-2)
                                             f. Trinitrophenylmethyl-         ..........  ..........  ..........
                                              nitramine (tetryl) (CAS 479-45-
                                              8)
V(c)(7)....................................  Pyrotechnics and pyrophorics     ..........  ..........          X
                                              specifically formulated for
                                              military purposes to enhance
                                              or control radiated energy in
                                              any part of the IR spectrum.
V(d)(3)....................................  Bis-2, 2-dinitropropylnitrate    ..........  ..........          X
                                              (BDNPN).
VI.........................................  Defense Articles specific to     ..........  ..........          X
                                              equipment specially designed
                                              or configured to be installed
                                              in a vehicle for military
                                              ground, marine, airborne or
                                              space applications, capable of
                                              operating while in motion and
                                              of producing or maintaining
                                              temperatures below 103 K (-170
                                              [deg]C).
VI.........................................  Defense Articles specific to     ..........  ..........          X
                                              superconductive electrical
                                              equipment (rotating machinery
                                              and transformers) specially
                                              designed or configured to be
                                              installed in a vehicle for
                                              military ground, marine,
                                              airborne, or space
                                              applications and capable of
                                              operating while in motion.
                                              This, however, does not
                                              include direct current hybrid
                                              homopolar generators that have
                                              single-pole normal metal
                                              armatures which rotate in a
                                              magnetic field produced by
                                              superconducting windings,
                                              provided those windings are
                                              the only superconducting
                                              component in the generator.
VI.........................................  Defense articles and services    ..........          X           X
                                              specific to naval technology
                                              and systems relating to
                                              acoustic spectrum control and
                                              awareness. See Note 10.
VI(a)......................................  Nuclear powered vessels........          X           X           X
VI(c)......................................  Defense articles and services    ..........          X           X
                                              specific to submarine combat
                                              control systems.
VI(d)......................................  Harbor entrance detection        ..........  ..........          X
                                              devices.
VI(e)......................................  Defense articles and services            X           X           X
                                              specific to naval nuclear
                                              propulsion equipment. See Note
                                              7.
VI(g)......................................  Technical data and defense               X           X           X
                                              services for gas turbine
                                              engine hot sections related to
                                              Category VI(f). See Note 8.
VI(g)......................................  Software source code related to  ..........          X           X
                                              Categories VI(a) or VI(c). See
                                              Note 4.
VII........................................  Defense articles specific to     ..........  ..........          X
                                              equipment specially designed
                                              or configured to be installed
                                              in a vehicle for military
                                              ground, marine, airborne, or
                                              space applications, capable of
                                              operating while in motion and
                                              of producing or maintaining
                                              temperatures below 103 K (-170
                                              [deg]C).

[[Page 72264]]

 
VII........................................  Defense articles specific to     ..........  ..........          X
                                              superconductive electrical
                                              equipment (rotating machinery
                                              and transformers) specially
                                              designed or configured to be
                                              installed in a vehicle for
                                              military ground, marine,
                                              airborne, or space
                                              applications and capable of
                                              operating while in motion.
                                              This, however, does not
                                              include direct current hybrid
                                              homopolar generators that have
                                              single-pole normal metal
                                              armatures which rotate in a
                                              magnetic field produced by
                                              superconducting windings,
                                              provided those windings are
                                              the only superconducting
                                              component in the generator.
VII........................................  Armored all wheel drive          ..........  ..........          X
                                              vehicles, other than vehicles
                                              specifically designed or
                                              modified for military use,
                                              fitted with, or designed or
                                              modified to be fitted with, a
                                              plough or flail for the
                                              purpose of land mine clearance.
VII(e).....................................  Amphibious vehicles............  ..........  ..........          X
VII(f).....................................  Technical data and defense               X           X           X
                                              services for gas turbine
                                              engine hot sections. See Note
                                              8.
VIII.......................................  Defense articles specific to     ..........  ..........          X
                                              equipment specially designed
                                              or configured to be installed
                                              in a vehicle for military
                                              ground, marine, airborne, or
                                              space applications, capable of
                                              operating while in motion and
                                              of producing or maintaining
                                              temperatures below 103 K (-170
                                              [deg]C).
VIII.......................................  Defense articles specific to     ..........  ..........          X
                                              superconductive electrical
                                              equipment (rotating machinery
                                              and transformers) specially
                                              designed or configured to be
                                              installed in a vehicle for
                                              military ground, marine,
                                              airborne, or space
                                              applications and capable of
                                              operating while in motion.
                                              This, however, does not
                                              include direct current hybrid
                                              homopolar generators that have
                                              single-pole normal metal
                                              armatures which rotate in a
                                              magnetic field produced by
                                              superconducting windings,
                                              provided those windings are
                                              the only superconducting
                                              component in the generator.
VIII(a)....................................  All Category VIII(a) items.....          X   ..........  ..........
VIII(b)....................................  Defense articles and services    ..........          X           X
                                              specific to gas turbine engine
                                              hot section components and
                                              digital engine controls. See
                                              Note 8.
VIII(f)....................................  Developmental aircraft, engines          X   ..........  ..........
                                              and components identified in
                                              Category VIII(f).
VIII(g)....................................  Ground Effect Machines (GEMS)..  ..........  ..........          X
VIII(i)....................................  Technical data and defense               X           X           X
                                              services for gas turbine
                                              engine hot sections related to
                                              Category VIII(b). See Note 8.
VIII(i)....................................  Manufacturing know-how related           X           X           X
                                              to Categories VIII(a),
                                              VIII(b), or VIII(e) and their
                                              specially designed components.
                                              See Note 5.
VIII(i)....................................  Software source code related to  ..........          X           X
                                              Categories VIII(a) or VIII(e).
                                              See Note 4.
IX.........................................  Training or simulation           ..........  ..........          X
                                              equipment for MANPADS. See
                                              Note 6.
IX(e)......................................  Software source code related to  ..........          X           X
                                              Categories IX(a) or IX(b). See
                                              Note 4.
IX(e)......................................  Software that is both            ..........  ..........          X
                                              specifically designed or
                                              modified for military use and
                                              specifically designed or
                                              modified for modeling or
                                              simulating military
                                              operational scenarios.
X(e).......................................  Manufacturing know-how related           X           X           X
                                              to Categories X(a)(1) or
                                              X(a)(2) and their specially
                                              designed components. See Note
                                              5.
XI(a)......................................  Defense articles and services    ..........          X           X
                                              specific to countermeasures
                                              and counter-countermeasures
                                              See Note 9.
XI.........................................  Defense articles and services    ..........          X           X
                                              specific to naval technology
                                              and systems relating to
                                              acoustic spectrum control and
                                              awareness. See Note 10.
XI(b) XI(c) XI(d)..........................  Defense articles and services    ..........          X           X
                                              specific to communications
                                              security (e.g., COMSEC and
                                              TEMPEST).
XI(d)......................................  Software source code related to  ..........          X           X
                                              Category XI(a). See Note 4.
XI(d)......................................  Manufacturing know-how related           X           X           X
                                              to Categories XI(a)(3) or
                                              XI(a)(4) and their specially
                                              designed components. See Note
                                              5.
XII........................................  Defense articles and services    ..........          X           X
                                              specific to countermeasures
                                              and counter-countermeasures.
                                              See Note 9.
XII(c).....................................  Defense articles and services            X   ..........  ..........
                                              specific to XII(c) articles,
                                              except any 1st- and 2nd-
                                              generation image
                                              intensification tubes and 1st-
                                              and 2nd-generation image
                                              intensification night sighting
                                              equipment. End items in XII(c)
                                              and related technical data
                                              limited to basic operations,
                                              maintenance, and training
                                              information as authorized
                                              under the exemption in Sec.
                                              125.4(b)(5) of this subchapter
                                              may be exported directly to a
                                              Canadian Government entity.
XII(c).....................................  Technical data or defense                X           X           X
                                              services for night vision
                                              equipment beyond basic
                                              operations, maintenance, and
                                              training data. However, the AS
                                              and UK Treaty exemptions apply
                                              when such export is pursuant
                                              to a written solicitation or
                                              contract issued or awarded by
                                              the U.S. Department of Defense
                                              for an end use identified in
                                              subsections (e)(1), (2), or
                                              (4) of Sec.   126.16 or Sec.
                                              126.17 of this subchapter and
                                              is consistent with other
                                              exclusions of this supplement.
XII(f).....................................  Manufacturing know-how related           X           X           X
                                              to Category XII(d) and their
                                              specially designed components.
                                              See Note 5.
XII(f).....................................  Software source code related to  ..........          X           X
                                              Categories XII(a), XII(b),
                                              XII(c), or XII(d). See Note 4.
XIII(b)....................................  Defense articles and services    ..........          X           X
                                              specific to Military
                                              Information Security Assurance
                                              Systems.

[[Page 72265]]

 
XIII(c)....................................  Defense articles and services    ..........  ..........          X
                                              specific to armored plate
                                              manufactured to comply with a
                                              military standard or
                                              specification or suitable for
                                              military use. See Note 11.
XIII(d)....................................  Carbon/carbon billets and        ..........  ..........          X
                                              performs which are reinforced
                                              in three or more dimensional
                                              planes, specifically designed,
                                              developed, modified,
                                              configured or adapted for
                                              defense articles.
XIII(f)....................................  Structural materials...........  ..........  ..........          X
XIII(g)....................................  Defense articles and services    ..........  ..........          X
                                              related to concealment and
                                              deception equipment and
                                              materials.
XIII(h)....................................  Energy conversion devices other  ..........  ..........          X
                                              than fuel cells.
XIII(i)....................................  Metal embrittling agents.......  ..........  ..........          X
XIII(j)....................................  Defense articles and services    ..........          X           X
                                              related to hardware associated
                                              with the measurement or
                                              modification of system
                                              signatures for detection of
                                              defense articles as described
                                              in Note 2.
XIII(k)....................................  Defense articles and services    ..........          X           X
                                              related to tooling and
                                              equipment specifically
                                              designed or modified for the
                                              production of defense articles
                                              identified in Category XIII(b).
XIII(l)....................................  Software source code related to  ..........          X           X
                                              Category XIII(a). See Note 4.
XIV........................................  Defense articles and services    ..........          X           X
                                              related to toxicological
                                              agents, including chemical
                                              agents, biological agents, and
                                              associated equipment.
XIV(a) XIV(b) XIV(d) XIV(e) XIV(f).........  Chemical agents listed in                X   ..........  ..........
                                              Category XIV(a), (d) and (e),
                                              biological agents and
                                              biologically derived
                                              substances in Category XIV(b),
                                              and equipment listed in
                                              Category XIV(f) for
                                              dissemination of the chemical
                                              agents and biological agents
                                              listed in Category XIV(a),
                                              (b), (d), and (e).
XV(a)......................................  Defense articles and services            X           X           X
                                              specific to spacecraft/
                                              satellites. However, the
                                              Canadian exemption may be used
                                              for commercial communications
                                              satellites that have no other
                                              type of payload.
XV(b)......................................  Defense articles and services    ..........          X           X
                                              specific to ground control
                                              stations for spacecraft
                                              telemetry, tracking, and
                                              control.
XV(c)......................................  Defense articles and services    ..........          X           X
                                              specific to GPS/PPS security
                                              modules.
XV(c)......................................  Defense articles controlled in           X   ..........  ..........
                                              XV(c) except end items for end
                                              use by the Federal Government
                                              of Canada exported directly or
                                              indirectly through a Canadian-
                                              registered person.
XV(d)......................................  Defense articles and services            X           X           X
                                              specific to radiation-hardened
                                              microelectronic circuits.
XV(e)......................................  Anti-jam systems with the                X   ..........  ..........
                                              ability to respond to incoming
                                              interference by adaptively
                                              reducing antenna gain
                                              (nulling) in the direction of
                                              the interference.
XV(e)......................................  Antennas having any of the
                                              following:
                                             (a) Aperture (overall dimension
                                              of the radiating portions of
                                              the antenna) greater than 30
                                              feet;
                                             (b) All sidelobes less than or
                                              equal to -35 dB relative to
                                              the peak of the main beam; or
                                             (c) Designed, modified, or               X   ..........  ..........
                                              configured to provide coverage
                                              area on the surface of the
                                              earth less than 200 nautical
                                              miles in diameter, where
                                              ``coverage area'' is defined
                                              as that area on the surface of
                                              the earth that is illuminated
                                              by the main beam width of the
                                              antenna (which is the angular
                                              distance between half power
                                              points of the beam).
XV(e)......................................  Optical intersatellite data              X   ..........  ..........
                                              links (cross links) and
                                              optical ground satellite
                                              terminals.
XV(e)......................................  Spaceborne regenerative                  X   ..........  ..........
                                              baseband processing (direct up
                                              and down conversion to and
                                              from baseband) equipment.
XV(e)......................................  Propulsion systems which permit          X   ..........  ..........
                                              acceleration of the satellite
                                              on-orbit (i.e., after mission
                                              orbit injection) at rates
                                              greater than 0.1 g.
XV(e)......................................  Attitude control and                     X   ..........  ..........
                                              determination systems designed
                                              to provide spacecraft pointing
                                              determination and control or
                                              payload pointing system
                                              control better than 0.02
                                              degrees per axis.
XV(e)......................................  All specifically designed or             X   ..........  ..........
                                              modified systems, components,
                                              parts, accessories,
                                              attachments, and associated
                                              equipment for all Category
                                              XV(a) items, except when
                                              specifically designed or
                                              modified for use in commercial
                                              communications satellites.
XV(e)......................................  Defense articles and services    ..........          X           X
                                              specific to spacecraft and
                                              ground control station systems
                                              (only for telemetry, tracking
                                              and control as controlled in
                                              XV(b)), subsystems,
                                              components, parts,
                                              accessories, attachments, and
                                              associated equipment.
XV(f)......................................  Technical data and defense               X           X           X
                                              services directly related to
                                              the other defense articles
                                              excluded from the exemptions
                                              for Category XV.
XVI........................................  Defense articles and services            X           X           X
                                              specific to design and testing
                                              of nuclear weapons.
XVI(c).....................................  Nuclear radiation measuring              X   ..........  ..........
                                              devices manufactured to
                                              military specifications.
XVI(e).....................................  Software source code related to  ..........          X           X
                                              Category XVI(c). See Note 4.
XVII.......................................  Classified articles and defense          X           X           X
                                              services not elsewhere
                                              enumerated. See Note 1.
XVIII......................................  Defense articles and services    ..........          X           X
                                              specific to directed energy
                                              weapon systems.
XX.........................................  Defense articles and services            X           X           X
                                              related to submersible
                                              vessels, oceanographic, and
                                              associated equipment.
XXI........................................  Miscellaneous defense articles           X           X           X
                                              and services.
----------------------------------------------------------------------------------------------------------------

[[Page 72266]]

 
Note 1: Classified defense articles and services are not eligible for export under the Canadian exemptions. U.S.
 origin defense articles and services controlled in Category XVII are not eligible for export under the UK
 Treaty exemption. U.S. origin classified defense articles and services are not eligible for export under either
 the UK or AS Treaty exemptions except when being released pursuant to a U.S. Department of Defense written
 request, directive or contract that provides for the export of the defense article or service.
Note 2: The phrase ``any part of the spectrum'' includes radio frequency (RF), infrared (IR), electro-optical,
 visual, ultraviolet (UV), acoustic, and magnetic. Defense articles related to reduced observables or counter
 reduced observables are defined as:
    a. Signature reduction (radio frequency (RF), infrared (IR), Electro-Optical, visual, ultraviolet (UV),
     acoustic, magnetic, RF emissions) of defense platforms, including systems, subsystems, components,
     materials, (including dual-purpose materials used for Electromagnetic Interference (EM) reduction)
     technologies, and signature prediction, test and measurement equipment and software and material
     transmissivity/reflectivity prediction codes and optimization software.
    b. Electronically scanned array radar, high power radars, radar processing algorithms, periscope-mounted
     radar systems (PATRIOT), LADAR, multistatic and IR focal plane array-based sensors, to include systems,
     subsystems, components, materials, and technologies.
Note 3: Defense Articles related to sensor fusion beyond that required for display or identification correlation
 is defined as techniques designed to automatically combine information from two or more sensors/sources for the
 purpose of target identification, tracking, designation, or passing of data in support of surveillance or
 weapons engagement. Sensor fusion involves sensors such as acoustic, infrared, electro optical, frequency, etc.
 Display or identification correlation refers to the combination of target detections from multiple sources for
 assignment of common target track designation.
Note 4: Software source code beyond that source code required for basic operation, maintenance, and training for
 programs, systems, and/or subsystems is not eligible for use of the UK or AS Treaty Exemptions, unless such
 export is pursuant to a written solicitation or contract issued or awarded by the U.S. Department of Defense
 for an end use identified in subsections (e)(1), (2), or (4) of Sec.   126.16 or Sec.   126.17 of this
 subchapter and is consistent with other exclusions of this supplement.
Note 5: Manufacturing know-how, as defined in Sec.   125.4(c)(6) of this subchapter, is not eligible for use of
 the UK or AS Treaty Exemptions, unless such export is pursuant to a written solicitation or contract issued or
 awarded by the U.S. Department of Defense for an end use identified in subsections (e)(1), (2), or (4) of Sec.
  126.16 or Sec.   126.17 of this subchapter and is consistent with other exclusions of this supplement.
Note 6: Defense Articles specific to Man Portable Air Defense Systems (MANPADS) includes missiles which can be
 used without modification in other applications. It also includes production equipment specifically designed or
 modified for MANPAD systems, as well as training equipment specifically designed or modified for MANPAD
 systems.
Note 7: Naval nuclear propulsion plants includes all of USML Category VI(e). Naval nuclear propulsion
 information is technical data that concerns the design, arrangement, development, manufacture, testing,
 operation, administration, training, maintenance, and repair of the propulsion plants of naval nuclear-powered
 ships and prototypes, including the associated shipboard and shore-based nuclear support facilities. Examples
 of defense articles covered by this exclusion include nuclear propulsion plants and nuclear submarine
 technologies or systems; nuclear powered vessels (see USML Categories VI and XX).
Note 8: Examples of gas turbine engine hot section exempted defense article components and technology are
 combustion chambers/liners; high pressure turbine blades, vanes, disks and related cooled structure; cooled low
 pressure turbine blades, vanes, disks and related cooled structure; advanced cooled augmenters; and advanced
 cooled nozzles. Examples of gas turbine engine hot section developmental technologies are Integrated High
 Performance Turbine Engine Technology (IHPTET), Versatile, Affordable Advanced Turbine Engine (VAATE), Ultra-
 Efficient Engine Technology (UEET).
Note 9: Examples of countermeasures and counter-countermeasures related to defense articles not exportable under
 the AS or UK Treaty exemptions are:
    a. IR countermeasures;
    b. Classified techniques and capabilities;
    c. Exports for precision radio frequency location that directly or indirectly supports fire control and is
     used for situation awareness, target identification, target acquisition, and weapons targeting and Radio
     Direction Finding (RDF) capabilities. Precision RF location is defined as angle of arrival accuracy of less
     than five degrees (RMS) and RF emitter location of less than ten percent range error;
    d. Providing the capability to reprogram; and
    e. Acoustics (including underwater), active and passive countermeasures, and counter-countermeasures
Note 10: Examples of defense articles covered by this exclusion include underwater acoustic vector sensors;
 acoustic reduction; off-board, underwater, active and passive sensing, propeller/propulsor technologies; fixed
 mobile/floating/powered detection systems which include in-buoy signal processing for target detection and
 classification; autonomous underwater vehicles capable of long endurance in ocean environments (manned
 submarines excluded); automated control algorithms embedded in on-board autonomous platforms which enable (a)
 group behaviors for target detection and classification, (b) adaptation to the environment or tactical
 situation for enhancing target detection and classification; ``intelligent autonomy'' algorithms which define
 the status, group (greater than 2) behaviors, and responses to detection stimuli by autonomous, underwater
 vehicles; and low frequency, broad-band ``acoustic color,'' active acoustic ``fingerprint'' sensing for the
 purpose of long range, single pass identification of ocean bottom objects, buried or otherwise. (Controlled
 under Category XI(a), (1) and (2) and in (b), (c), and (d)).
Note 11: The defense articles include constructions of metallic or non-metallic materials or combinations
 thereof specially designed to provide protection for military systems. The phrase ``suitable for military use''
 applies to any articles or materials which have been tested to level IIIA or above IAW NIJ standard 0108.01 or
 comparable national standard. This exclusion does not include military helmets, body armor, or other protective
 garments which may be exported IAW the terms of the AS or UK Treaties.
----------------------------------------------------------------------------------------------------------------
* An ``X'' in the chart indicates that the item is excluded from use under the exemption referenced in the top
  of the column. An item excluded in any one row is excluded regardless of whether other rows may contain a
  description that would include the item.

PART 127--VIOLATIONS AND PENALTIES

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

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

    29. Section 127.1 is revised to read as follows:


Sec.  127.1  Violations.

    (a) Without first obtaining the required license or other written

[[Page 72267]]

approval from the Directorate of Defense Trade Controls, it is 
unlawful:
    (1) To export or attempt to export from the United States any 
defense article or technical data or to furnish or attempt to furnish 
any defense service for which a license or written approval is required 
by this subchapter;
    (2) To reexport or retransfer or attempt to reexport or retransfer 
any defense article, technical data, or defense service from one 
foreign end-user, end-use, or destination to another foreign end-user, 
end-use, or destination for which a license or written approval is 
required by this subchapter, including, as specified in Sec.  126.16(h) 
and Sec.  126.17(h) of this subchapter, any defense article, technical 
data, or defense service that was exported from the United States 
without a license pursuant to any exemption under this subchapter;
    (3) To import or attempt to import any defense article whenever a 
license is required by this subchapter;
    (4) To conspire to export, import, reexport, retransfer, furnish or 
cause to be exported, imported, reexported, retransferred or furnished, 
any defense article, technical data, or defense service for which a 
license or written approval is required by this subchapter.
    (b) It is unlawful:
    (1) To violate any of the terms or conditions of a license or 
approval granted pursuant to this subchapter, any exemption contained 
in this subchapter, or any rule or regulation contained in this 
subchapter.
    (2) To engage in the business of brokering activities for which 
registration and a license or written approval is required by this 
subchapter without first registering or obtaining the required license 
or written approval from the Directorate of Defense Trade Controls. For 
the purposes of this subchapter, engaging in the business of brokering 
activities requires only one occasion of engaging in an activity as 
reflected in Sec.  129.2(b) of this subchapter.
    (3) To engage in the United States in the business of either 
manufacturing or exporting defense articles or furnishing defense 
services without complying with the registration requirements. For the 
purposes of this subchapter, engaging in the business of manufacturing 
or exporting defense articles or furnishing defense services requires 
only one occasion of manufacturing or exporting a defense article or 
furnishing a defense service.
    (c) Any person who is granted a license or other approval or who 
acts pursuant to an exemption under this subchapter is responsible for 
the acts of employees, agents, and all authorized persons to whom 
possession of the defense article or technical data has been entrusted 
regarding the operation, use, possession, transportation, and handling 
of such defense article or technical data abroad. All persons abroad 
subject to U.S. jurisdiction who obtain temporary or permanent custody 
of a defense article exported from the United States or produced under 
an agreement described in part 124 of this subchapter, and irrespective 
of the number of intermediate transfers, are bound by the regulations 
of this subchapter in the same manner and to the same extent as the 
original owner or transferor.
    (d) A person with knowledge that another person is then ineligible 
pursuant to Sec. Sec.  120.1(c) or 126.7 of this subchapter may not, 
directly or indirectly, in any manner or capacity, without prior 
disclosure of the facts to, and written authorization from, the 
Directorate of Defense Trade Controls:
    (1) Apply for, obtain, or use any export control document as 
defined in Sec.  127.2(b) of this subchapter for such ineligible 
person; or
    (2) Order, buy, receive, use, sell, deliver, store, dispose of, 
forward, transport, finance, or otherwise service or participate in any 
transaction which may involve any defense article or the furnishing of 
any defense service for which a license or approval is required by this 
subchapter or an exemption is available under this subchapter for 
export, where such ineligible person may obtain any benefit therefrom 
or have any direct or indirect interest therein.
    (e) No person may knowingly or willfully cause, or aid, abet, 
counsel, demand, induce, procure, or permit the commission of, any act 
prohibited by, or the omission of any act required by, 22 U.S.C. 2778 
and 2779, or any regulation, license, approval, or order issued 
thereunder.
    30. Section 127.2 is amended by revising paragraphs (a), (b) 
introductory text, (b)(1), (b)(2), and adding (b)(14), to read as 
follows:


Sec.  127.2  Misrepresentation and omission of facts.

    (a) It is unlawful to use or attempt to use any export or temporary 
import control document containing a false statement or misrepresenting 
or omitting a material fact for the purpose of exporting, transferring, 
reexporting, retransferring, obtaining, or furnishing any defense 
article, technical data, or defense service. Any false statement, 
misrepresentation, or omission of material fact in an export or 
temporary import control document will be considered as made in a 
matter within the jurisdiction of a department or agency of the United 
States for the purposes of 18 U.S.C. 1001, 22 U.S.C. 2778, and 22 
U.S.C. 2779.
    (b) For the purpose of this subchapter, export or temporary import 
control documents include the following:
    (1) An application for a permanent export, reexport, retransfer, or 
a temporary import license and supporting documents.
    (2) Shipper's Export Declaration or an Electronic Export 
Information filing.
* * * * *
    (14) Any other shipping document that has information related to 
the export of the defense article or defense service.
    31. Section 127.3 is revised to read as follows:


Sec.  127.3  Penalties for violations.

    Any person who willfully:
    (a) Violates any provision of Sec.  38 or Sec.  39 of the Arms 
Export Control Act (22 U.S.C. 2778 and 2779) or any rule or regulation 
issued under either Sec.  38 or Sec.  39 of the Act, or any undertaking 
specifically required by part 124 of this subchapter; or
    (b) In a registration, license application, or report required by 
Sec.  38 or Sec.  39 of the Arms Export Control Act (22 U.S.C. 2778 and 
2779) or by any rule or regulation issued under either section, makes 
any untrue statement of a material fact or omits a material fact 
required to be stated therein or necessary to make the statements 
therein not misleading, shall upon conviction be subject to a fine or 
imprisonment, or both, as prescribed by 22 U.S.C. 2778(c).
    32. Section 127.4 is amended by revising paragraphs (a) and (c), 
and adding paragraph (d), to read as follows:


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

    (a) U.S. Immigration and Customs Enforcement and U.S. Customs and 
Border Protection officers may take appropriate action to ensure 
observance of this subchapter as to the export or the attempted export 
of any defense article or technical data, including the inspection of 
loading or unloading of any vessel, vehicle, or aircraft. This applies 
whether the export is authorized by license or by written approval 
issued under this subchapter or by exemption.
* * * * *
    (c) Upon the presentation to a U.S. Customs and Border Protection 
Officer of a license or written approval, or claim of an exemption, 
authorizing the export

[[Page 72268]]

of any defense article, the customs officer may require the production 
of other relevant documents and information relating to the proposed 
export. This includes an invoice, order, packing list, shipping 
document, correspondence, instructions, and the documents otherwise 
required by the U.S. Customs and Border Protection or U.S. Immigration 
and Customs Enforcement.
    (d) If an exemption under this subchapter is used or claimed to 
export, transfer, reexport or retransfer, furnish, or obtain a defense 
article, technical data, or defense service, law enforcement officers 
may rely upon the authorities noted above, additional authority 
identified in the language of the exemption, and any other lawful means 
to investigate such a matter.
    33. Section 127.7 is amended by revising paragraph (a) to read as 
follows:


Sec.  127.7  Debarment.

    (a) Debarment. In implementing Sec.  38 of the Arms Export Control 
Act, the Assistant Secretary of State for Political-Military Affairs 
may prohibit any person from participating directly or indirectly in 
the export, reexport and retransfer of defense articles, including 
technical data, or in the furnishing of defense services for any of the 
reasons listed below and publish notice of such action in the Federal 
Register. Any such prohibition is referred to as a debarment for 
purposes of this subchapter. The Assistant Secretary of State for 
Political-Military Affairs shall determine the appropriate period of 
time for debarment, which shall generally be for a period of three 
years. However, reinstatement is not automatic and in all cases the 
debarred person must submit a request for reinstatement and be approved 
for reinstatement before engaging in any export or brokering activities 
subject to the Arms Export Control Act or this subchapter.
* * * * *
    34. Section 127.10 is amended by revising paragraph (a) to read as 
follows:


Sec.  127.10  Civil penalty.

    (a) The Assistant Secretary of State for Political-Military Affairs 
is authorized to impose a civil penalty in an amount not to exceed that 
authorized by 22 U.S.C. 2778, 2779a, and 2780 for each violation of 22 
U.S.C. 2778, 2779a, and 2780, or any regulation, order, license, or 
written approval issued thereunder. This civil penalty may be either in 
addition to, or in lieu of, any other liability or penalty which may be 
imposed.
* * * * *
    35. Section 127.12 is amended by adding paragraph (b)(5), and 
revising paragraph (d), to read as follows:


Sec.  127.12  Voluntary disclosures.

* * * * *
    (b) * * *
    (5) Nothing in this section shall be interpreted to negate or 
lessen the affirmative duty pursuant to Sec. Sec.  126.1(e), 
126.16(h)(5), and 126.17(h)(5) of this subchapter upon persons to 
inform the Directorate of Defense Trade Controls of the actual or 
proposed sale, export, transfer, reexport, or retransfer of a defense 
article, technical data, or defense service to any country referred to 
in Sec.  126.1 of this subchapter, any citizen of such country, or any 
person acting on its behalf.
* * * * *
    (d) Documentation. The written disclosure should be accompanied by 
copies of substantiating documents. Where appropriate, the 
documentation should include, but not be limited to:
    (1) Licensing documents (e.g., license applications, export 
licenses, and end-user statements), exemption citation, or other 
authorization description, if any;
    (2) Shipping documents (e.g., Shipper's Export Declarations; 
Electronic Export Information filing, including the Internal 
Transaction Number), air waybills, and bills of laden, invoices, and 
any other associated documents);
    (3) Any other relevant documents must be retained by the person 
making the disclosure until the Directorate of Defense Trade Controls 
requests them or until a final decision on the disclosed information 
has been made.
* * * * *

PART 129--REGISTRATION AND LICENSING OF BROKERS

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

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

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


Sec.  129.6  Requirements for License/Approval.

* * * * *
    (b) * * *
    (2) Brokering activities that are arranged wholly within and 
destined exclusively for the North Atlantic Treaty Organization, any 
member country of that Organization, Australia, Israel, Japan, New 
Zealand, or the Republic of Korea, except in the case of the defense 
articles or defense services specified in Sec.  129.7(a) of this 
subchapter, for which prior approval is always required.
    38. Section 129.7 is amended by revising paragraphs (a)(1)(vii) and 
(a)(2) to read as follows:


Sec.  129.7  Prior Approval (License).

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

    Dated: November 7, 2011.
Ellen O. Tauscher,
Under Secretary, Arms Control and International Security, Department of 
State.
[FR Doc. 2011-29328 Filed 11-21-11; 8:45 am]
BILLING CODE 4710-25-P