[Federal Register Volume 78, Number 165 (Monday, August 26, 2013)]
[Rules and Regulations]
[Pages 52680-52694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20743]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF STATE
22 CFR Parts 120, 122, 126, 127, 128, and 129
RIN 1400-AC37
[Public Notice 8437]
Amendment to the International Traffic in Arms Regulations:
Registration and Licensing of Brokers, Brokering Activities, and
Related Provisions
AGENCY: Department of State.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of State is issuing this interim final rule
amending the International Traffic in Arms Regulations (ITAR) relating
to brokers and brokering activities and to related provisions of the
ITAR. These amendments clarify registration requirements, the scope of
brokering activities, prior approval requirements and exemptions,
procedures for obtaining prior approval and guidance, and reporting and
recordkeeping of such activities. Conforming and technical changes are
made to other parts of the ITAR that affect export as well as brokering
activities. The revisions contained in this rule are part of the
Department of State's retrospective plan under E.O. 13563 completed on
August 17, 2011.
DATES: This rule is effective October 25, 2013. Interested parties may
submit comments on this rule by October 10, 2013. The Department will
publish a final rule notifying of any changes to the rule pursuant to
public comment assessment.
ADDRESSES: Interested parties may submit comments within 45 days of the
date of publication by one of the following methods:
Email: [email protected] with the subject line,
``Brokering Rule.''
Internet: At www.regulations.gov, search for this document
by using this document's RIN (1400-AC37).
Comments received after that date will be considered if feasible,
but consideration cannot be assured. Those submitting comments should
not include any personally identifying information they do not desire
to be made public or information for which a claim of confidentiality
is asserted because those comments and/or transmittal emails will be
made available for public inspection and copying after the close of the
comment period via the Directorate of Defense Trade Controls Web site
at www.pmddtc.state.gov. Parties who wish to comment anonymously may do
so by submitting their comments via www.regulations.gov, leaving the
fields that would identify the commenter blank and including no
identifying information in the comment itself. Comments submitted via
www.regulations.gov are immediately available for public inspection.
FOR FURTHER INFORMATION CONTACT: Ms. Sarah J. Heidema, Acting Director,
Office of Defense Trade Controls Policy, U.S. Department of State,
telephone (202) 663-2809, or email [email protected]. ATTN:
Brokering Rule. The Department of State's full retrospective plan can
be accessed at http://www.state.gov/documents/organization/181028.pdf.
SUPPLEMENTARY INFORMATION: This rule makes changes to part 129 and
related sections of the ITAR that regulate brokers and brokering
activities and implement the brokering amendment to the Arms Export
Control Act (AECA) (section 38(b)(1)(A)(ii) of the AECA, 22 U.S.C.
2778(b)(1)(A)(ii)).
The AECA was amended in 1996 (Pub. L. 104-164) to provide for the
regulation of brokering activities. The following year, implementing
regulations were added to the ITAR in part 129. These regulations have
remained unchanged except for two minor technical changes.
In 2003, in a report to Congress, the Department of State noted
that it was beginning a review of the brokering regulations. The
purpose of the review was to assess the need to modify the regulations
in light of the experience gained in administering them. Based on this
experience as well as comments received from other agencies and
industry, including the Defense Trade Advisory Group, a Department of
State Federal advisory committee, the Department published a proposed
rule on December 19, 2011 (see ``Amendment to the International Traffic
in Arms Regulations: Registration and Licensing of Brokers, Brokering
Activities, and Related Provisions,'' 76 FR 78578) modifying the
provisions relating to brokering and brokering activities. The comment
period ended February 17, 2012. Thirty-one parties filed comments
recommending changes, which were reviewed and considered by the
Department and other agencies. The Department's evaluation of the
written comments and recommendations follows.
The Department received numerous comments and recommendations
regarding the definitions for terms and provisions set forth in ITAR
part 129. The Department reviewed and considered these comments, and
where the recommendations were in conformance with the requirements for
brokering as set forth in the AECA, and clarified the regulation, the
Department has made amendments accordingly.
Twenty-seven commenting parties expressed concerns regarding the
scope of ``broker'' and ``brokering activities,'' and that the revised
definition of ``broker'' in conjunction with the revised definition of
``brokering activities'' would result in a greatly increased number of
persons requiring to register as brokers. In conformance with the
statutory requirements for the brokering of defense articles and
services, the Department has revised the proposed changes to these
definitions to clarify their scope. In particular, the Department has
clarified that foreign persons that are required to register as brokers
are those that are in the United States and those foreign persons
outside the United States that are owned/controlled by a U.S. person.
And the Department has removed from the definition of ``brokering
activities'' the activities of any foreign person located outside the
United States acting on behalf of a U.S. person.
One commenting party requested clarification on whether the
addition of ``or are otherwise charged'' to ITAR Sec. 120.1(c)(2)
would preclude any person charged with any export violation from
applying for, obtaining, or using export control documents, and
recommended the Department identify such ineligible parties to prevent
applicants from including the ineligible parties on export license
applications and other submissions. The Department confirms that any
person charged with a violation of the U.S. criminal statutes
enumerated in ITAR Sec. 120.27 is generally ineligible
[[Page 52681]]
to be involved in ITAR-regulated activities.
One commenting party noted that the addition of ``source or
manufacturer'' to the list of ineligible persons in ITAR Sec. 120.1(d)
could add a significant burden to applicants. The Department notes that
applicants already should be screening all parties to their
transaction, including screening the source or manufacturer. The
addition of the phrase ``source or manufacturer'' is not a new
requirement, but a clarification of requirements.
Two commenting parties recommended reconsideration of the inclusion
of reference to ``foreign criminal statutes dealing with subject matter
similar to that in the U.S. criminal statutes enumerated in ITAR Sec.
120.27,'' as the reference is imprecise and may lead to confusion and
misapplication, and that it would be an undue burden to supply this
information. The Department has revised this provision to apply to the
more specific circumstances of a person violating a foreign criminal
law on exportation of defense articles where conviction of such law
carries a minimum term of imprisonment of greater than one year.
One commenting party recommended that the Department allow U.S.
exporters registered pursuant to ITAR part 122 to include U.S. and
foreign person third parties to be listed and identified as brokers in
their Statements of Registration. The new ITAR Sec. 129.3(d) allows
U.S. and foreign subsidiaries and affiliates owned or otherwise
controlled by a registrant to be listed as brokers on the registrant's
manufacturer/exporter registration. The Department notes that while
these entities, under these circumstances, are not required to submit a
separate broker registration or pay a separate broker registration fee,
all other requirements of ITAR part 129 apply to such brokers and their
brokering activities.
One commenting party recommended that revised ITAR Sec. 122.2 be
changed to impose notification requirements on foreign brokers, and not
on the registrants. The inclusion of foreign affiliates or brokers in a
registrant's Statement of Registration may occur where the registrant
owns or otherwise controls such foreign subsidiaries and affiliates who
may be listed as brokers. As the registrant is the responsible party in
this regard, the Department did not accept this recommendation.
Several parties commented that the brokering prior approval
requirement effectively results in multiple authorizations for the same
transaction. These parties recommended that the logic of the removal of
the former ITAR Sec. 126.8 requirement for prior approval of certain
export activities be adopted in this instance, and require prior
brokering approval only when no other U.S. export authorization would
be applicable for regulation. Because the export or retransfer of U.S.
origin defense articles, defense services, and technical data stemming
from brokering activities still requires prior written authorization,
the Department's review or enforcement authority will not be
diminished. The Department agrees with this assessment in part. Rather
than requiring prior approval for brokering activities related to all
U.S. Munitions List (USML) items, the new ITAR Sec. 129.4 specifies
which of these items requires prior approval for brokering generally
consistent with U.S. international commitments or obligations.
Seven parties expressed concerns regarding the proposed requirement
in ITAR Sec. 126.13 to identify brokers and brokering activities in
all authorization requests. The parties stated this requirement would
be burdensome, would supersede any prior approval exemption, would
result in registrant liability for the actions of non-employee brokers,
and could result in multiple license requirements for the same
activity. The Department has removed this provision from the revised
regulation.
Two commenting parties recommended that the Department remove the
proposed inclusion of brokers and brokering activities from the
liabilities of the registrant in ITAR Sec. 127.1. The Department notes
that this is not a new provision, but a clarification of existing
requirements.
One commenting party recommended the Department clarify that
activities undertaken within the corporate family of a single
registrant do not qualify as brokering under ITAR part 129. Section
129.2 provides that brokering activity does not include activities
performed by an affiliate on behalf of another affiliate.
Two commenting parties recommended reconsideration of including
``financing, insuring, transporting, and freight forwarding'' and
``soliciting'' and ``promoting'' within the scope of ``brokering
activities.'' The Department has provided an exemption for persons
whose business is exclusively financing, insuring, transporting, or
freight forwarding, as distinct from those who engage in these
activities as part of their direct involvement in arranging
transactions for defense articles or defense services or hold title to
defense articles, even when no physical custody of defense articles is
involved. In addition, the Department believes that ``soliciting'' or
``promoting'' the purchase, sale, transfer, loan, or lease of a defense
article or defense service is an integral aspect of a broker's
brokering activities, and therefore did not accept the recommendation
to remove these activities from the definition of ``brokering
activities.''
Three commenting parties recommended clarification of the services
a broker may receive from an attorney, to specifically provide that any
kind of legal advice or any export compliance services provided by an
attorney to a client is not within the definition of ``brokering
activities.'' The Department has clarified that ``activities by an
attorney that do not extend beyond the provision of legal advice to
clients'' is not within the definition, and notes that ``legal advice''
includes the provision of export compliance advice by an attorney to a
client.
One commenting party recommended the removal of the requirement to
provide information on what if any consideration is expected to be
received with regard to a brokering activity, as it would be a
duplication of reporting given the requirement to provide similar
information pursuant to ITAR part 130. While the Department has removed
this provision with regard to procedures for obtaining prior approval,
it has not removed this requirement from the annual reporting of
brokering activities. The part 130 requirement has reporting
limitations that the brokering requirement does not have.
One commenting party recommended the provision of an exhaustive
list for the definition of brokering activities, which would obviate
the need for the regulatory provision enabling Department guidance to
industry upon request. The Department does not believe it is
practicable to provide such a listing, and therefore did not accept
this recommendation.
While the Department agrees with one commenting party that the new
reporting provision of the regulation does expand the list of required
elements to report to the Department, it disagrees that this would be
an undue burden on industry, as the requested information should be
readily available to the broker, and would assist the Department in its
statutory requirement to monitor this activity.
One commenting party requested an expanded implementation period
(12 months) for the new brokering regulation, given the numerous
changes involved. The Department notes that the proposed rule was
published in December 2011, and an updated version
[[Page 52682]]
of the regulation has been available on the Department's Directorate of
Defense Trade Controls Web site since November 2012. The Department
believes the affected public has had the opportunity to become informed
of the impending changes, and therefore does not agree that a prolonged
implementation period is necessary.
One commenting party recommended the Department adopt a form DS-
2032 amendment process to enable persons to add brokering to their
existing registrations once the new rule is implemented. The Department
has added a provision to the regulations instructing registrants to
apply for a consolidated registration covering manufacturers/exporters
and brokers, as applicable, during their registration renewal rather
than upon the effective date of this rule. The Department has added a
similar provision to the regulations regarding the listing of firms on
a Statement of Registration that are wholly owned or otherwise
controlled, providing that registrants should notify the Department of
these changes during their registration renewal, rather than within
five days of the effective date of this rule (see ITAR Sec. 129.8(d)
and note to paragraph (d)).
Other Changes
Section 120.1 is amended to revise the section heading and make
editorial changes in all paragraphs. Section 120.20 is revised to
provide a definition for ``other approval.'' Section 120.25(a)(4) is
revised to include ``brokering activity.'' Section 120.27 is revised to
update and clarify the definition for ``U.S. criminal statutes.''
Section 120.40 is added to provide a definition for ``affiliate.''
Section 120.44 is added to provide a definition for ``foreign defense
article or defense service.''
Section 122.1 is revised to provide clarifications and editorial
changes. Section 122.2 is revised by removing provisions regarding
submission of registration fee payment, adding a provision regarding
the reporting of affiliates on the Statement of Registration, and
providing other clarifications and editorial changes. Section 122.3(a)
is revised by removing the paragraphs describing the registration fee,
and providing a reference to the DDTC Web site for this information.
Section 122.4(a) is revised to provide clarifications and editorial
changes, and to add provisions instructing registrants to apply for a
consolidated registration covering manufacturers/exporters and brokers,
as applicable, and to notify the Department of changes to their
registrations regarding the listing of firms that are wholly owned or
otherwise controlled, during their registration renewal rather than
upon the effective date of this rule.
Section 126.1 is revised to provide clarification and editorial
changes, and to provide a definition for terms used in paragraph (e).
Section 126.13 is revised to provide updated process information, as
well clarifications and editorial changes.
Part 127 is revised to reorganize, clarify, and provide editorial
changes to sections 1, 2, and 7, and remove section 8 (regarding
interim suspensions). Additionally, ITAR Sec. Sec. 127.9, 128.2,
128.3, 128.15, and 128.17 are amended to remove references to interim
suspension, given removal of ITAR Sec. 127.8.
Regulatory Analysis and Notices
Administrative Procedure Act
The Department of State is of the opinion that controlling the
import and export of defense articles and services is a foreign affairs
function of the United States Government and that rules implementing
this function are exempt from sections 553 (rulemaking) and 554
(adjudications) of the Administrative Procedure Act (APA). Although the
Department is of the opinion that this rule is exempt from the
rulemaking provisions of the APA, the Department has published this
rule as a proposed rule (76 FR 78578) with a 60-day provision for
public comment and without prejudice to its determination that
controlling the import and export, and brokering thereof, of defense
articles and defense services is a foreign affairs function.
Regulatory Flexibility Act
Since the Department is of the opinion that this rule is exempt
from the provisions of 5 U.S.C. 553, there is no requirement for an
analysis under the Regulatory Flexibility Act.
Unfunded Mandates Reform Act of 1995
This rulemaking 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.
Small Business Regulatory Enforcement Fairness Act of 1996
Based on the criteria of 5 U.S.C. 804(2), the Department does not
believe this rulemaking will have an annual effect on the economy of
$100,000,000 or more. The Department estimates that approximately 1,300
of the currently-registered brokers will not need to maintain
registration following implementation of this rule, and that
approximately 300 brokers will be eligible to consolidate into their
manufacturer/exporter registration and no longer be required to pay a
broker registration fee. This estimate is based on internal data on the
number of foreign person brokers who are now registered but will not
need to be so after implementation of the revised brokering regulation
in the first instance, and the number of registered manufacturers/
exporters who are also registered as brokers in the second instance.
The submission of 1,600 fewer brokering-only registration applications
would result in an annual time burden reduction of 3,200 hours for the
public, based on the revised burden of two hours to complete a
Statement of Registration. In addition, this would result in the
elimination of approximately $3,600,000 in registration fees that
otherwise would have been collected by the Department.
A rule is also considered ``major'' if it will result in a major
increase in costs or prices for consumers, individual industries,
Federal, state, or local government agencies, or geographic regions.
The Department does not anticipate major increases in any of those
categories. As described in the preceding paragraph, this rule, among
other things, clarifies who is required to register as a broker of
defense articles and services. The clarification will result in fewer
persons registering as brokers. These brokers will no longer have the
expense of registering as brokers with the Department.
Finally, a rule is considered major if it will have significant
adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and foreign markets.
To the extent that a clarification of regulatory scope that leads to
the decrease in the types of regulated persons and types of regulated
activities results in an economic competitive advantage, the Department
anticipates that this rule will not have an adverse effect in these
categories.
This rulemaking has been found not to be a major rule within the
meaning of the 5 U.S.C. 804.
Executive Orders 13132 and 12372
This rulemaking will not have substantial direct effects on the
States, on the relationship between the national
[[Page 52683]]
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 13132, it is determined that this
rulemaking 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 rulemaking.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributed impacts, and equity). These executive orders
stress the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility.
This rule has been designated a ``significant regulatory action,''
although not economically significant, under section 3(f) of Executive
Order 12866. Accordingly, this rule has been reviewed by the Office of
Management and Budget (OMB).
Executive Order 12988
The Department of State has reviewed this rulemaking in light of
sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate
ambiguity, minimize litigation, establish clear legal standards, and
reduce burden.
Executive Order 13175
The Department of State has determined that this rulemaking will
not have tribal implications, will not impose substantial direct
compliance costs on Indian tribal governments, and will not pre-empt
tribal law. Accordingly, the provisions of Executive Order 13175 do not
apply to this rulemaking.
Paperwork Reduction Act
The Paperwork Reduction Act (``PRA,'' 44 U.S.C. 3501 et seq.)
requires all Federal agencies to analyze proposed regulations for
potential burdens on the regulated community created by provisions in
the proposed regulations that require the submission or retention of
information. As part of its continuing effort to reduce paperwork and
respondent burden, and to conform with the requirements as set forth in
this rule, the Department of State has submitted the following approved
information collections to the Office of Management and Budget (OMB)
for re-approval, in light of the changes to these collections: DS-2032,
Statement of Registration (approved by OMB under control number 1405-
0002); the Annual Brokering Report (OMB control number 1405-0141); and
Brokering Prior Approval (OMB control number 1405-0142).
Information Collection
Title of Information Collection: DS-2032 Statement of
Registration
OMB Control Number: 1405-0002
Type of Request: Revision of Currently Approved Collection
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC
Form Number: DS-2032
Respondents: Business and Nonprofit Organizations
Estimated Number of Respondents: 11,500
Estimated Number of Responses: 11,500
Average Hours per Response: 2 hours
Total Estimated Burden: 23,000 hours
Frequency: Annually and On Occasion
Obligation to Respond: Mandatory
Title of Information Collection: Annual Brokering Report
OMB Control Number: 1405-0141
Type of Request: Revision of Currently Approved Collection
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC
Form Number: None
Respondents: Business and Nonprofit Organizations
Estimated Number of Respondents: 760
Estimated Number of Responses: 760
Average Hours per Response: 2 hours
Total Estimated Burden: 1,520 hours
Frequency: Annually
Obligation to Respond: Mandatory
Title of Information Collection: Brokering Prior Approval
(License)
OMB Control Number: 1405-0142
Type of Request: Revision of Currently Approved Collection
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC
Form Number: None
Respondents: Business and Nonprofit Organizations
Estimated Number of Respondents: 760
Estimated Number of Responses: 150
Average Hours Per Response: 2 hours
Total Estimated Burden: 300 hours
Frequency: On Occasion
Obligation to Respond: Required to Obtain Benefits
We are soliciting public comments to permit the Department to:
Evaluate whether the proposed collections of information
is necessary for the proper functions of the Department.
Evaluate the accuracy of our estimate of the burden of the
proposed collections, including the validity of the methodology and
assumptions used.
Enhance the quality, utility, and clarity of the
information to be collected.
Minimize the reporting burden on those who are to respond,
including the use of automated collection techniques or other forms of
technology.
Please note that comments submitted in response to this document
are public record. Before including any detailed personal information,
you should be aware that your comments as submitted, including your
personal information, will be available for public review.
Submit comments on these information collections (and not the rule
within which notice of these collections is provided) to OMB up to 30
days from date of publication in the Federal Register.
Direct comments on these information collections to the Department
of State Desk Officer in the Office of Information and Regulatory
Affairs at the Office of Management and Budget (OMB). You may submit
comments by the following methods:
Email: [email protected]. You must include the
DS form number, information collection title, and OMB control number in
the subject line of your message.
Fax: 202-395-5806. Attention: Desk Officer for Department
of State.
Comments and questions regarding the collections listed in this
document should be directed to Daniel L. Cook, Chief, Compliance and
Registration Division, Office of Defense Trade Controls Compliance,
Directorate of Defense Trade Controls, Department of State, 12th Floor,
SA-1, 2401 E Street NW., Washington, DC 20037; or email
[email protected], with the subject line ``Brokering Rule
Information Collections.''
Abstract of Proposed Collections: The export, temporary import,
temporary export, and brokering of defense articles, defense services,
and related technical data are licensed by the Department of State in
accordance with the International Traffic in Arms Regulations (22 CFR
parts 120-130) and
[[Page 52684]]
Section 38 of the Arms Export Control Act. Those of the public who
manufacture or export defense articles, defense services, and related
technical data, or the brokering thereof, must register with the
Department of State. Persons desiring to engage in brokering activities
must submit an application or written request to conduct the
transaction to the Department to obtain a decision whether it is in the
interests of U.S. foreign policy and national security to approve the
transaction. Also, registered brokers must submit annual reports
regarding all brokering activity that was transacted, and registered
manufacturers and exporters must maintain records of defense trade
activities for five years.
Methodology: These forms/information collections may be sent to the
Directorate of Defense Trade Controls via email, regular mail, or
personal delivery.
Summary of Proposed Changes to the Information Collections: The
proposed changes to the DS-2032, Statement of Registration, follow the
changes to ITAR parts 122 and 129. One change would allow
manufacturers/exporters to register as brokers on the same form, with
one registration fee. In addition, the form asks for more information
regarding company structure, specifically for information on
intermediary and ultimate parents of the registering party, if
applicable. Finally, the form requests further clarification when the
registrant is foreign (non-U.S.) owned or controlled.
As a result of the changes to the brokering regulations, the
Department estimates there will be time burden and cost reductions to
the public with regard to the Statement of Registration collection. The
Department estimates that approximately 1,300 of the currently-
registered brokers will not need to maintain registration following
implementation of this rule, and that approximately 300 brokers will be
eligible to consolidate into their manufacturer/exporter registration
and no longer be required to pay a broker registration fee. This
estimate is based on Department data on the number of foreign person
brokers who are now registered but will not need to be so after
implementation of the revised brokering regulation in the first
instance, and the number of registered exporters who are also
registered as brokers in the second instance. The submission of 1,600
fewer brokering-only registration applications would result in an
annual time burden reduction of 3,200 hours for the public, based on
the revised burden of two hours to complete a Statement of
Registration. In addition, this would result in the elimination of
approximately $3,600,000 in registration fees that otherwise would have
been collected by the Department.
The revised regulations provide that the Annual Brokering Report
collection be submitted with the DS-2032, as an attachment. New
information that is required on the report includes the following:
Brokering registration code; signature and certification of the report
by an empowered official; identification of all parties involved in the
brokering transaction (formerly, the regulations required only the
identification of purchasers and recipients); and identification of the
source of any consideration paid for the brokering transaction.
As a result of the changes to the brokering regulations, the
Department estimates there will be time burden reductions to the public
with regard to the Annual Brokering Report collection. The Department
estimates that the reduction in the number of responses and the annual
time burden for this collection will reflect the reduction in the
number of brokers who need to register: 1,300 fewer responses, with a
burden reduction of 2,600 hours annually. Those who would no longer
need to register as brokers as a result of the changes to the brokering
regulation will no longer be required to submit a brokering report.
Clarification of the requirements for obtaining Brokering Prior
Approval result in the applicant providing additional information, to
include the following: categorization of the types of defense articles
and services to be brokered, including whether the defense articles are
significant military equipment; identification of the type of sale that
is to be brokered (commercial or under the Foreign Military Sales
program); listing of any consideration expected to be received; and
signature of an empowered official certifying the information provided
is complete and accurate. The Department does not anticipate any time
burden changes or change in number of responses for this information
collection at this time.
List of Subjects
22 CFR Part 120
Arms and munitions, Classified information, Exports.
22 CFR Part 122
Arms and munitions, Exports, Reporting and recordkeeping
requirements.
22 CFR Part 126
Arms and munitions, Exports.
22 CFR Part 127
Arms and munitions, Crime, Exports, Penalties, Seizures and
forfeitures.
22 CFR Part 128
Administrative practice and procedure, Arms and munitions, Exports.
22 CFR Part 129
Arms and munitions, Brokers, Exports, Technical assistance.
Accordingly, for the reasons set forth above, Title 22, Chapter I,
Subchapter M, parts 120, 122, 126, 127, 128, and 129 are amended as
follows:
PART 120--PURPOSE AND DEFINITIONS
0
1. The authority citation for part 120 continues to read as follows:
Authority: Sections 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; 22 U.S.C. 2651a; Pub.
L. 105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L.
112-239; E.O. 13637, 78 FR 16129.
0
2. Section 120.1 is revised to read as follows:
Sec. 120.1 General authorities, receipt of licenses, and
ineligibility.
(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 is delegated to the Secretary of State by
Executive Order 13637. This subchapter implements that authority, as
well as other relevant authorities in the Arms Export Control Act (22
U.S.C. 2751 et seq.). 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 Controls and the
Managing Director of the Directorate of Defense Trade Controls, Bureau
of Political-Military Affairs.
(b)(1) Authorized officials. All authorities conferred upon the
Deputy Assistant Secretary of State for Defense Trade Controls or the
Managing Director for the Directorate of Defense Trade Controls by this
subchapter may be exercised at any time by the Under Secretary of State
for Arms Control and International Security or the Assistant Secretary
of State for Political-Military Affairs unless the Legal Adviser or the
Assistant Legal Adviser for Political-Military Affairs of the
Department of State determines that any specific
[[Page 52685]]
exercise of this authority under this paragraph may be inappropriate.
(2) In the Bureau of Political-Military Affairs, there is a Deputy
Assistant Secretary of State for Defense Trade Controls and a Managing
Director for the Directorate of Defense Trade Controls. The Deputy
Assistant Secretary of State for Defense Trade Controls and Managing
Director for the Directorate of Defense Trade Controls are responsible
for exercising the authorities conferred under this subchapter. The
Deputy Assistant Secretary of State for Defense Trade Controls is
responsible for oversight of the defense trade controls function. The
Managing Director for the Directorate of Defense Trade Controls is
responsible for the Directorate of Defense Trade Controls, which
oversees the subordinate offices described in paragraphs (b)(2)(ii)
through (b)(2)(iv) of this section.
(i) The Managing Director will have responsibilities related to the
management of defense trade controls operations, to include the
exercise of general authorities in this part 120, and the design,
development, and refinement of processes, activities, and functional
tools for the export licensing regime and to effect export compliance/
enforcement activities.
(ii) The Office of Defense Trade Controls Licensing and the
Director, Office of Defense Trade Controls Licensing, which have
responsibilities related to licensing or other authorization of defense
trade, including references under parts 120, 123, 124, 125, 126, 129,
and 130 of this subchapter.
(iii) The Office of Defense Trade Controls Compliance and the
Director, Office of Defense Trade Controls Compliance, which have
responsibilities related to violations of law or regulation and
compliance therewith, including references contained in parts 122, 126,
127, 128, and 130 of this subchapter, and that portion under part 129
of this subchapter pertaining to registration.
(iv) The Office of Defense Trade Controls Policy and the Director,
Office of Defense Trade Controls Policy, which have responsibilities
related to the general policies of defense trade, including references
under this part 120 and part 126 of this subchapter, and the commodity
jurisdiction procedure under this subchapter, including under this part
120.
(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 U.S. may receive a license
or other approval;
(ii) A foreign person may receive a reexport or retransfer
approval; or
(iii) A foreign person may receive a prior approval for brokering
activities.
A request for a license or other approval by a U.S. person or by a
person referred to in paragraphs (c)(1)(i) and (c)(1)(iii) of this
section 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 U.S. criminal
statutes enumerated in Sec. 120.27, who have been debarred pursuant to
part 127 or 128 of this subchapter, who are subject to indictment or
are otherwise charged (e.g., charged by criminal information in lieu of
indictment) with violating the U.S. criminal statutes enumerated in
Sec. 120.27, 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, are generally ineligible to be involved in
activities regulated under the subchapter.
(d) The exemptions provided in this subchapter do not apply to
transactions in which the exporter, any party to the export (see 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 in paragraph (c)(2) of this section, unless prior written
authorization has been granted by the Directorate of Defense Trade
Controls.
0
3. Section 120.20 is revised to read as follows:
Sec. 120.20 License or other approval.
License means a document bearing the word ``license'' issued by the
Managing Director, Directorate of Defense Trade Controls, or his
authorized designee that permits the export, temporary import, or
brokering of a specific defense article or defense service controlled
by this subchapter.
Other approval means a document issued by the Managing Director,
Directorate of Defense Trade Controls, or his authorized designee, that
approves an activity regulated by this subchapter (e.g., approvals for
brokering activities or retransfer authorizations), or the use of an
exemption to the license requirements as described in this subchapter.
0
4. Section 120.25 is amended by revising paragraph (a)(4)(i) and adding
paragraph (b), to read as follows:
Sec. 120.25 Empowered official.
(a) * * *
(4) * * *
(i) Inquire into any aspect of a proposed export, temporary import,
or brokering activity by the applicant;
* * * * *
(b) For the purposes of a broker who is a foreign person, the
empowered official may be a foreign person who otherwise meets the
criteria for an empowered official in paragraph (a) of this section.
0
5. Section 120.27 is amended by revising paragraphs (a)(3), (a)(6),
(a)(8), (a)(12), and (a)(13), removing and reserving paragraph (a)(11),
and adding paragraphs (a)(14) through (a)(18), to read as follows:
Sec. 120.27 U.S. criminal statutes.
(a) * * *
(3) Section 793, 794, or 798 of title 18, United States Code
(relating to espionage involving defense or classified information) or
section 2332d, 2339A, 2339B, 2339C, or 2339D of such title (relating to
financial transactions with the government of a country designated as a
country supporting international terrorism, providing material support
to terrorists or terrorist organizations, financing of terrorism, or
receiving military-type training from a foreign terrorist
organization);
* * * * *
(6) Section 30A of the Securities Exchange Act of 1934 (15 U.S.C.
78dd-1) or section 104 of the Foreign Corrupt Practices Act (15 U.S.C.
78dd-2 or 78dd-3);
* * * * *
(8) Section 4(b) of the Internal Security Act of 1950 (relating to
communication of classified information; 50 U.S.C. 783(a));
* * * * *
(11) [Reserved]
(12) Section 371 of title 18, United States Code (when it involves
conspiracy to violate any of the statutes listed in this section);
(13) Sections 3, 4, 5, and 6 of the Intelligence Reform and
Terrorism Prevention Act of 2004, Public Law 108-458 sections 6903-
6906, relating to missile systems designed to destroy aircraft (18
U.S.C. 2332g), prohibitions
[[Page 52686]]
governing atomic weapons (42 U.S.C. 2122), radiological dispersal
services (18 U.S.C. 2332h), and variola virus (18 U.S.C. 175c);
(14) Sections 2779 and 2780 of title 22, United States Code
(relating to fees of military sales agents and other payments, and
transactions with countries supporting acts of international
terrorism);
(15) Section 542 of title 18, United States Code (relating to the
entry of goods by means of false statements), where the underlying
offense involves a defense article, including technical data, or
violations related to the Arms Export Control Act or International
Traffic in Arms Regulations;
(16) Section 545 of title 18, United States Code (relating to
smuggling goods into the United States), where the underlying offense
involves a defense article, including technical data, or violations
related to the Arms Export Control Act or International Traffic in Arms
Regulations;
(17) Section 554 of title 18, United States Code (relating to
smuggling goods from the United States), where the underlying offense
involves a defense article, including technical data, or violations
related to the Arms Export Control Act or International Traffic in Arms
Regulations; and
(18) Section 1001 of title 18, United States Code (relating to
false statements or entries generally), Section 1831 of title 18,
United States Code (relating to economic espionage), and Section 1832
of title 18, United States Code (relating to theft of trade secrets)
where the underlying offense involves a defense article, including
technical data, or violations related to the Arms Export Control Act or
International Traffic in Arms Regulations.
* * * * *
0
6. Section 120.40 is added to read as follows:
Sec. 120.40 Affiliate.
An affiliate of a registrant is a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such registrant.
Note to Sec. 120.40: For purposes of this section, ``control''
means having the authority or ability to establish or direct the
general policies or day-to-day operations of the firm. Control is
rebuttably presumed to exist where there is ownership of 25 percent
or more of the outstanding voting securities if no other person
controls an equal or larger percentage.
0
7. Section 120.43 is added and reserved, as follows:
Sec. 120.43 [Reserved]
0
8. Section 120.44 is added to read as follows:
Sec. 120.44 Foreign defense article or defense service.
Foreign defense article or defense service means any article or
service described on the U.S. Munitions List of non-U.S. origin. Unless
otherwise provided in this subchapter, the terms defense article and
defense service refer to both U.S. and foreign origin defense articles
and defense services described on the U.S. Munitions List. A defense
article or defense service is determined exclusively in accordance with
the Arms Export Control Act and this subchapter, regardless of any
designation (either affirming or contrary) that may be attributed to
the same article or service by any foreign government or international
organization.
PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS
0
9. The authority citation for part 122 is revised to read as follows:
Authority: Sections 2 and 38, Pub. L. 90-629, 90 Stat. 744 (22
U.S.C. 2752, 2778); 22 U.S.C. 2651a; E.O. 13637, 78 FR 16129.
0
10. Section 122.1 is revised to read as follows:
Sec. 122.1 Registration requirements.
(a) Any person who engages in the United States in the business of
manufacturing or exporting or temporarily importing defense articles,
or furnishing defense services, is required to register with the
Directorate of Defense Trade Controls under Sec. 122.2. For the
purpose of this subchapter, engaging in such a business requires only
one occasion of manufacturing or exporting or temporarily importing a
defense article or furnishing a defense service. A manufacturer who
does not engage in exporting must nevertheless register. (See part 129
of this subchapter for requirements for registration of persons who
engage in brokering activities.)
(b) Exemptions. The registration requirements of paragraph (a) of
this section do not apply to:
(1) Officers and employees of the U.S. Government acting in an
official capacity;
(2) Persons whose pertinent business activity is confined to the
production of unclassified technical data only;
(3) Persons all of whose manufacturing and export activities are
licensed under the Atomic Energy Act of 1954, as amended; or
(4) Persons who engage in the fabrication of articles solely for
experimental or scientific purposes, including research and
development.
Note to paragraph (b): Persons who qualify for the exemptions
in paragraphs (b)(2) or (b)(4) of this section remain subject to the
requirements for licenses or other approvals for exports of defense
articles and defense services and may not receive an export license
or approval unless registered under Sec. 122.2.
(c) Purpose. Registration is primarily a means to provide the U.S.
Government with necessary information on who is involved in certain
manufacturing and exporting activities. Registration does not confer
any export rights or privileges. It is generally a precondition to the
issuance of any license or other approval under this subchapter, unless
an exception is granted by the Directorate of Defense Trade Controls.
0
11. Section 122.2 is amended by revising paragraphs (a), (b)(1), and
(b)(2), to read as follows:
Sec. 122.2 Submission of registration statement.
(a) General. An intended registrant must submit a Statement of
Registration (Department of State form DS-2032) to the Office of
Defense Trade Controls Compliance by following the submission
guidelines available on the Directorate of Defense Trade Controls Web
site at www.pmddtc.state.gov. The Statement of Registration must be
signed by a U.S. person senior officer (e.g., chief executive officer,
president, secretary, partner, member, treasurer, general counsel) who
has been empowered by the intended registrant to sign such documents.
The Statement of Registration may include subsidiaries and affiliates
when more than 50 percent of the voting securities are owned by the
registrant or the subsidiaries and affiliates are otherwise controlled
by the registrant (see Sec. 120.40 of this subchapter). The intended
registrant also shall submit documentation that demonstrates that it is
incorporated or otherwise authorized to do business in the U.S. The
Directorate of Defense Trade Controls will notify the registrant if the
Statement of Registration is incomplete either by notifying the
registrant of what information is required or through the return of the
entire registration package. Registrants may not establish new entities
for the purpose of reducing registration fees.
(b) * * *
(1) Whether the intended registrant or its parent, subsidiary, or
other affiliate listed in the Statement of Registration, or any of its
chief executive officers,
[[Page 52687]]
presidents, vice presidents, secretaries, partners, members, other
senior officers or officials (e.g., comptroller, treasurer, general
counsel), or any member of the board of directors of the intended
registrant, or of any parent, subsidiary, or other affiliate listed in
the Statement of Registration:
(i) Has ever been indicted or otherwise charged (e.g., charged by
criminal information in lieu of indictment) for or has been convicted
of violating any U.S. criminal statutes enumerated in Sec. 120.27 of
this subchapter or violating a foreign criminal law on exportation of
defense articles where conviction of such law carries a minimum term of
imprisonment of greater than 1 year; or
(ii) Is ineligible to contract with, or to receive a license or
other approval to import defense articles or defense services from, or
to receive an export license or other approval from, any agency of the
U.S. Government; and
(2) Whether the intended registrant is foreign owned or foreign
controlled (see Sec. 120.37 of this subchapter). If the intended
registrant is foreign owned or foreign controlled, the certification
shall include an explanation of such ownership or control, including
the identities of the foreign person or persons who ultimately own or
control the registrant. This requirement applies to a registrant who is
a U.S. person and is owned or controlled by a foreign person. It also
applies to a registrant who is a foreign person and is owned or
controlled by a foreign person from the same country or a foreign
person from another country.
0
12. Section 122.3 is amended by revising paragraph (a) to read as
follows:
Sec. 122.3 Registration fees.
(a) Frequency of registration and fee. A person who is required to
register must do so on an annual basis by submitting a completed
Statement of Registration (form DS-2032) and payment of a fee following
the payment guidelines available on the Directorate of Defense Trade
Controls Web site at www.pmddtc.state.gov. For those renewing a
registration, notice of the fee due for the next year's registration
will be sent to the registrant of record at least 60 days prior to its
expiration date.
* * * * *
0
13. Section 122.4 is amended by revising paragraph (a), and adding
notes to paragraph (a), to read as follows:
Sec. 122.4 Notification of changes in information furnished by
registrants.
(a) A registrant must, within five days of the event, provide to
the Directorate of Defense Trade Controls a written notification,
signed by a senior officer (e.g., chief executive officer, president,
secretary, partner, member, treasurer, general counsel), if:
(1) Any of the persons referred to in Sec. 122.2(b) is indicted or
otherwise charged (e.g., by criminal information in lieu of indictment)
for or convicted of violating any of the U.S. criminal statutes
enumerated in Sec. 120.27 of this subchapter or violating a foreign
criminal law on exportation of defense articles where conviction of
such law carries a minimum term of imprisonment of greater than 1 year,
or becomes ineligible to contract with, or to receive a license or
other approval to export or temporarily import defense articles or
defense services from any agency of the U.S. Government; or
(2) There is a change in the following information contained in the
Statement of Registration:
(i) Registrant's name;
(ii) Registrant's address;
(iii) Registrant's legal organization structure;
(iv) Ownership or control;
(v) The establishment, acquisition, or divestment of a U.S. or
foreign subsidiary or other affiliate who is engaged in manufacturing
defense articles, exporting defense articles or defense services; or
(vi) Board of directors, senior officers, partners, or owners.
Note 1 to paragraph (a): All other changes in the Statement of
Registration must be provided as part of annual registration
renewal.
Note 2 to paragraph (a): For one year from the effective date
of the rule, ``Amendment to the International Traffic in Arms
Regulations: Registration and Licensing of Brokers, Brokering
Activities, and Related Provisions,'' RIN 1400-AC37, the following
changes must be provided as part of the annual registration renewal:
Pursuant to Sec. 129.3(d) of this subchapter, changes to combine an
existing broker registration with an existing manufacturer/exporter
registration; and pursuant to Sec. 122.2(a) of this subchapter,
changes to an existing registration to remove partially owned and
not otherwise controlled subsidiaries or affiliates, which are not
the subject of an internal reorganization, merger, acquisition, or
divestiture.
* * * * *
PART 126--GENERAL POLICIES AND PROVISIONS
0
14. The authority citation for part 126 continues to read as follows:
Authority: Secs. 2, 38, 40, 42, and 71, Pub. L. 90-629, 90
Stat. 744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); 22 U.S.C.
2651a; 22 U.S.C. 287c; E.O. 12918, 59 FR 28205; 3 CFR, 1994 Comp.,
p. 899; Sec. 1225, Pub. L. 108-375; Sec. 7089, Pub. L. 111-117; Pub.
L. 111-266; Sections 7045 and 7046, Pub. L. 112-74; E.O. 13637, 78
FR 16129.
* * * * *
0
15. Section 126.1 is amended by revising paragraphs (a), (b), and (e),
and adding a note to paragraph (e), to read as follows:
Sec. 126.1 Prohibited exports, imports, and sales to or from certain
countries.
(a) General. It is the policy of the United States to deny licenses
and other approvals for exports and imports of defense articles and
defense services, destined for or originating in certain countries.
This policy applies to Belarus, Cuba, Eritrea, Iran, North Korea,
Syria, and Venezuela. This policy also applies to countries with
respect to which the United States maintains an arms embargo (e.g.,
Burma, China, and the Republic of the Sudan) or whenever an export
would not otherwise be in furtherance of world peace and the security
and foreign policy of the United States. Information regarding certain
other embargoes appears elsewhere in this section. Comprehensive arms
embargoes are normally the subject of a Department of State notice
published in the Federal Register. The exemptions provided in this
subchapter, except Sec. Sec. 123.17, 126.4, and 126.6 of this
subchapter or when the recipient is a U.S. Government department or
agency, do not apply with respect to defense articles or defense
services originating in or for export to any proscribed countries,
areas, or persons identified in this section or to brokering activities
involving such countries, areas, or persons. (See Sec. 129.7 of this
subchapter, which imposes restrictions on brokering activities similar
to those in this section.)
(b) Shipments. A defense article licensed or otherwise authorized
for export, temporary import, reexport, or retransfer under this
subchapter may not be shipped on a vessel, aircraft, spacecraft, or
other means of conveyance that is owned by, operated by, leased to, or
leased from any of the proscribed countries, areas, or other persons
referred to in this section.
* * * * *
(e)(1) Proposed and final sales. No sale, export, transfer,
reexport, or retransfer of, and no proposal or presentation 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
[[Page 52688]]
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.
(2) Duty to notify. Any person who knows or has reason to know of a
proposed, final, or actual sale, export, transfer, reexport, or
retransfer of articles, services, or data as described in paragraph
(e)(1) of this section 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.
Note to paragraph (e): ``Proposal'' and ``presentation'' mean
the communication of information in sufficient detail that it would
permit an intended purchaser to decide to acquire the article in
question or to enter into an agreement as described in part 124 of
this subchapter. For example, communicating information on the
equipment's performance characteristics, price, and probable
availability for delivery would be a proposal or presentation
requiring a license or other approval.
* * * * *
0
16. Section 126.13 is amended by revising paragraphs (a)(1) through
(a)(4), (b), and (c), to read as follows:
Sec. 126.13 Required information.
(a) * * *
(1) The applicant or the chief executive officer, president, vice-
presidents, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel) or any member
of the board of directors is the subject of an indictment or has been
otherwise charged (e.g., by criminal information in lieu of indictment)
for, or has been convicted of, violating any of the U.S. criminal
statutes enumerated in Sec. 120.27 of this subchapter;
(2) The applicant or the chief executive officer, president, vice-
presidents, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel) or any member
of the board of directors is ineligible to contract with, or to receive
a license or other approval to temporarily import or export defense
articles or defense services from any agency of the U.S. Government;
(3) To the best of the applicant's knowledge, any party to the
export as defined in Sec. 126.7(e) has been convicted of violating any
of the U.S. criminal statutes enumerated in Sec. 120.27 of this
subchapter, or is ineligible to contract with, or to receive a license
or other approval to temporarily import or export defense articles or
defense services from any agency of the U.S. government; and
(4) The natural person signing the application, notification, or
other request for approval (including the statement required by this
subchapter) 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)(20), 66 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.
(b) In addition, all applications for licenses must include the
complete names and addresses of all U.S. consignors and freight
forwarders, and all foreign consignees and foreign intermediate
consignees involved in the transaction. Port Directors of U.S. Customs
and Border Protection and Department of Defense transmittal authorities
will permit only those U.S. consignors or freight forwarders listed on
the license to make shipments under the license, and only to those
foreign consignees and foreign intermediate consignees listed on the
license. Applicants should list all freight forwarders who may be
involved with shipments under the license to ensure that the list is
complete and to avoid the need for amendments after the license has
been approved. If there are unusual or extraordinary circumstances that
preclude the specific identification of all the U.S. consignors and
freight forwarders and all foreign consignees and foreign intermediate
consignees, the applicant must provide a letter of explanation with
each application.
(c) In cases when natural foreign persons are employed at or
assigned to security-cleared facilities, provision by the applicant of
a technology control plan will facilitate processing.
PART 127--VIOLATIONS AND PENALTIES
0
17. The authority citation for part 127 is revised to read as follows:
Authority: Sections 2, 38, and 42, Pub. L. 90-629, 90 Stat. 744
(22 U.S.C. 2752, 2778, 2791); 22 U.S.C. 401; 22 U.S.C. 2651a; 22
U.S.C. 2779a; 22 U.S.C. 2780; E.O. 13637, 78 FR 16129.
0
18. Section 127.1 is amended by adding paragraph (a)(5), and revising
paragraphs (a)(3), (a)(4), (c), (d), and (e), to read as follows:
Sec. 127.1 Violations.
(a) * * *
(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; or
(5) To possess or attempt to possess any defense article with
intent to export or transfer such defense article in violation of 22
U.S.C. 2778 and 2779, or any regulation, license, approval, or order
issued thereunder.
* * * * *
(c) Any person who is granted a license or other approval or acts
pursuant to an exemption under this subchapter is responsible for the
acts of employees, agents, brokers, and all authorized persons to whom
possession of the defense article, which includes technical data, has
been entrusted regarding the operation, use, possession,
transportation, and handling of such defense article abroad. All
persons abroad subject to U.S. jurisdiction who obtain custody of a
defense article exported from the United States or produced under an
agreement described in part 124 of this subchapter, and regardless 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 who is ineligible pursuant to Sec. 120.1(c)(2) of
this subchapter, or a person with knowledge that another person is
ineligible pursuant to Sec. 120.1(c)(2) 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) 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
manner in any transaction that may involve any defense article, which
includes technical data, defense services, or brokering activities
subject to this subchapter, where such ineligible person may obtain any
benefit therefrom or have any direct or indirect interest therein.
(e) No person may knowingly or willfully attempt, solicit, cause,
or aid, abet, counsel, demand, induce, procure,
[[Page 52689]]
or permit the commission of any act prohibited by, or the omission of
any act required by 22 U.S.C. 2778, 22 U.S.C. 2779, or any regulation,
license, approval, or order issued thereunder.
0
19. Section 127.2 is amended by revising paragraph (b)(13) to read as
follows:
Sec. 127.2 Misrepresentation and omission of facts.
* * * * *
(b) * * *
(13) Any other document used in the regulation or control of a
defense article, defense service, or brokering activity regulated by
this subchapter.
* * * * *
0
20. Section 127.7 is revised to read as follows:
Sec. 127.7 Debarment.
(a) Administrative debarment. In implementing section 38 of the
Arms Export Control Act, the Assistant Secretary of State for
Political-Military Affairs may debar and thereby prohibit any person
from participating directly or indirectly in any activities that are
subject to this subchapter for any of the reasons listed below. Any
such prohibition is referred to as an administrative debarment for
purposes of this subchapter. The Assistant Secretary of State for
Political-Military Affairs shall determine the appropriate period of
time for administrative debarment, which generally shall be for a
period of three years. Reinstatement is not automatic, however, and in
all cases the debarred persons must submit a request for reinstatement
and be approved for reinstatement before engaging in any activities
subject to this subchapter. (See part 128 of this subchapter for
administrative procedures.)
(b) Statutory debarment. Section 38(g)(4) of the Arms Export
Control Act prohibits the issuance of licenses to persons who have been
convicted of violating the U.S. criminal statutes enumerated in section
38(g)(1) of the Arms Export Control Act. Discretionary authority to
issue licenses is provided, but only if certain statutory requirements
are met. It is the policy of the Department of State not to consider
applications for licenses or requests for approvals involving any
person who has been convicted of violating the Arms Export Control Act
or convicted of conspiracy to violate that Act for a three year period
following conviction. Such individuals shall be notified in writing
that they are statutorily debarred pursuant to this policy. A list of
persons who have been convicted of such offenses and debarred for this
reason shall be published periodically in the Federal Register.
Statutory debarment in such cases is based solely upon the outcome of a
criminal proceeding, conducted by a court of the United States, that
established guilt beyond a reasonable doubt in accordance with due
process. The procedures of part 128 of this subchapter are not
applicable in such cases.
(c) Grounds. (1) The basis for statutory debarment, as described in
paragraph (b) of this section, is any conviction for violating the Arms
Export Control Act (see Sec. 127.3) or any conspiracy to violate the
Arms Export Control Act.
(2) The basis for administrative debarment, as described in
paragraph (a) of this section and in part 128 of this subchapter, is
any violation of 22 U.S.C. 2778 or any rule or regulation issued
thereunder when such a violation is of such a character as to provide a
reasonable basis for the Directorate of Defense Trade Controls to
believe that the violator cannot be relied upon to comply with the
statute or these rules or regulations in the future, and when such
violation is established in accordance with part 128 of this
subchapter.
(d) Appeals. Any person who is ineligible pursuant to paragraph (b)
of this section may appeal to the Under Secretary of State for Arms
Control and International Security for reconsideration of the
ineligibility determination. The procedures specified in Sec. 128.13
of this subchapter will be used in submitting a reconsideration appeal.
0
21. Section 127.8 is removed and reserved, as follows:
Sec. 127.8 [Reserved]
0
22. Section 127.9 is revised to read as follows:
Sec. 127.9 Applicability of orders.
For the purpose of preventing evasion, orders of the Assistant
Secretary of State for Political-Military Affairs debarring a person
under Sec. 127.7 may be made applicable to any other person who may
then or thereafter (during the term of the order) be related to the
debarred person by affiliation, ownership, control, position of
responsibility, or other commercial connection. Appropriate notice and
opportunity to respond to the basis for the suspension will be given.
PART 128--ADMINISTRATIVE PROCEDURES
0
23. The authority citation for part 128 is revised to read as follows:
Authority: Sections. 2, 38, 40, 42, and 71, Arms Export Control
Act. 90 Stat. 744 (22 U.S.C. 2752, 2778, 2780, 2791, and 2797); 22
U.S.C. 2651a; E.O. 12291, 46 FR 1981; E.O. 13637, 78 FR 16129.
0
24. Section 128.2 is revised to read as follows:
Sec. 128.2 Administrative Law Judge.
The Administrative Law Judge referred to in this part is an
Administrative Law Judge appointed by the Department of State. The
Administrative Law Judge is authorized to exercise the powers and
perform the duties provided for in Sec. Sec. 127.7 and 128.3 through
128.16 of this subchapter.
0
25. Section 128.3 is amended by revising paragraph (a) to read as
follows:
Sec. 128.3 Institution of Administrative Proceedings.
(a) Charging letters. The Deputy Assistant Secretary of State for
Defense Trade Controls or the Director, Office of Defense Trade
Controls Compliance, with the concurrence of the Office of the Legal
Adviser, Department of State, may initiate proceedings to impose
debarment or civil penalties in accordance with Sec. 127.7 or Sec.
127.10 of this subchapter, respectively. Administrative proceedings
shall be initiated by means of a charging letter. The charging letter
will state the essential facts constituting the alleged violation and
refer to the regulatory or other provision involved. It will give
notice to the respondent to answer the charges within 30 days, as
provided in Sec. 128.5(a), and indicate that a failure to answer will
be taken as an admission of the truth of the charges. It will inform
the respondent that he or she is entitled to an oral hearing if a
written demand for one is filed with the answer or within seven days
after service of the answer. The respondent will also be informed that
he or she may, if so desired, be represented by counsel of his or her
choosing. Charging letters may be amended from time to time, upon
reasonable notice.
0
26. Section 128.15 is amended by revising paragraph (a) to read as
follows:
Sec. 128.15 Orders containing probationary periods.
(a) Revocation of probationary periods. A debarment order may set a
probationary period during which the order may be held in abeyance for
all or part of the debarment period, subject to the conditions stated
therein. The Managing Director, Directorate of Defense Trade Controls,
may apply, without notice to any person to be affected thereby, to the
Administrative Law Judge for a recommendation on the appropriateness of
revoking probation when it appears that the conditions of
[[Page 52690]]
the probation have been breached. The facts in support of the
application will be presented to the Administrative Law Judge, who will
report thereon and make a recommendation to the Assistant Secretary of
State for Political-Military Affairs. The latter will make a
determination whether to revoke probation and will issue an appropriate
order. The party affected by this action may request the Assistant
Secretary of State for Political-Military Affairs to reconsider the
decision by submitting a request within 10 days of the date of the
order.
* * * * *
0
27. Section 128.17 is revised to read as follows:
Sec. 128.17 Availability of orders.
All charging letters, debarment orders, and orders imposing civil
penalties and probationary periods are available for public inspection
in the Public Reading Room of the Department of State.
PART 129--REGISTRATION AND LICENSING OF BROKERS
0
28. The authority citation for part 129 is revised to read as follows:
Authority: Section 38, Pub. L. 104-164, 110 Stat. 1437, (22
U.S.C. 2778); E.O. 13637, 78 FR 16129.
0
29. The table of contents for part 129 is revised to read as follows:
Sec.
129.1 Purpose.
129.2 Definitions.
129.3 Requirement to register.
129.4 Requirement for approval.
129.5 Exemption from requirement for approval.
129.6 Procedures for obtaining approval.
129.7 Policy on embargoes and other proscriptions.
129.8 Submission of Statement of Registration, registration fees,
and notification of changes in information furnished by registrants.
129.9 Guidance.
129.10 Reports.
129.11 Maintenance of brokering records by registrants.
0
30. Section 129.1 is revised to read as follows:
Sec. 129.1 Purpose.
(a) Section 38(b)(1)(A)(ii) of the Arms Export Control Act (22
U.S.C. 2778) provides that persons engaged in the business of brokering
activities shall register and pay a registration fee as prescribed in
regulations, and that no person may engage in the business of brokering
activities without a license issued in accordance with the Act.
(b) The brokering activities identified in this subchapter apply to
those defense articles and defense services controlled for purposes of
export on the U.S. Munitions List (see part 121 of this subchapter) or
for purposes of permanent import on the U.S. Munitions Import List (see
27 CFR part 447).
0
31. Section 129.2 is revised to read as follows:
Sec. 129.2 Definitions.
As used in this part:
(a) Broker means any person (see Sec. 120.14 of this subchapter)
described below who engages in the business of brokering activities:
(1) Any U.S. person (see Sec. 120.15 of this subchapter) wherever
located;
(2) Any foreign person (see Sec. 120.16 of this subchapter)
located in the United States; or
(3) Any foreign person located outside the United States where the
foreign person is owned or controlled by a U.S. person.
Note to paragraph (a)(3): For purposes of this paragraph,
``owned by a U.S. person'' means more than 50 percent of the
outstanding voting securities of the firm are owned by a U.S.
person, and ``controlled by a U.S. person'' means one or more U.S.
persons have the authority or ability to establish or direct the
general policies or day-to-day operations of the firm. U.S. person
control is rebuttably presumed to exist where U.S. persons own 25
percent or more of the outstanding voting securities unless one
foreign person controls an equal or larger percentage.
(b) Brokering activities means any action on behalf of another to
facilitate the manufacture, export, permanent import, transfer,
reexport, or retransfer of a U.S. or foreign defense article or defense
service, regardless of its origin.
(1) Such action includes, but is not limited to:
(i) Financing, insuring, transporting, or freight forwarding
defense articles and defense services; or
(ii) Soliciting, promoting, negotiating, contracting for,
arranging, or otherwise assisting in the purchase, sale, transfer,
loan, or lease of a defense article or defense service.
(2) Such action does not include:
(i) Activities by a U.S. person in the United States that are
limited exclusively to U.S. domestic sales or transfers (e.g., not for
export);
(ii) Activities by employees of the U.S. Government acting in an
official capacity;
(iii) Activities by regular employees (see Sec. 120.39 of this
subchapter) acting on behalf of their employer, including those regular
employees who are dual nationals or third-country nationals that
satisfy the requirements of Sec. 126.18 of this subchapter;
Note to paragraph (b)(2)(iii): The exclusion does not apply to
persons subject to U.S. jurisdiction with respect to activities
involving a defense article or defense service originating in or
destined for any proscribed country, area, or person identified in
Sec. 126.1 of this subchapter.
(iv) Activities that do not extend beyond administrative services,
such as providing or arranging office space and equipment, hospitality,
advertising, or clerical, visa, or translation services, collecting
product and pricing information to prepare a response to Request for
Proposal, generally promoting company goodwill at trade shows, or
activities by an attorney that do not extend beyond the provision of
legal advice to clients;
(v) Activities performed by an affiliate, as defined in Sec.
120.40 of this subchapter, on behalf of another affiliate; or
(vi) Activities by persons, including their regular employees (see
Sec. 120.39 of this subchapter), that do not extend beyond acting as
an end-user of a defense article or defense service exported pursuant
to a license or other approval under parts 123, 124, or 125 of this
subchapter, or subsequently acting as a reexporter or retransferor of
such article or service under such license or other approval, or under
an approval pursuant to Sec. 123.9 of this subchapter.
(c) For the purposes of this subchapter, engaging in the business
of brokering activities requires only one occasion of brokering as
described in paragraph (b) of this section.
0
32. Section 129.3 is revised to read as follows:
Sec. 129.3 Requirement to register.
(a) Except as provided in paragraph (b) of this section, any person
who engages in brokering activities (see Sec. 129.2) is required to
register with the Directorate of Defense Trade Controls. Registration
under this section is generally a precondition for the issuance of
approval for brokering activities required under this part 129 or the
use of exemptions.
(b) Exemptions. Registration, approval, recordkeeping, and
reporting under this section are not required for:
(1) Foreign governments or international organizations, including
their employees, acting in an official capacity; or
(2) Persons exclusively in the business of financing, insuring,
transporting, customs brokering, or freight forwarding, whose
activities do not extend beyond financing, insuring, transporting,
customs brokering, or freight forwarding. Examples include air carriers
or freight forwarders that merely
[[Page 52691]]
transport or arrange transportation for licensed defense articles, and
banks or credit companies who merely provide commercially available
lines or letters of credit to persons registered or required to
register in accordance with parts 122 or 129 of this subchapter.
However, banks, firms, or other persons providing financing for defense
articles or defense services are required to register under certain
circumstances, such as when the bank or its employees are directly
involved in arranging transactions involving defense articles or
defense services or hold title to defense articles, even when no
physical custody of defense articles is involved. In such
circumstances, the banks, firms, or other persons providing financing
for defense articles or defense services are not exempt.
(c) Persons exempt from registration, approval, recordkeeping, and
reporting as provided in Sec. 129.3(b) are subject to the policy on
embargoes and other proscriptions as outlined in Sec. 129.7.
(d) U.S. persons who are registered as a manufacturer or exporter
in accordance with part 122 of this subchapter, including their U.S. or
foreign subsidiaries and other affiliates listed on their Statement of
Registration who are required to register under this part, are not
required to submit a separate broker registration or pay a separate
broker registration fee when more than 50 percent of the voting
securities are owned by the registrant or such subsidiaries and
affiliates are otherwise controlled by the registrant (see Sec. 120.40
of this subchapter), and they are listed and identified as brokers
within their manufacturer or exporter Statement of Registration. All
other requirements of this part apply to such brokers and their
brokering activities.
(e) Registration under this section is a precondition for the
issuance of approval for brokering activities required under this
section or the use of exemptions, unless an exception is granted by the
Directorate of Defense Trade Controls.
0
33. Sections 129.6, 129.7, 129.8, 129.5, 129.4, 129.10, and 129.9 are
redesignated as Sec. Sec. 129.4, 129.5, 129.6, 129.7, 129.8, 129.9,
and 129.10 respectively.
0
34. Newly redesignated Sec. 129.4 is revised to read as follows:
Sec. 129.4 Requirement for approval.
(a) Except as provided in Sec. 129.5, no person who is required to
register as a broker pursuant to Sec. 129.3 of this subchapter may
engage in the business of brokering activities pursuant to Sec.
129.2(b) without first obtaining the approval of the Directorate of
Defense Trade Controls for the brokering of any of the following:
(1) Any foreign defense article or defense service (see Sec.
120.44 of this subchapter, and Sec. 129.5 for exemptions); or
(2) Any of the following U.S. origin defense articles or defense
services:
(i) Firearms and other weapons of a nature described by Category
I(a) through (d), Category II(a) and (d), and Category III(a) of Sec.
121.1 of this subchapter;
(ii) Rockets, bombs, and grenades as well as launchers for such
defense articles of a nature described by Category IV(a), and launch
vehicles and missile and anti-missile systems of a nature described by
Category IV(b) of Sec. 121.1 of this subchapter (including man-
portable air-defense systems);
(iii) Vessels of war described by Category VI of Sec. 121.1 of
this subchapter;
(iv) Tanks and military vehicles described by Category VII of Sec.
121.1 of this subchapter;
(v) Aircraft and unmanned aerial vehicles described by Category
VIII of Sec. 121.1 of this subchapter;
(vi) Night vision-related defense articles and inertial platform,
sensor, and guidance-related systems of a nature described by Category
XII(c) and (d) of Sec. 121.1 of this subchapter;
(vii) Chemical agents and precursors described by Category XIV(a),
(c), and (e) of Sec. 121.1 of this subchapter, biological agents and
biologically derived substances described by Category XIV(b) of Sec.
121.1 of this subchapter, and equipment described by Category XIV(f) of
Sec. 121.1 of this subchapter for dissemination of the chemical agents
and biological agents described by Category XIV(a), (b), and (e) of
Sec. 121.1 of this subchapter;
(viii) Submersible vessels described by Category XX of Sec. 121.1
of this subchapter; and
(ix) Miscellaneous articles of a nature described by Category XXI
of Sec. 121.1 of this subchapter.
0
35. Newly redesignated Sec. 129.5 is revised to read as follows:
Sec. 129.5 Exemption from requirement for approval.
(a) Unless paragraph (c) of this section applies, brokering
activities undertaken for an agency of the U.S. Government pursuant to
a contract between the broker and that agency are exempt from the
requirement for approval provided that:
(1) The brokering activities concern defense articles or defense
services solely for the use of the agency; or
(2) The brokering activities are undertaken for carrying out a
foreign assistance or sales program authorized by law and subject to
control by the President by other means, as demonstrated by one of the
following conditions being met:
(i) The U.S. Government agency contract with the broker contains an
explicit provision stating the contract supports a foreign assistance
or sales program authorized by law and the contracting agency has
established control of the activity covered by the contract by other
means equivalent to that established under this subchapter; or
(ii) The Directorate of Defense Trade Controls provides written
concurrence in advance that the condition is met.
(b) Unless paragraph (c) of this section applies, brokering
activities regarding a foreign defense article or defense service (see
Sec. 120.44 of this subchapter) are exempt from the requirement for
approval when 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. 129.4(a)(2), for which approval is required.
(c) Brokers engaging in brokering activities described in paragraph
(a) or (b) of this section are not exempt from obtaining approval from
the Directorate of Defense Trade Controls if:
(1) The broker is not registered as required by Sec. 129.3;
(2) The broker or any person who has a direct or indirect interest
in or may benefit from the brokering activities, including any related
defense article or defense service transaction, is ineligible as
defined in Sec. 120.1(c)(2) of this subchapter; or
(3) A country or person referred to in Sec. 126.1 of this
subchapter is involved in the brokering activities or such activities
are otherwise subject to Sec. 129.7.
(d) Brokers who use the exemptions in this section must comply with
all other provisions of this part 129.
0
36. Newly redesignated Sec. 129.6 is revised to read as follows:
Sec. 129.6 Procedures for obtaining approval.
(a) All requests for approval of brokering activities must be made
to the Directorate of Defense Trade Controls, be signed by an empowered
official, and include the following information:
(1) The applicant's name, address and registration code;
(2) A certification on whether:
(i) The applicant or the chief executive officer, president, vice
[[Page 52692]]
presidents, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel), or any
member of the board of directors is the subject of an indictment or has
been otherwise charged (e.g., by criminal information in lieu of
indictment) for, or has been convicted of, violating any of the U.S.
criminal statutes enumerated in Sec. 120.27 of this subchapter;
(ii) The applicant or the chief executive officer, president, vice
presidents, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel), or any
member of the board of directors is ineligible to contract with, or to
receive a license or other approval to import defense articles or
defense services from, or to receive an export license or other
approval from, any agency of the U.S. Government; and
(iii) To the best of the applicant's knowledge, any other person
involved in the brokering activities enumerated in the request for
approval as defined in Sec. 129.2 is the subject of an indictment or
has been otherwise charged (e.g., charged by criminal information in
lieu of indictment) for or has been convicted of violating any of the
U.S. criminal statutes enumerated in Sec. 120.27 of this subchapter,
or is ineligible to contract with, or to receive a license or other
approval to import defense articles or defense services from, or to
receive an export license or other approval from, any agency of the
U.S. Government.
(b) The request for approval shall describe fully the brokering
activities that will be undertaken, including:
(1) The action to be taken by the applicant to facilitate the
manufacture, export, import, or transfer of a defense article or
defense service (which may be referred to as a ``defense article or
defense service transaction'');
(2) The name, nationality, address, and place of business of all
persons who may participate in the brokering activities;
(3) A description of each defense article or defense service that
may be involved, including:
(i) The U.S. Munitions List category and sub-category for each
article;
(ii) The name or military nomenclature of each defense article;
(iii) Whether the defense article is significant military
equipment;
(iv) Estimated quantity of each defense article;
(v) Estimated U.S. dollar value of defense articles and defense
services;
(vi) Security classification; and
(vii) End-user and end-use; and
(4) A statement whether the brokering activities are related to a
sale through direct commercial sale or under the U.S. Foreign Military
Sales program or other activity in support of the U.S. Government.
(c) The empowered official signing the request for approval shall
include a certification that the request is complete and accurate.
(d) If at the time of submission certain information required by
paragraph (b) of this section is not yet available, this fact must be
stated and explained in the certification required by paragraph (c) of
this section. The Directorate of Defense Trade Controls will take any
such explanation into account in deciding whether to approve the
request.
(e) The period of validity for an approval may not exceed four
years.
0
37. Newly redesignated Sec. 129.7 is revised to read as follows:
Sec. 129.7 Policy on embargoes and other proscriptions.
(a) This section applies to brokering activities defined in Sec.
129.2, regardless of whether the person involved in such activities has
registered or is exempt from registration under Sec. 129.3. The
exemptions in Sec. 129.5 from the requirement for approval are not
applicable to brokering activities subject to this section.
(b) No person may engage in or make a proposal to engage in
brokering activities that involve any country, area, or person referred
to in Sec. 126.1 of this subchapter without first obtaining the
approval of the Directorate of Defense Trade Controls.
(c) No person may engage in or make a proposal to engage in
brokering activities without first obtaining approval of the
Directorate of Defense Trade Controls if such activities involve
countries or persons identified by the Department of State through
notice in the Federal Register, with respect to which certain
limitations on defense articles or defense services are imposed for
reasons of U.S. national security, foreign policy, or law enforcement
interests (e.g., an individual subject to debarment pursuant to Sec.
127.7 of this subchapter). (See Sec. 127.1(c) of this subchapter for
additional disclosure and approval requirements applicable to brokering
activities.)
(d) It is the policy of the Department of State to deny requests
for approval of brokering activities or proposals to engage in
brokering activities involving the countries or persons referred to in
paragraph (b) or (c) of this section. Any person who knows or has
reason to know of brokering activities involving such countries or
persons must immediately inform the Directorate of Defense Trade
Controls.
0
38. Section 129.4 is redesignated as Sec. 129.8 revised to read as
follows:
Sec. 129.8 Submission of Statement of Registration, registration
fees, and notification of changes in information furnished by
registrants.
(a) An intended registrant must submit a Department of State form
DS-2032 (Statement of Registration) to the Office of Defense Trade
Controls Compliance by following the submission guidelines available on
the Directorate of Defense Trade Controls Web site at
www.pmddtc.state.gov. The Statement of Registration must be signed by a
U.S. person senior officer (e.g., chief executive officer, president,
secretary, partner, member, treasurer, general counsel) who has been
empowered by the intended registrant to sign such documents, with the
exception that a foreign senior officer may sign the Statement of
Registration if the intended registrant seeks only to register as a
foreign broker. The Statement of Registration may include subsidiaries
and affiliates when more than 50 percent of the voting securities are
owned by the registrant or the subsidiaries and affiliates are
otherwise controlled by the registrant (see Sec. 120.40 of this
subchapter). The intended registrant, whether a U.S. or foreign person,
shall submit documentation that demonstrates it is incorporated or
otherwise authorized to do business in its respective country. Foreign
persons who are required to register shall provide information that is
substantially similar in content to that which a U.S. person would
provide under this provision (e.g., foreign business license or similar
authorization to do business). The Directorate of Defense Trade
Controls will notify the registrant if the Statement of Registration
(form DS-2032) is incomplete either by notifying the registrant of what
information is required or through the return of the entire
registration package.
(b)(1) Frequency of registration and fee. A person who is required
to register must do so on an annual basis by submitting a completed
Statement of Registration (form DS-2032) and a fee following the fee
guidelines available on the Directorate of Defense Trade Controls Web
site at www.pmddtc.state.gov. Registrants are not required to submit a
separate statement of registration and pay an additional fee when
provisions in Sec. 129.3(d) are met.
(2) Expiration of registration. A registrant must submit its
request for registration renewal at least 30 days, but no earlier than
60 days, prior to the expiration date.
[[Page 52693]]
(3) Lapse in registration. A registrant who fails to renew a
registration and, after an intervening period, seeks to register again
must pay registration fees for any part of such intervening period
during which the registrant engaged in the business of brokering
defense articles or defense services.
(c) Statement of Registration Certification. The Statement of
Registration (form DS-2032) of the intended registrant shall include a
certification by an authorized senior officer of the following:
(1) Whether the intended registrant or its parent, subsidiary, or
other affiliate listed in the Statement of Registration, or any of its
chief executive officers, presidents, vice presidents, secretaries,
partners, members, other senior officers or officials (e.g.,
comptroller, treasurer, general counsel), or any member of the board of
directors of the intended registrant, or of any parent, subsidiary, or
other affiliate listed in the Statement of Registration:
(i) Has ever been indicted or otherwise charged (e.g., charged by
criminal information in lieu of indictment) for or has been convicted
of violating any U.S. criminal statutes enumerated in Sec. 120.27 of
this subchapter or violating a foreign criminal law on exportation of
defense articles where conviction of such law carries a minimum term of
imprisonment of greater than 1 year; or
(ii) Is ineligible to contract with, or to receive a license or
other approval to import defense articles or defense services from, or
to receive an export license or other approval from, any agency of the
U.S. Government; and
(2) Whether the intended registrant is foreign owned or foreign
controlled (see Sec. 120.37 of this subchapter). If the intended
registrant is foreign owned or foreign controlled, the certification
shall include an explanation of such ownership or control, including
the identities of the foreign person or persons who ultimately own or
control the registrant. This requirement applies to a registrant who is
a U.S. person and is owned or controlled by a foreign person. It also
applies to a registrant who is a foreign person and is owned or
controlled by a foreign person from the same country or a foreign
person from another country.
(d) A registrant must, within five days of the event, provide to
the Directorate of Defense Trade Controls a written notification,
signed by a senior officer (e.g., chief executive officer, president,
secretary, partner, member, treasurer, general counsel), if:
(1) Any of the persons referred to in Sec. 129.8(c) is indicted or
otherwise charged (e.g., charged by criminal information in lieu of
indictment) for or convicted of violating any of the U.S. criminal
statutes enumerated in Sec. 120.27 of this subchapter or violating a
foreign criminal law on exportation of defense articles where
conviction of such law carries a minimum term of imprisonment of
greater than 1 year; or becomes ineligible to contract with, or to
receive a license or other approval to export or import defense
articles or defense services from, any agency of the U.S. government;
or
(2) There is a change in the following information contained in the
Statement of Registration (form DS-2032):
(i) Registrant's name;
(ii) Registrant's address;
(iii) Registrant's legal organization structure;
(iv) Ownership or control;
(v) The establishment, acquisition or divestment of a U.S. or
foreign subsidiary or other affiliate who is engaged in brokering
activities or otherwise required to be listed in registrant's Statement
of Registration; or
(vi) Board of directors, senior officers, partners and owners.
Note 1 to paragraph (d): All other changes in the Statement of
Registration must be provided as part of annual registration
renewal.
Note 2 to paragraph (d): For one year from October 25, 2013,
``Amendment to the International Traffic in Arms Regulations:
Registration and Licensing of Brokers, Brokering Activities, and
Related Provisions,'' RIN 1400-AC37, the following changes must be
provided as part of the annual registration renewal: pursuant to
Sec. 129.3(d), changes to combine an existing broker registration
with an existing manufacturer/exporter registration, and pursuant to
Sec. 129.8(a), changes to an existing registration to remove
partially owned and not otherwise controlled subsidiaries or
affiliates, which are not the subject of an internal reorganization,
merger, acquisition, or divestiture.
(e) A U.S. or foreign registrant must provide written notification
to the Directorate of Defense Trade Controls at least sixty (60) days
in advance of any intended sale or transfer to a foreign person of
ownership or control of the registrant or any parent, subsidiary, or
other affiliate listed and covered in its Statement of Registration.
Such notice does not relieve the registrant from obtaining any prior
approval required under this subchapter.
(f) The new entity formed when a registrant merges with another
company or acquires, or is acquired by, another company or a subsidiary
or division of another company, shall advise the Directorate of Defense
Trade Controls of the following:
(1) The new firm name and all previous firm names;
(2) The registration number that will continue and those that are
to be discontinued (if any); and
(3) The numbers of all approvals for brokering activities under the
continuing registration number, since any approval not the subject of
notification will be considered invalid.
(g) A registrant whose registration lapses because of failure to
renew and, after an intervening period, seeks to register again must
pay registration fees for any part of such intervening period during
which the registrant engaged in the business of brokering activities.
0
39. Newly redesignated Sec. 129.9 is revised to read as follows:
Sec. 129.9 Guidance.
(a) Any person desiring guidance on whether an activity constitutes
a brokering activity within the scope of this part 129 may request in
writing guidance from the Directorate of Defense Trade Controls. The
request for guidance shall identify the applicant and registrant code
(if applicable) and describe fully the activities that will be
undertaken, including:
(1) The specific activities to be undertaken by the applicant and
any other U.S. or foreign person;
(2) The name, nationality, and geographic location of all U.S. and
foreign persons who may participate in the activities;
(3) A description of each defense article or defense service that
may be involved, including:
(i) The U.S. Munitions List category and sub-category for each
article;
(ii) The name or military nomenclature of each defense article;
(iii) Whether the defense article is significant military
equipment;
(iv) Estimated quantity of each defense article;
(v) Estimated U.S. dollar value of defense articles and defense
services; and
(vi) Security classification;
(4) End-user and end-use; and
(5) A copy of any agreement or documentation, if available, between
or among the requester and other persons who will be involved in the
activity or related transactions that describes the activity to be
taken by such persons.
(b) If at the time of submission certain information is not yet
available, this circumstance must be stated and explained. The
Directorate of Defense Trade Controls will take the completeness of the
information into account in providing guidance on whether the
activities constitute brokering activities. The guidance will
[[Page 52694]]
constitute an official determination by the Department of State. The
guidance shall not substitute for approval when required under Sec.
129.4.
(c) Persons desiring guidance on other aspects of this part may
also request guidance from the Directorate of Defense Trade Controls in
a similar manner by submitting a description of the relevant facts or
copies of relevant documentation.
0
40. Newly redesignated Sec. 129.10 is revised to read as follows:
Sec. 129.10 Reports.
(a) Any person required to register under this part (including
those registered in accordance with Sec. 129.3(d)) shall provide to
the Directorate of Defense Trade Controls on an annual basis a report
of its brokering activities in the previous twelve months. Such report
shall be submitted along with the registrant's annual renewal
submission or, if not renewing, within 30 days after expiration of
registration.
(b) The report shall include brokering activities that received or
were exempt from approval as follows:
(1) The report shall identify the broker's name, address, and
registration code and be signed by an empowered official who shall
certify that the report is complete and accurate. The report shall
describe each of the brokering activities, including the number
assigned by the Directorate of Defense Trade Controls to the approval
or the exemption claimed; and
(2) For each of the brokering activities, the report shall identify
all persons who participated in the activities, including each person's
name, address, nationality, and country where located and role or
function; the quantity, description, and U.S. dollar value of the
defense articles or defense services; the type and U.S. dollar value of
any consideration received or expected to be received, directly or
indirectly, by any person who participated in the brokering activities,
and the source thereof.
(c) If there were no brokering activities, the report shall certify
that there were no such activities.
0
41. Section 129.11 is added to read as follows:
Sec. 129.11 Maintenance of brokering records by registrants.
A person who is required to register pursuant to this part
(including those registered in accordance with Sec. 129.3(d)) must
maintain records concerning brokering activities in accordance with
Sec. 122.5 of this subchapter.
Rose E. Gottemoeller,
Acting Under Secretary, Arms Control and International Security,
Department of State.
[FR Doc. 2013-20743 Filed 8-23-13; 8:45 am]
BILLING CODE 4710-25-P