[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)]
[Notices]
[Pages 76992-76994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26715]


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DEPARTMENT OF STATE

[Public Notice: 9782]


30-Day Notice of Proposed Information Collection: Statement of 
Material Change, Merger, Acquisition, or Divestment of a Registered 
Party

ACTION: Notice of request for public comment.

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SUMMARY: The Department of State is seeking Office of Management and 
Budget (OMB) approval for the information collection described below. 
In accordance with the Paperwork Reduction Act of 1995, we are 
requesting comments on this collection from all interested individuals 
and organizations. The purpose of this notice is to allow 30 days for 
public comment preceding submission of the collection to OMB.

DATES: The Department will accept comments from the public up to 
December 5, 2016.

ADDRESSES: Direct comments to the Department of State Desk Officer in 
the Office of Information and Regulatory Affairs (OIRA) 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 the OMB control 
number in the subject line of your message.
     Fax: 202-395-5806. Attention: Desk Officer for Department 
of State.
    You must include the DS form number, information collection title, 
and OMB control number in any correspondence.

FOR FURTHER INFORMATION CONTACT: Direct requests for additional 
information regarding the collection listed in this notice, including 
requests for copies of the proposed collection instrument and 
supporting documents, to Steve Derscheid--Management Analyst, who may 
be reached at [email protected].

SUPPLEMENTARY INFORMATION: 
     Title of Information Collection: Statement of Material 
Change, Merger, Acquisition, or Divestiture of a Registered Party.
     OMB Control Number: 1405-XXXX.
     Type of Request: New Collection.
     Originating Office: Directorate of Defense Trade Controls, 
Bureau of Political Military Affairs, Department of State (T/PM/DDTC).
     Form Number: DS-7789.
     Respondents: Individuals and companies registered with 
DDTC and engaged in the business of manufacturing, brokering, 
exporting, or temporarily importing defense hardware or defense 
technology data.
     Estimated Number of Respondents: 1,700.
     Estimated Number of Responses: 1,700.
     Average Time per Response: 2 hours.
     Total Estimated Burden Time: 3,400 hours.
     Frequency: On occasion.
     Obligation to Respond: Mandatory.
    We are soliciting public comments to permit the Department to:
     Evaluate whether the proposed information collection is 
necessary for the proper functions of the Department.
     Evaluate the accuracy of our estimate of the time and cost 
burden for this proposed collection, 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 
information technology.
    Please note that comments submitted in response to this Notice 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.

Abstract of Proposed Collection

    The International Traffic in Arms Regulations (ITAR) Sec. Sec.  
122.4 and 129.8 require registrants to notify the Directorate of 
Defense Trade Controls of the Department of State in the event of a 
change in registration information, in the event a foreign person or 
entity acquires a registered entity, or if the registrant is a party to 
a merger, acquisition, or divestiture (MAD) of an entity producing or 
marketing ITAR-controlled items. Based on certain conditions enunciated 
in the ITAR, respondents must notify DDTC of these changes at differing 
intervals--no less than 60 days prior to the event and/or within 5 days 
of its culmination. This information is necessary for DDTC to ensure 
registration records are accurate and to determine whether the 
transaction is in compliance with the regulations (e.g. with respect to 
ITAR Sec.  126.1); assess the steps that need to be taken with respect 
to existing authorizations (e.g. transfers of licenses); and to 
evaluate the implications for US national security and foreign policy. 
This information collection is estimated to take an average of 2 hours 
to execute, and DDTC expects to receive approximately 1,700 responses 
per year; therefore, the total burden for this collection will be 3,400 
hours per year.

Summary of Public Comments Received

    On June 20, 2016, DDTC published a Federal Register Notice (81 FR 
39992) soliciting public comments through August 19, 2016. DDTC 
received nine public comments during this period. One comment was not 
germane to the proposed information collection. The remaining eight 
comments provided significant feedback on the form. These comments are 
summarized below:
    One commenter remarked that the proposed 2-hour burden for the DS-
7789 is low and should be revised. DDTC replies that the burden is an 
average of all submissions using the DS-7789, and while some responses 
will require a longer period based on the complexity of a transaction, 
many will be far below the declared burden for the form. Similarly, 
information previously provided to the Directorate via the DS-2032, 
Statement of Registration, will auto-populate into the DS-7789, saving 
respondents the burden of re-keying their basic information multiple 
times. DDTC therefore believes that a 2-hour burden is accurate for 
this form.
    Another comment centered on the name of the form itself, 
``Statement of Material Change, Merger, Acquisition, or Divestiture of 
a Registered Party.'' The commenter was concerned that the term 
``material change'' is inconsistent with current business usage and the 
use of this form could potentially affect the market value of the 
submitting company. While DDTC understands these concerns, the changes 
that require notification, and are therefore ``material changes'' for 
ITAR purposes, are defined in the regulations (see ITAR Sec.  122.4).

[[Page 76993]]

Therefore the title of the form will remain the same.
    Multiple commenters opined that the form, currently formatted in 
four separate sheets, is difficult to follow. DDTC notes that the form 
as currently written serves as a ``placeholder'' for a new case 
management system that is in development, and the focus throughout the 
form's creation has been to finalize discrete data fields and workflows 
more than format. The data fields on the form will be used to guide 
users through questions based on their previous responses; not all 
users will see all fields during each submission.
    Relatedly, many commenters noted that Block 1 of the form, 
currently named ``Applicant Information,'' should be changed to 
``Registrant Information'' to avoid confusing nomenclature. DDTC notes 
that the title of this block is a field designator only, as the word 
``Applicant'' will be used throughout the case management system to 
collate data fields for interoperability. The title of the field has no 
bearing on the role of the submitter of the DS-7789 and is not intended 
to imply that the submitter is ``applying'' to declare a material 
change. Rather, this was done in order for the electronic system to 
recognize the information in this block as duplicative of information 
that might be contained elsewhere in the user's system profile.
    DDTC believes that many of the usability issues identified by the 
commenters will be resolved through the guided nature of the case 
management system. For instance, some comments noted that the .pdf 
version of the DS-7789 lacked functionality to add additional 
supporting documentation and that text fields did not expand to 
accommodate easier editing. DDTC notes that the case management system 
will have fully functional ``add'' capability as well as unlimited-
character text boxes which will allow for easy editing of responses. To 
this point, some commenters also noted that uploading information on 
each authorization (licenses and agreements) that will transfer 
ownership through a merger, acquisition, or divestiture (``MAD'') event 
is unduly burdensome and that respondents should have the ability to 
upload documentation in lieu of keying such information into the 
system. DDTC replies that the case management system will automatically 
populate this field from the registrant's information; users will then 
have the ability to select which authorizations will transfer under the 
proposed merger, acquisition, or divestiture instead of keying 
information on each authorization.
    One commenter noted that DDTC has historically provided a limited 
period for an acquired entity's registration to remain current after 
the date of the transaction to allow for the shipment of unshipped 
balances on authorizations which are transferring to the new or 
acquiring entity, but that this practice is not reflected on the DS-
7789. DDTC replies that this practice stemmed from paper-based 
reporting and was used to allow companies to continue exporting goods 
under approved licenses while the authorizations were manually updated 
within DDTC. Because of the automated nature of the DS-7789, 
authorizations will be transferred rapidly from one entity to another 
and therefore the ``grace period'' will no longer be needed nor 
provided in the ordinary course.
    Several commenters also opined that DDTC should convene an industry 
working group to beta test the new form and system that is being 
developed. In fact, DDTC has already convened such a group, and all 
interested industry users are welcome to join by contacting 
[email protected].
    Many respondents provided feedback on the instructions for the DS-
7789. Most comments centered on requesting more detailed guidance for 
specific fields on the form. DDTC is pleased to provide additional 
guidance and revised instructions will be made available on the DDTC 
Web site (https://www.pmddtc.state.gov) in conjunction with the 
publication of this request for public comment. For example, a 
commenter asked for clarification regarding DDTC's request for percent-
ownership of outstanding voting securities of the foreign buyer of a 
registered entity. In response, DDTC revised the instructions to 
clarify the distinction between the 50% ownership, as referenced in 22 
CFR 122.2, and the presumption of control in 22 CFR 120.37 associated 
with 25% ownership. The percent-ownership question in the DS-7789 
facilitates DDTC's national security and foreign policy evaluation 
which, as part of the transactional review, includes an understanding 
of who has potential control of the foreign buyer.
    DDTC also received several comments related to the electronic 
signature requirement for the DS-7789. Numerous responses noted that 
the signature requirement for a senior officer is unduly burdensome for 
their executive-level managers; DDTC notes that the requirement for a 
senior officer to sign a notification of a change in registration 
information is enunciated in ITAR Sec.  122.4. Similarly, one commenter 
opined that the requirement to provide information about senior 
officers and board members on the 60-day submission preceding a MAD 
event should be dispensed with since they may not be the same once the 
event actually occurs; however, DDTC needs this information to evaluate 
the entirety of a transaction, and it will still be required.
    Many commenters also remarked that the ``60-day Buyer'' portion of 
the form should be removed as only registered parties are required to 
submit information to DDTC. DDTC notes that the requested information 
is about the buyer and not necessarily from the buyer. For this reason, 
DDTC is providing registrants the ability to provide this information 
about the buyer or to have the buyer provide the information directly. 
In practice, registrants already provide buyer information in many 
divestitures (in other words, the buyer provides the registrant with 
the requested information, which the registrant then submits to DDTC). 
Allowing the buyer to submit the information to DDTC directly allows 
the buyer to provide information that they may not otherwise wish to 
share with the registrant. The requested information is relevant to 
DDTC's analysis of the foreign policy and national security 
implications of transactions and, in many cases, is what the acquiring 
company will ultimately provide in a post-transaction DS-2032 
(Statement of Registration) covering the acquired entity.
    Two comments also centered on the protection of information 
submitted via the form's proposed electronic interface. DDTC's IT 
security team is working on a secure web-based system to accept 
proprietary data from industry users. Recognizing the sensitivity of 
the data submitted, the system will meet all current government 
standards for data security and the Privacy Act of 1974. Similarly, 
DDTC will protect information from public disclosure to the extent 
permitted by law. DDTC encourages submitters to clearly mark 
proprietary information in accordance with the Department of State 
guidelines at 22 CFR 171.12.

Methodology

    This information will be collected by DDTC's electronic case 
management system and respondents will certify the data via electronic 
signature. Respondents will be required to enroll in DDTC's online 
system and will be issued an appropriate credential based on the 
business the user will be transacting. Lower assurance matters (such as 
initial registration in the system) will require a secure username

[[Page 76994]]

and password. Matters requiring higher assurance will require multi-
factor credentials, such as a certificate based login.

    Dated: October 26, 2016.
Lisa Aguirre,
Managing Director, Directorate of Defense Trade Controls, Department of 
State.
[FR Doc. 2016-26715 Filed 11-3-16; 8:45 am]
 BILLING CODE 4710-25-P