[Federal Register Volume 82, Number 7 (Wednesday, January 11, 2017)]
[Proposed Rules]
[Pages 3219-3232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00152]


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NATIONAL ARCHIVES AND RECORDS ADMINISTRATION

Information Security Oversight Office

32 CFR Part 2004

[FDMS No. NARA-16-0006; Agency No. NARA-2017-017]
RIN 3095-AB79


National Industrial Security Program

AGENCY: Information Security Oversight Office, National Archives and 
Records Administration (NARA).

ACTION: Proposed rule.

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SUMMARY: The Information Security Oversight Office (ISOO) of the 
National Archives and Records Administration (NARA), proposes to revise 
the National Industrial Security Program (NISP) Directive. The NISP 
safeguards classified information the Federal Government or foreign 
governments release to contractors, licensees, grantees, and 
certificate holders. This proposed revision adds provisions 
incorporating executive branch insider threat policy and minimum 
standards, identifies the Office of the Director of National 
Intelligence (ODNI) and the Department of Homeland Security (DHS) as 
new cognizant security agencies (CSAs), and adds responsibilities for 
all CSAs and non-CSA departments and agencies (to reflect oversight 
functions that are already detailed for private sector entities in the 
National Industrial Security Program Operating Manual (NISPOM)). The 
proposed revisions also make other administrative changes to be 
consistent with recent revisions to the NISPOM and with updated 
regulatory language and style.

[[Page 3220]]


DATES: Submit comments by February 10, 2017.

ADDRESSES: You may submit comments, identified by RIN 3095-AB79, by any 
of the following methods:
    [ssquf] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    [ssquf] Email: [email protected]. Include RIN 3095-AB79 
in the subject line of the message.
    [ssquf] Mail (for paper, disk, or CD-ROM submissions. Include RIN 
3095-AB79 on the submission): Regulations Comments Desk (External 
Policy Program, Strategy and Performance Division (SP)); Suite 4100; 
National Archives and Records Administration; 8601 Adelphi Road; 
College Park, MD 20740-6001.
    [ssquf] Hand delivery or courier: Deliver comments to the front 
desk at the address above.
    Instructions: You must include on all submissions the Regulatory 
Information Number (RIN) for this rulemaking (RIN 3095-AB79) and NARA's 
name. We may publish any comments we receive without changes, including 
any personal information you provide.

FOR FURTHER INFORMATION CONTACT: For information about this regulation 
and the regulatory process, contact Kimberly Keravuori, External Policy 
Program Manager, by email at [email protected], or by 
telephone at 301.837.3151. For information about the NISP and the 
requirements in this regulation, contact William A. Cira, Acting 
Director, ISOO, by telephone at 202-357-5323.

SUPPLEMENTARY INFORMATION: We have coordinated and vetted the proposed 
revisions through the CSAs listed in Executive Order (E.O.) 12829, 
National Industrial Security Program (January 6, 1993 (58 FR 3479)), as 
amended by E.O. 12885 (December 14, 1993 (58 FR 65863): Department of 
Defense, Department of Energy, Nuclear Regulatory Commission, Office of 
the Director of National Intelligence, and Department of Homeland 
Security. We have also coordinated this with the other executive branch 
agencies that are members of the National Industrial Security Program 
Policy Advisory Committee (NISPPAC) or that release classified 
information to contractors, licensees, grantees, or certificate 
holders, and with the industry members of the NISPPAC. The proposed 
revisions do not change requirements for industry (which are contained 
in the NISPOM), but instead clarify agency responsibilities.

Background

    The NISP is the Federal Government's single, integrated industrial 
security program. E.O. 12829 (amended in 1993) established the NISP to 
safeguard classified information in industry and preserve the nation's 
economic and technological interests. The President issued E.O. 13691, 
Promoting Private Sector Cybersecurity Information Sharing (February 
13, 2015 (80 FR 9347)), and E.O. 13708, Continuance or Reestablishment 
of Certain Federal Advisory Committees (September 30, 2015 (80 FR 
60271)), which further amended E.O. 12829.
    E.O. 12829, sec. 102(b), delegated oversight of the NISP to the 
Director of NARA's Information Security Oversight Office (ISOO). As 
part of ISOO's responsibilities under E.O. 12829, it is authorized to 
issue such directives as necessary to implement the E.O., which are 
binding on agencies. In 2006, ISOO issued, and periodically updates, 
this regulation, which functions as one of those directives.
    This regulation establishes uniform standards throughout the 
Program, and helps agencies implement requirements in E.O. 12829, as 
amended (collectively referred to as ``E.O. 12829''). This revision 
also establishes agency responsibilities for implementing the insider 
threat provisions of E.O. 13587, Structural Reforms to Improve the 
Security of Classified Networks and the Responsible Sharing and 
Safeguarding of Classified Information (October 7, 2011 (76 FR 63811)) 
within the NISP. However, the regulation does not stand alone; users 
should refer concurrently to the underlying executive orders for 
guidance.
    Nothing in this regulation supersedes the authority of the 
Secretary of Energy or the Nuclear Regulatory Commission under the 
Atomic Energy Act of 1954, as amended (42 U.S.C. 2011, et seq.); the 
authority of the Director of National Intelligence (or any intelligence 
community element) under the Intelligence Reform and Terrorism 
Prevention Act of 2004 (Pub. L. 108-458), the National Security Act of 
1947 (50 U.S.C. 401, et seq.), as amended, and E.O. 12333 (December 4, 
1981), as amended by E.O. 13355, Strengthened Management of the 
Intelligence Community (August 27, 2004) and E.O. 13470, Further 
Amendments to Executive Order 12333 (July 30, 2008); or the authority 
of the Secretary of Homeland Security, as the Executive Agent for the 
Classified National Security Information Program established under E.O. 
13549, Classified National Security Information Program for State, 
Local, Tribal, and Private Sector Entities (August 18, 2010), or by 
E.O. 13284, Amendment of Executive Orders, and Other Actions, in 
Connection with the Establishment of the Department of Homeland 
Security, (January 23, 2003).

Revision Process and Proposed Changes

    This proposed rule reflects a national level policy framework that 
should not change existing practices and procedures for any of the 
affected agencies or for entities in any significant way. A working 
group comprised of NISP CSA representatives, ISOO staff, the Department 
of Defense's (DoD) Defense Security Service (DSS), and the Central 
Intelligence Agency, drafted this proposed rule.
    We initiated the proposed revisions in 2013 to incorporate new 
insider threat program requirements as a result of E.O. 13587, 
Structural Reforms to Improve the Security of Classified Networks and 
the Responsible Sharing and Safeguarding of Classified Information, 
October 2011, and the associated National Insider Threat Policy and 
Minimum Standards from the White House in November 2012. The national 
insider threat policy directs that the Government apply insider threat 
provisions to private sector entities that access classified 
information, which the executive branch accomplishes through the 
National Industrial Security Program Operating Manual (NISPOM), issued 
by the NISP Executive Agent, DoD. The NISPOM also provides private 
sector entities that access classified information with other NISP 
requirements and procedures. On the other side of the equation, this 
NISP regulation gives policy direction and establishes responsibilities 
for the agencies that release classified information to private sector 
entities to ensure that the agencies provide consistent oversight of 
entity programs. We are therefore proposing revisions to the regulation 
to add the insider threat requirements that pertain to NISP oversight 
by agencies; similar provisions have been added to the NISPOM for 
private sector entities to follow. The NISP CSAs, ISOO, and the 
National Insider Threat Task Force (NITTF) collaborated on the proposed 
insider threat provisions that are incorporated.
    During review of the regulation, the working group determined that, 
although the NISPOM provides requirements and procedures for entities, 
this regulation did not include many of the coinciding oversight 
requirements for agencies. We therefore expanded the revision to 
include adding aspects of NISP implementation for which the agencies 
have a responsibility that weren't already spelled out in the 
regulation. These proposed changes include adding responsibility 
provisions

[[Page 3221]]

for CSAs and Government contracting activities (GCAs), standards by 
which they make entity and employee eligibility determinations for 
access to classified information, standards for assessing foreign 
ownership, control, or influence and for mitigating or negating it, and 
identifying CSA and non-CSA agency responsibilities for security 
classification and for authorizing entity information systems to 
process classified information. While CSAs and other agencies have been 
carrying out these responsibilities since the establishment of the NISP 
under E.O. 12829, and they have been spelled out in the NISPOM, they 
were not previously included in this regulation. We are including them 
to ensure agencies consistently apply the NISP requirements for all 
entities that have access to classified information and thereby aid in 
reducing processing burdens on entities. This affords agencies the 
opportunity to ensure that they are complying with existing NISP 
requirements, to include verifying that all current contracts or 
agreements with contractors, licensees, or grantees include appropriate 
security requirements. E.O. 12829 was amended by E.O. 13691, Promoting 
Private Sector Cybersecurity Information Sharing, in February 2015. The 
amendment established the DHS as a CSA, not limited to the classified 
critical infrastructure protection program (CCIPP). As part of its CSA 
responsibilities, DHS will perform oversight of critical sector 
entities participating in the CCIPP. We also incorporated DHS 
responsibilities as a CSA and the provisions of the CCIPP into this 
revision.
    We have also made some proposed revisions to more clearly set out 
items that were already in the regulation. One such proposed change is 
the approach to reciprocity. Because of the separate and unique 
authorities of the CSAs, one CSA might not, in some cases, reciprocally 
accept entity eligibility determinations made by another CSA. However, 
the proposed revision stipulates that CSAs will not require entities to 
go through duplicate steps for eligibility determinations. This should 
help reduce and streamline eligibility determinations for entities 
receiving classified information from more than one agency.
    We are also proposing some new, more general terminology (like 
``entity eligibility determination,'' which describes a process all 
CSAs do, instead of ``facility security clearance (FCL),'' which is an 
agency-specific term for a favorable determination resulting from that 
process). Our goal is to create a common framework that all CSAs can 
effectively use because it sets out requirements in terms that 
encompass CSA processes for varying types of classified information 
under the NISP. These terminology changes do not preclude the CSAs from 
using their traditional terminology in agency policies that implement 
this rule or in the NISPOM.
    The NISPOM currently includes a limited facility security clearance 
as an option for agencies to consider when foreign ownership, control, 
or influence (FOCI) of an entity cannot be mitigated or negated. We 
have added the limited eligibility determination option to this 
regulation, but have also expanded it to include limited eligibility 
for entities that are not under FOCI, but for which an agency considers 
it appropriate to limit access to a specific and narrow purpose.
    In addition, we have made some drafting changes to make the 
regulation more readable.

Regulatory Analysis

    The Office of Management and Budget (OMB) has reviewed this 
proposed regulation.

Review Under Executive Orders 12866 and 13563

    Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 
(September 30, 1993), and Executive Order 13563, Improving Regulation 
and Regulation Review, 76 FR 23821 (January 18, 2011), direct agencies 
to assess all 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, distributive impacts, and equity). 
This proposed rule is ``significant'' under Executive Order 12866, sec. 
3(f), but is not a major rule as defined in 5 U.S.C. Chapter 8, 
Congressional Review of Agency Rulemaking. The Office of Management and 
Budget (OMB) has reviewed this proposed regulation.

Review Under the Regulatory Flexibility Act (5 U.S.C. 601, et seq.)

    This review requires an agency to prepare an initial regulatory 
flexibility analysis and publish it when the agency publishes the 
proposed rule. This requirement does not apply if the agency certifies 
that the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities (5 U.S.C. 603). As 
required by the Regulatory Flexibility Act, we certify that this 
proposed rulemaking will not have a significant impact on a substantial 
number of small entities because it applies only to Federal agencies. 
This regulation does not establish requirements for entities; those 
requirements are established in the NISPOM. This rule sets out 
coinciding requirements for agencies. However, agencies implementing 
this regulation will do so through contracts with businesses (as well 
as other agreements with entities) and thus it indirectly affects those 
entities. Agencies have been applying the requirements and procedures 
contained in the NISPOM (and, to a lesser extent, contained in this 
regulation) to entities for 20 years, with the exception of insider 
threat provisions added to the NISPOM in 2016, and the proposed 
additions to this regulation do not substantially alter those 
requirements. Most of the provisions being added to this regulation 
have applied to entities through the NISPOM; we are simply 
incorporating the agency responsibilities for those requirements into 
the regulation.
    Other revisions to this regulation are primarily administrative, 
except the new insider threat requirements. The insider threat 
requirements make minor additions to training, oversight, information 
system security, and similar functions already being conducted by 
entities, and thus will not have a significant economic impact on a 
substantial number of small business entities.

Review Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.)

    This proposed rule contains information collection activities that 
are subject to review and approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act. We refer to the 
following OMB-approved DoD information collection in Sec. Sec.  
2004.34(b), 2004.34(c)(1) of this regulation: OMB control No. 0704-
0194, SF 328, Certificate Pertaining to Foreign Interests, approved 
through September 30, 2019. DoD published the information collection 
notice in the Federal Register in May 2015 (80 FR 27938, May 15, 2015) 
for public comment, and the notice of OMB review in the Federal 
Register in July 2016 (81 FR 47790, July 22, 2016), providing a second 
opportunity for public comment.

Review Under Executive Order 13132, Federalism, 64 FR 43255 (August 4, 
1999)

    Review under Executive Order 13132 requires that agencies review 
regulations for federalism effects on the

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institutional interest of states and local governments, and, if the 
effects are sufficiently substantial, prepare a Federal assessment to 
assist senior policy makers. This proposed rule will not have any 
direct effects on State and local governments within the meaning of the 
Executive Order. Therefore, this rule does not include a federalism 
assessment.

List of Subjects in 32 CFR Part 2004

    Classified information, National Industrial Security Program.

    For the reasons stated in the preamble, the National Archives and 
Records Administration proposes to revise 32 CFR part 2004 to read as 
follows:

PART 2004--NATIONAL INDUSTRIAL SECURITY PROGRAM (NISP)

Subpart A--Implementation and Oversight
2004.1 Purpose and scope.
2004.4 Definitions that apply to this part.
2004.10 Responsibilities of the Director, Information Security 
Oversight Office (ISOO).
2004.11 CSA and agency implementing regulations, internal rules, or 
guidelines.
2004.12 ISOO reviews of agency NISP implementation.
Subpart B--Administration
2004.20 National Industrial Security Program Executive Agent (EA) 
and Operating Manual (NISPOM).
2004.22 Agency responsibilities.
2004.24 Insider threat program.
2004.26 Reviews of entity NISP implementation.
2004.28 Cost reports.
Subpart C--Operations
2004.30 Security classification requirements and guidance.
2004.32 Determining entity eligibility for access to classified 
information.
2004.34 Foreign ownership, control, or influence (FOCI).
2004.36 Determining entity employee eligibility for access to 
classified information.
2004.38 Safeguarding and marking.
2004.40 Information system security.
2004.42 International programs security. [Reserved]

Appendix A to Part 2004--Acronym Table

    Authority:  Section 102(b)(1) of E.O. 12829 (January 6, 1993), 
as amended by E.O. 12885 (December 14, 1993), E.O. 13691 (February 
12, 2015), and section 4 of E.O. 13708 (September 30, 2015).

Subpart A--Implementation and Oversight


Sec.  2004.1   Purpose and scope.

    (a) This part sets out the National Industrial Security Program 
(``NISP'' or ``the Program'') governing the protection of executive-
branch agency classified information released to Federal contractors, 
licensees, grantees, and certificate holders. It establishes uniform 
standards throughout the Program, and helps agencies implement 
requirements in E.O. 12829, National Industrial Security Program, as 
amended by E.O. 12558 and E.O.13691 (collectively referred to as ``E.O. 
12829''), E.O. 13691, Promoting Private Sector Cybersecurity 
Information Sharing, and E.O. 13587, Structural Reforms to Improve the 
Security of Classified Networks and the Responsible Sharing and 
Safeguarding of Classified Information. It applies to any executive 
branch agency that releases classified information to current, 
prospective, or former Federal contractors, licensees, grantees, or 
certificate holders. However, this part does not stand alone; users 
should refer concurrently to the underlying executive orders for 
guidance. ISOO maintains policy oversight over the NISP as established 
by E.O.12829.
    (b) This part also does not apply to release of classified 
information pursuant to criminal proceedings. The Classified 
Information Procedures Act (CIPA) (18 U.S.C. Appendix 3) governs 
release of classified information in criminal proceedings.
    (c) Nothing in this part supersedes the authority of the Secretary 
of Energy or the Nuclear Regulatory Commission under the Atomic Energy 
Act of 1954, as amended (42 U.S.C. 2011, et seq.) (collectively 
referred to as ``the Atomic Energy Act''); the authority of the 
Director of National Intelligence (or any intelligence community 
element) under the Intelligence Reform and Terrorism Prevention Act of 
2004 (Pub. L. 108-458), the National Security Act of 1947 as amended 
(50 U.S.C. 401, et seq.), and E.O. 12333 (December 4, 1981), as amended 
by E.O. 13355, Strengthened Management of the Intelligence Community 
(August 27, 2004) and E.O. 13470, Further Amendments to Executive Order 
12333 (July 30, 2008) (collectively referred to as ``E.O. 12333''); or 
the authority of the Secretary of Homeland Security, as the Executive 
Agent for the Classified National Security Information Program 
established under E.O. 13549, Classified National Security Information 
Program for State, Local, Tribal, and Private Sector Entities (August 
18, 2010), or as established by E.O. 13284, Amendment of Executive 
Orders, and Other Actions, in Connection with the Establishment of the 
Department of Homeland Security (January 23, 2003).


Sec.  2004.4   Definitions that apply to this part.

    (a) Access is the ability or opportunity to gain knowledge of 
classified information.
    (b) Agency(ies) are any ``Executive agency'' as defined in 5 U.S.C. 
105; any ``Military department'' as defined in 5 U.S.C. 102; and any 
other entity within the executive branch that releases classified 
information to private sector entities. This includes component 
agencies under another agency or under a cross-agency oversight office 
(such as ODNI with CIA), which are also agencies for purposes of this 
part.
    (c) Classified Critical Infrastructure Protection Program (CCIPP) 
is the DHS program established by E.O. 13691, ``Promoting Private 
Sector Cybersecurity Information Sharing.'' The Government uses this 
program to share classified threat information with employees of 
private sector entities that own or operate critical infrastructure. 
Critical infrastructure refers to systems and assets, whether physical 
or virtual, so vital to the United States that incapacitating or 
destroying such systems and assets would have a debilitating impact on 
security, national economic security, national public health or safety, 
or any combination thereof. These entities include banks and power 
plants, among others. The sectors of critical infrastructure are listed 
in Presidential Policy Directive 21, Critical Infrastructure Security 
and Resilience (February 12, 2013).
    (d) Classified Critical Infrastructure Protection Program (CCIPP) 
security point of contact (security POC) is an official whom a CCIPP 
entity designates to maintain eligibility information about the entity 
and its cleared employees, and to report that information to DHS. The 
CCIPP security POC must be eligible for access to classified 
information.
    (e) Classified information is information the Government designates 
as requiring protection against unauthorized disclosure in the interest 
of national security, pursuant to E.O. 13526, Classified National 
Security Information, or any predecessor order, and the Atomic Energy 
Act of 1954, as amended. Classified information includes national 
security information (NSI), restricted data (RD), and formerly 
restricted data (FRD), regardless of its physical form or 
characteristics (including tangible items other than documents).
    (f) Cognizance is the area over which a CSA has operational 
oversight. Normally, a statute or executive order establishes a CSA's 
cognizance over certain types of information, programs, or non-CSA 
agencies, although CSAs

[[Page 3223]]

may also have cognizance through an agreement with another CSA or non-
CSA agency or an entity. A CSA may have cognizance over a particular 
type(s) of classified information based on specific authorities (such 
as those listed in 2004.1(d)), and a CSA may have cognizance over 
certain agencies or cross-agency programs (such as DoD's cognizance 
over non-CSA agencies as the EA for NISP, or ODNI's oversight (if 
applicable) of all intelligence community elements within the executive 
branch). Entities fall under a CSA's cognizance when they enter or 
compete to enter contracts or agreements to access classified 
information under the CSA's cognizance, including when they enter or 
compete to enter such contracts or agreements with a non-CSA agency or 
another entity under the CSA's cognizance.
    (g) Cognizant security agencies (CSAs) are the agencies E.O. 12829, 
sec. 202, designates as having NISP implementation and security 
responsibilities for their own agencies (including component agencies) 
and any entities and non-CSA agencies under their cognizance. The CSAs 
are: Department of Defense (DoD); Department of Energy (DOE); Nuclear 
Regulatory Commission (NRC); Office of the Director of National 
Intelligence (ODNI); and Department of Homeland Security (DHS).
    (h) Cognizant security office (CSO) is an organizational unit to 
which the head of a CSA delegates authority to administer industrial 
security services on behalf of the CSA.
    (i) Contracts or agreements are any type of arrangement between an 
agency and an entity or an agency and another agency. They include, but 
are not limited to, contracts, sub-contracts, licenses, certificates, 
memoranda of understanding, inter-agency service agreements, other 
types of documents or arrangements setting out responsibilities, 
requirements, or terms agreed upon by the parties, programs, projects, 
and other legitimate U.S. or foreign government requirements. FOCI 
mitigation or negation measures, such as Voting Trust Agreements, that 
have the word ``agreement'' in their title are not included in the term 
``agreements'' within this part.
    (j) Controlling agency is an agency that owns or controls certain 
types of proscribed information and thus has authority over access to 
or release of the proscribed information. For communications security 
information (COMSEC), the controlling agency is NSA; for restricted 
data (RD), the controlling agency is DOE; and for sensitive 
compartmented information (SCI), the controlling agency is ODNI. For 
Top Secret and SAP information, the controlling agency is always the 
same agency as the GCA.
    (k) Entity is a generic and comprehensive term which may include 
sole proprietorships, partnerships, corporations, limited liability 
companies, societies, associations, institutions, contractors, 
licensees, grantees, certificate holders, and other organizations 
usually established and operating to carry out a commercial, 
industrial, educational, or other legitimate business, enterprise, or 
undertaking, or parts of these organizations. It may reference an 
entire organization, a prime contractor, parent organization, a branch 
or division, another type of sub-element, a sub-contractor, subsidiary, 
or other subordinate or connected entity (referred to as ``sub-
entities'' when necessary to distinguish such entities from prime or 
parent entities), a specific location or facility, or the headquarters/
official business location of the organization, depending upon the 
organization's business structure, the access needs involved, and the 
responsible CSA's procedures. The term ``entity'' as used in this part 
refers to the particular entity to which an agency might release, or is 
releasing, classified information, whether that entity is a parent or 
subordinate organization.
    (l) Entity eligibility determination is an assessment by the CSA as 
to whether an entity is eligible for access to classified information 
of a certain level (and all lower levels). Eligibility determinations 
may be broad or limited to specific contracts, sponsoring agencies, or 
circumstances. A favorable determination results in eligibility to 
access classified information under the cognizance of the responsible 
CSA to the level approved. When the entity would be accessing 
categories of information such as RD or SCI for which the CSA for that 
information has set additional requirements, CSAs must also assess 
whether the entity is eligible for access to that category. Some CSAs 
refer to their favorable determinations as facility security clearances 
(FCL). A favorable entity eligibility determination does not convey 
authority to store classified information.
    (m) Foreign interest is any foreign government, agency of a foreign 
government, or representative of a foreign government; any form of 
business enterprise or legal entity organized, chartered, or 
incorporated under the laws of any country other than the United States 
or its territories; and any person who is not a United States citizen 
or national.
    (n) Government contracting activity (GCA) is an agency component or 
subcomponent to which the agency head delegates broad authority 
regarding acquisition functions. A foreign government may also be a 
GCA.
    (o) Industrial security services are those activities performed by 
a CSA to verify that an entity is protecting classified information. 
They include, but are not limited to, conducting oversight reviews, 
making eligibility determinations, and providing agency and entity 
guidance and training.
    (p) Insider(s) are entity employees who are eligible to access 
classified information and may be authorized access to any U.S. 
Government or entity resource (such as personnel, facilities, 
information, equipment, networks, or systems).
    (q) Insider threat is the likelihood, risk, or potential that an 
insider will use his or her authorized access, wittingly or 
unwittingly, to do harm to the national security of the United States. 
Insider threats may include harm to entity or program information to 
the extent that the information impacts the entity's or agency's 
obligations to protect classified information.
    (r) Insider threat response action(s) are actions (such as 
investigations) an agency takes to ascertain whether an insider threat 
exists, and actions the agency takes to mitigate the threat. Agencies 
may conduct insider threat response actions through their 
counterintelligence (CI), security, law enforcement, or inspector 
general organizations, depending on the statutory authority and 
internal policies that govern the agency.
    (s) Insider threat program senior official (SO) is the official an 
agency head or entity designates with responsibility to manage, account 
for, and oversee the agency's or entity's insider threat program, 
pursuant to the National Insider Threat Policy and Minimum Standards. 
An agency may have more than one insider threat program SO.
    (t) Key managers and officials (KMO) are the senior management 
official (or authorized executive official under CCIPP), the entity's 
security officer (or security POC under CCIPP), the insider threat 
program senior official, and other entity employees whom the 
responsible CSA identifies as having authority, direct or indirect, to 
influence or decide matters affecting the entity's management or 
operations, its classified contracts, or national security interests. 
They may include individuals who hold majority ownership interest in 
the entity

[[Page 3224]]

(in the form of stock or other ownership interests).
    (u) Proscribed information is information that is classified as top 
secret (TS) information; communications security (COMSEC) information 
(excluding controlled cryptographic items when un-keyed or utilized 
with unclassified keys); restricted data (RD); special access program 
information (SAP); or sensitive compartmented information (SCI).
    (v) Security officer is a U.S. citizen employee the entity 
designates to supervise and direct security measures implementing 
NISPOM (or equivalent; such as DOE Orders) requirements. Some CSAs 
refer to this position as a facility security officer (FSO). The 
security officer must complete security training specified by the 
responsible CSA, and must have and maintain an employee eligibility 
determination level that is at least the same level as the entity's 
eligibility determination level.
    (w) Senior agency official for NISP (SAO for NISP) is the official 
an agency head designates to direct and administer the agency's 
National Industrial Security Program.
    (x) Senior management official (SMO) is the person in charge of an 
entity. Under the CCIPP, this is the authorized executive official with 
authority to sign the security agreement with DHS.
    (y) Sub-entity is an entity's branch or division, another type of 
sub-element, a sub-contractor, subsidiary, or other subordinate or 
connected entity. Sub-entities fall under the definition of ``entity,'' 
but this part refers to them as sub-entities when necessary to 
distinguish such entities from prime contractor or parent entities. See 
definition of ``entity'' at Sec.  2004.4(k) for more context.


Sec.  2004.10   Responsibilities of the Director, Information Security 
Oversight Office (ISOO).

    The Director, ISOO:
    (a) Implements E.O. 12829, including ensuring that:
    (1) The NISP operates as a single, integrated program across the 
executive branch of the Federal Government (i.e., such that agencies 
that release classified information to entities adhere to NISP 
principles);
    (2) A responsible CSA oversees each entity's NISP implementation in 
accordance with Sec.  2004.22;
    (3) All agencies that contract for classified work include the 
Security Requirements clause, 48 CFR 52.204-2, from the Federal 
Acquisition Regulation (FAR), or an equivalent clause, in contracts 
that require access to classified information;
    (4) Those agencies for which the Department of Defense (DoD) serves 
as the CSA or provides industrial security services have agreements 
with DoD defining the Secretary of Defense's responsibilities on behalf 
of their agency;
    (5) Each CSA issues directions to entities under their cognizance 
that are consistent with the NISPOM insider threat guidance;
    (6) CSAs share with each other, as lawful and appropriate, relevant 
information about entity employees that indicates an insider threat; 
and
    (7) CSAs conduct ongoing analysis and adjudication of adverse or 
relevant information about entity employees that indicates an insider 
threat.
    (b) Raises an issue to the National Security Council (NSC) for 
resolution if the EA's NISPOM coordination process cannot reach a 
consensus on NISPOM security standards (see Sec.  2004.20(d)).


Sec.  2004.11   CSA and agency implementing regulations, internal 
rules, or guidelines.

    (a) Each CSA implements NISP practices in part through policies and 
guidelines that are consistent with this part, so that agencies for 
which it serves as the CSA are aware of appropriate security standards, 
engage in consistent practices with entities, and so that practices 
effectively protect classified information those entities receive 
(including foreign government information that the U.S. Government must 
protect in the interest of national security).
    (b) Each CSA must also routinely review and update its NISP 
policies and guidelines and promptly issue revisions when needed 
(including when a change in national policy necessitates a change in 
agency NISP policies and guidelines).
    (c) Non-CSA agencies may choose to augment CSA NISP policies or 
guidelines as long as the agency policies or guidelines are consistent 
with the CSA's policies or guidelines and this part.


Sec.  2004.12   ISOO review of agency NISP implementation.

    (a) ISOO fulfills its oversight role based, in part, on information 
received from NISP Policy Advisory Committee (NISPPAC) members, from 
on-site reviews that ISOO conducts under the authority of E.O. 12829, 
and from any submitted complaints and suggestions. ISOO reports 
findings to the responsible CSA or agency.
    (b) ISOO reviews agency policies and guidelines to ensure 
consistency with NISP policies and procedures. ISOO may conduct reviews 
during routine oversight visits, when a problem or potential problem 
comes to ISOO's attention, or after a change in national policy that 
impacts agency policies and guidelines. ISOO provides the responsible 
agency with findings from these reviews.

Subpart B--Administration


Sec.  2004.20   National Industrial Security Program Executive Agent 
and Operating Manual (NISPOM).

    (a) The executive agent (EA) for NISP is the Secretary of Defense. 
The EA:
    (1) Provides industrial security services for agencies that are not 
CSAs but that release classified information to entities. The EA 
provides industrial security services only through an agreement with 
the agency. Non-CSA agencies must enter an agreement with the EA and 
comply with EA industrial security service processes before releasing 
classified information to an entity;
    (2) Provides services for other CSAs by agreement; and
    (3) Issues and maintains the National Industrial Security Program 
Operating Manual (NISPOM) in consultation with all affected agencies 
and with the concurrence of the other CSAs.
    (b) The NISPOM sets out the procedures and standards that entities 
must follow during all phases of the contracting process to safeguard 
any classified information an agency releases to an entity. The NISPOM 
requirements may apply to the entity directly (i.e., through FAR 
clauses or other contract clauses referring entities to the NISPOM) or 
through equivalent contract clauses or requirements documents that are 
consistent with NISPOM requirements.
    (c) The EA, in consultation with all affected agencies and with the 
concurrence of the other CSAs, develops the requirements, restrictions, 
and safeguards contained in the NISPOM. The EA uses security standards 
applicable to agencies as the basis for developing NISPOM entity 
standards to the extent practicable and reasonable.
    (d) The EA also facilitates the NISPOM coordination process, which 
addresses issues raised by entities, agencies, ISOO, or the NISPPAC, 
including requests to create or change NISPOM security standards.


Sec.  2004.22   Agency responsibilities.

    (a) Agency categories and general areas of responsibility. (1) 
Federal agencies fall into two categories for the purpose of NISP 
responsibilities:
    (i) CSAs. CSAs are responsible for carrying out NISP implementation 
within their agency, for providing NISP

[[Page 3225]]

industrial security services on behalf of non-CSA agencies by agreement 
when authorized, and for overseeing NISP compliance by entities that 
access classified information under the CSA's cognizance. When the CSA 
has oversight responsibilities for a particular non-CSA agency or for 
an entity, the CSA also functions as the responsible CSA;
    (ii) Non-CSA agencies. Non-CSA agencies are responsible for 
entering agreements with a designated CSA for industrial security 
services, and are responsible for carrying out NISP implementation 
within their agency consistently with the agreement, the CSA's 
guidelines and procedures, and this part;
    (2) Agencies that are components of another agency. Component 
agencies do not have itemized responsibilities under this part and do 
not independently need to enter agreements with a CSA, but they follow, 
and may have responsibilities under, implementing guidelines and 
procedures established by their CSA or non-CSA agency, or both.
    (b) Responsible CSA role. (1) The responsible CSA is the CSA (or 
its delegated CSO) that provides NISP industrial security services on 
behalf of an agency, determines an entity's eligibility for access, and 
monitors and inspects an entity's NISP implementation.
    (2) In general, the goal is to have one responsible CSA for each 
agency and for each entity, to minimize the burdens that can result 
from complying with differing CSA procedures and requirements.
    (i) With regard to agencies, NISP accomplishes this goal by a 
combination of designated CSAs and agreements between agencies and 
CSAs.
    (ii) With regard to entities, CSAs strive to reduce the number of 
responsible CSAs for a given entity as much as possible. To this end, 
when more than one CSA releases classified information to a given 
entity, those CSAs agree on which is the responsible CSA. However, due 
to certain unique agency authorities, there may be circumstances in 
which a given entity is under the oversight of more than one 
responsible CSA.
    (3) Responsible CSA for agencies. (i) In general, each CSA serves 
as the responsible CSA for classified information that it (or any of 
its component agencies) releases to entities, unless it enters an 
agreement otherwise with another CSA.
    (ii) DoD serves as the responsible CSA for DHS with the exception 
of the CCIPP, based on an agreement between the two CSAs.
    (iii) DoD serves as the responsible CSA on behalf of all non-CSA 
agencies, except CSA components, based on E.O. 12829 and its role as 
NISP EA.
    (iv) ODNI serves as the responsible CSA for CIA.
    (4) Responsible CSA for entities. When determining the responsible 
CSA for a given entity, the involved CSAs consider, at a minimum: 
Retained authorities, the information's classification level, number of 
classified contracts, location, number of Government customers, volume 
of classified activity, safeguarding requirements, responsibility for 
entity employee eligibility determinations, and any special 
requirements.
    (5) Responsible CSAs may delegate oversight responsibility to a 
cognizant security office (CSO) through CSA policy or by written 
delegation. The CSA must inform entities under its cognizance if it 
delegates responsibilities. For purposes of this rule, the term CSA 
also refers to the CSO.
    (c) CSA responsibilities. (1) The CSA may perform GCA 
responsibilities as its own GCA.
    (2) As CSA, the CSA performs or delegates the following 
responsibilities:
    (i) Designates a CSA senior agency official (SAO) for NISP;
    (ii) Identifies the insider threat senior official (SO) to the 
Director, ISOO;
    (iii) Shares insider threat information with other CSAs, as lawful 
and appropriate, including information that indicates an insider threat 
about entity employees eligible to access classified information;
    (iv) Acts upon and shares--with security management, GCAs, insider 
threat program employees, and Government program and CI officials--any 
relevant entity-reported information about security or CI concerns, as 
appropriate;
    (v) Submits reports to ISOO as required by this part; and
    (vi) Develops, coordinates, and provides concurrence on changes to 
the NISPOM when requested by the EA.
    (3) As a responsible CSA, the CSA also performs or delegates the 
following responsibilities:
    (i) Determines whether an entity is eligible for access to 
classified information (see Sec.  2004.32);
    (ii) Allocates funds, ensures appropriate investigations are 
conducted, and determines entity employee eligibility for access to 
classified information (see Sec.  2004.36);
    (iii) Reviews and approves entity safeguarding measures, including 
making safeguarding capability determinations (see Sec.  2004.38);
    (iv) Conducts periodic security reviews of entity operations (see 
Sec.  2004.26) to determine that entities: Effectively protect 
classified information provided to them; and follow NISPOM (or 
equivalent) requirements;
    (v) Provides and regularly updates guidance, training, training 
materials, and briefings to entities on:
    (A) Entity implementation of NISPOM (or equivalent) requirements, 
including: Responsibility for protecting classified information, 
requesting NISPOM interpretations, establishing training programs, and 
submitting required reports;
    (B) Initial security briefings and other briefings required for 
special categories of information;
    (C) Authorization measures for information systems processing 
classified information (except DHS) (see Sec.  2004.40);
    (D) Security training for security officers (or CCIPP POCs) and 
other employees whose official duties include performing NISP-related 
functions;
    (E) Insider threat programs in accordance with the National Insider 
Threat Policy and Minimum Standards; and
    (F) Other guidance and training as appropriate;
    (vi) Establishes a mechanism for entities to submit requests for 
waivers to NISPOM (or equivalent) provisions;
    (vii) Reviews, continuously analyzes, and adjudicates, as 
appropriate, reports from entities regarding events that:
    (A) Impact the status of the entity's eligibility for access to 
classisfied information;
    (B) Impact an employee's eligibility for access;
    (C) May indicate an employee poses an insider threat;
    (D) Affect proper safeguarding of classified information; or
    (E) Indicate that classified information has been lost or 
compromised.
    (viii) Verifies that reports offered in confidence and so marked by 
an entity may be withheld from public disclosure under applicable 
exemptions of the Freedom of Information Act (5 U.S.C. 552).
    (ix) Requests any additional information needed from an entity 
about involved employees to determine continued eligibility for access 
to classified information when the entity reports loss, possible 
compromise, or unauthorized disclosure of classified information; and
    (x) Posts hotline information on its Web site for entity access, or 
otherwise

[[Page 3226]]

disseminates contact numbers to the entities for which the CSA is 
responsible.
    (d) Non-CSA agency head responsibilities. The head of a non-CSA 
agency that is not a CSA component and that releases classified 
information to entities, performs the following responsibilities:
    (1) Designates an SAO for the NISP;
    (2) Identifies the SO for insider threat to ISOO to facilitate 
information sharing;
    (3) Enters into an agreement with the EA (except agencies that are 
components of another agency or a cross-agency oversight office) to act 
as the responsible CSA on the agency's behalf (see paragraph (a)(1)(ii) 
of this section);
    (4) Performs, or delegates in writing to a GCA, the following 
responsibilities:
    (i) Provides appropriate education and training to agency personnel 
who implement the NISP;
    (ii) Includes FAR security requirements clause 52.204-2, or 
equivalent (such as the DEAR clause 952.204-2), and a contract security 
classification specification into contracts and solicitations that 
require access to classified information (see Sec.  2004.30); and
    (iii) Reports to the appropriate CSA adverse information and 
insider threat activity pertaining to entity employees having access to 
classified information.


Sec.  2004.24   Insider threat program.

    (a) Responsible CSAs oversee and analyze entity activity to ensure 
entities implement an insider threat program in accordance with the 
National Insider Threat Policy and Minimum Standards (via requirements 
in the NISPOM or its equivalent) and guidance from the CSA, to include:
    (1) Verifying that entities appoint SOs for insider threat;
    (2) Requiring entities to monitor, report, and review insider 
threat program activities and response actions in accordance with the 
provisions set forth in the NISPOM (or equivalent);
    (3) Providing entities with access to data relevant to insider 
threat program activities and applicable reporting requirements and 
procedures;
    (4) Providing entities with a designated means to report insider 
threat-related activity; and
    (5) Advising entities on appropriate insider threat training for 
authorized entity employees.
    (b) CSAs share with other CSAs any insider threat information 
reported to them by entities, as lawful and appropriate.


Sec.  2004.26   Reviews of entity NISP implementation.

    (a) The responsible CSA conducts recurring oversight reviews of 
entities' NISP security programs to verify that the entity is 
protecting classified information and is implementing the provisions of 
the NISPOM (or equivalent). The CSA determines the scope and frequency 
of reviews. The CSA generally notifies entities when a review will take 
place, but may also conduct unannounced reviews at its discretion.
    (b) CSAs make every effort to avoid unnecessarily intruding into 
entity employee personal effects during the reviews.
    (c) A CSA may, on entity premises, physically examine the interior 
spaces of containers not authorized to store classified information in 
the presence of the entity's representative.
    (d) As part of a security review, the CSA:
    (1) Verifies that the entity limits entity employees with access to 
classified information to the minimum number necessary to perform on 
classified contracts.
    (2) Validates that the entity has not provided its employees 
unauthorized access to classified information;
    (3) Reviews the entity's self-inspection program and evaluates and 
records the entity's remedial actions; and
    (4) Verifies that the GCA approved any public release of 
information pertaining to a classified contract.
    (e) As a result of findings during the security review, the CSA 
may, as appropriate, notify:
    (1) GCAs if there are unfavorable results from the review; and
    (2) A prime entity if the CSA discovers unsatisfactory security 
conditions pertaining to a sub-entity.
    (f) The CSA maintains a record of reviews it conducts and the 
results. Based on review results, the responsible CSA determines 
whether an entity's eligibility for access to classified information 
may continue. See Sec.  2004.32(g).


Sec.  2004.28  Cost reports.

    (a) Agencies must annually report to the Director, ISOO, on their 
NISP implementation costs for the previous year.
    (b) CSAs must annually collect information on NISP implementation 
costs incurred by entities under their cognizance and submit a report 
to the Director, ISOO.

Subpart C--Operations


Sec.  2004.30   Security classification requirements and guidance.

    (a) Contract or agreement and solicition requirements. (1) The GCA 
must incorporate FAR clause 52.204-2, Security Requirements (or 
equivalent set of security requirements), into contracts or agreements 
and solicitations requiring access to classified information.
    (2) The GCA must also include a contract security classification 
specification (or equivalent guidance) with each contract or agreement 
and solicitation that requires access to classified information. The 
contract security classification specification (or equivalent guidance) 
must identify the specific elements of classified information involved 
in each phase of the contract or agreement life-cycle, such as:
    (i) Level of classification;
    (ii) Where the entity will access or store the classified 
information, and any requirements or limitations on transmitting 
classified information outside the entity;
    (iii) Any special accesses;
    (iv) Any classification guides or other guidance the entity needs 
to perform during that phase of the contract or agreement;
    (v) Any authorization to disclose information about the classified 
contract or agreement; and
    (vi) GCA personnel responsible for interpreting and applying the 
contract security specifications (or equivalent guidance).
    (3) The GCA revises the contract security classification 
specification (or equivalent guidance) throughout the contract or 
agreement life-cycle as security requirements change.
    (b) Guidance. Classification guidance is the exclusive 
responsibility of the GCA. The GCA prepares classification guidance in 
accordance with 32 CFR 2001.15, and provides appropriate security 
classification and declassification guidance to entities.
    (c) Requests for clarification and classification challenges. (1) 
The GCA responds to entity requests for clarification and 
classification challenges.
    (2) The responsible CSA assists entities to obtain appropriate 
classification guidance from the GCA, and to obtain a classification 
challenge response from the GCA.
    (d) Instructions upon contract or agreement termination. (1) The 
GCA provides instructions to the entity for returning or disposing of 
classified information upon contract or agreement

[[Page 3227]]

termination or when an entity no longer has a legitimate need to retain 
or possess classified information.
    (2) The GCA also determines whether the entity may retain 
classified information for particular purposes after the contract or 
agreement terminates, and if so, provides written authorization to the 
entity along with any instructions or limitations (such as which 
information, for how long, etc).


Sec.  2004.32   Determining entity eligibility for access to classified 
information.

    (a) Eligibility determinations. (1) The responsible CSA determines 
whether an entity is eligible for access to classified information. An 
entity may not have access to classified information until the 
responsible CSA determines that it meets all the requirements in this 
section. In general, the entity must be eligible to access classified 
information at the appropriate level before the CSA may consider any of 
the entity's subsidiaries, sub-contractors, or other sub-entities for 
eligibility. However, when the subsidiary will perform all classified 
work, the CSA may instead exclude the parent entity from access to 
classified information rather than determining its eligibility. In 
either case, the CSA must consider all information relevant to 
assessing whether the entity's access poses an unacceptable risk to 
national security interests.
    (2) A favorable access eligibility determination is not the same as 
a safeguarding capability determination. Entities may access classified 
information with a favorable eligibility determination, but may possess 
classified information only if the CSA determines both access 
eligibility and safeguarding capability, based on the GCA's requirement 
in the contract security classification specification (or equivalent).
    (3) If an entity has an existing eligibility determination, a CSA 
will not duplicate eligibility determination processes performed by 
another CSA. If a CSA cannot acknowledge an entity eligibility 
determination to another CSA, that entity may be subject to duplicate 
processing.
    (4) Each CSA maintains a record of its entities' eligibility 
determinations (or critical infrastructure entity eligibility status 
under the CCIPP, for DHS) and responds to inquiries from GCAs or 
entities, as appropriate and to the extent authorized by law, regarding 
the eligibility status of entities under their cognizance.
    (b) Process. (1) The responsible CSA provides guidance to entities 
on the eligibility determination process and on how to maintain 
eligibility throughout the period of the agreement or as long as an 
entity continues to need access to classified information in connection 
with a legitimate U.S. or foreign government requirement.
    (2) The CSA coordinates with appropriate authorities to determine 
whether an entity meets the eligibility criteria in paragraph (e) of 
this section. This includes coordinating with appropriate U.S. 
Government regulatory authorities to determine entity compliance with 
laws and regulations.
    (3) An entity cannot apply for its own eligibility determination. A 
GCA or an eligible entity must sponsor the entity to the responsible 
CSA for an eligibility determination. The GCA or eligible entity may 
sponsor an entity at any point during the contracting or agreement 
life-cycle at which the entity must have access to classified 
information to participate (including the solicitation or competition 
phase). An entity with limited eligibility granted under paragraph (f) 
of this section may sponsor a sub-entity for a limited eligibility 
determination for the same contract, agreement, or circumstance so long 
as the sponsoring entity is not under FOCI (see Sec.  2004.34(i)).
    (4) The GCA must include enough lead time in each phase of the 
acquisition or agreement cycle to accomplish all required security 
actions. Required security actions include any eligibility 
determination necessary for an entity to participate in that phase of 
the cycle. The GCA may award a contract or agreement before the CSA 
completes the entity eligibility determination. However, in such cases, 
the entity may not begin performance on portions of the contract or 
agreement that require access to classified information until the CSA 
makes a favorable entity eligibility determination.
    (5) When a CSA is unable to make an eligibility determination in 
sufficient time to qualify an entity to participate in the particular 
procurement action or phase that gave rise to the GCA request (this 
includes both solicitation and performance phases), the GCA may request 
that the CSA continue the determination process to qualify the entity 
for future classified work, provided that the processing delay was not 
due to the entity's lack of cooperation.
    (c) Coverage. (1) A favorable eligibility determination allows an 
entity to access classified information at the determined eligibility 
level, or lower.
    (2) The CSA must ensure that all entities needing access to 
classified information as part of a legitimate U.S. or foreign 
government requirement have or receive a favorable eligibility 
determination before accessing classified information. This includes 
both prime or parent entities and sub-entities, even in cases in which 
an entity intends to have the classified work performed only by sub-
entities. A prime or parent entity must have a favorable eligibility 
determination at the same classification level or higher than its sub-
entity(ies), unless the CSA determined that the parent entity could be 
effectively excluded from access (see paragraph (a)(1) of this 
section).
    (3) If a parent and sub-entity need to share classified information 
with each other, the CSA must validate that both the parent and the 
sub-entity have favorable eligibility determinations at the level 
required for the classified information prior to sharing the 
information.
    (d) DHS Classified Critical Infrastructure Protection Program 
(CCIPP). DHS shares classified cybersecurity information with certain 
employees of entities under the Classified Critical Infrastructure 
Protection Program (CCIPP). The CCIPP applies only to entities that do 
not need to store classified information, have no other contracts or 
agreements already requiring access to classified information, and are 
not already determined eligible for access to classified information. 
DHS establishes and implements procedures consistent with the NISP to 
determine CCIPP entity eligibility for access to classified 
information.
    (e) Eligibility criteria. An entity must meet the following 
requirements to be eligible to access classified information:
    (1) It must need to access classified information as part of a 
legitimate U.S. Government or foreign government requirement, and 
access must be consistent with U.S. national security interests as 
determined by the CSA;
    (2) It must be organized and existing under the laws of any of the 
50 States, the District of Columbia, or an organized U.S. territory 
(Guam, Commonwealth of the Northern Mariana Island, Commonwealth of 
Puerto Rico, and the U.S. Virgin Islands); or an American Indian or 
Alaska native tribe formally acknowledged by the Assistant Secretary--
Indian Affairs, of the U.S. Department of the Interior;
    (3) It must be located in the United States or its territorial 
areas;
    (4) It must have a record of compliance with pertinent laws, 
regulations, and contracts (or other relevant agreements).
    (5) Its KMOs must each have and maintain eligibility for access to

[[Page 3228]]

classified information that is at least the same level as the entity 
eligibility level;
    (6) It and all of its KMOs must not be excluded by a Federal 
agency, contract review board, or other authorized official from 
participating in Federal contracts or agreements;
    (7) It must meet all requirements the CSA or the authorizing law, 
regulation, or Government-wide policy establishes for access to the 
type of classified information or program involved; and
    (8) If the CSA determines the entity is under foreign ownership, 
control, or influence (FOCI), the responsible CSA must:
    (i) Agree that sufficient security measures are in place to 
mitigate or negate risk to national security interests due to the FOCI 
(see Sec.  2004.34);
    (ii) Determine that it is appropriate to grant eligibility for a 
single, narrowly defined purpose (see Sec.  2004.34(i)); or
    (iii) Determine that the entity is not eligible to access 
classified information.
    (9) DoD and DOE cannot award a contract involving access to 
proscribed information to an entity effectively owned or controlled by 
a foreign government unless the Secretary of the agency first issues a 
waiver (see 10 U.S.C. 2536). A waiver is not required if the CSA 
determines the entity is eligible and it agrees to establish a voting 
trust agreement (VTA) or proxy agreement (PA) (see Sec.  2004.34(f)) 
because both VTAs and PAs effectively negate foreign government 
control.
    (f) Limited entity eligibility determination. CSAs may choose to 
allow GCAs to request limited entity eligibility determinations (this 
is not the same as limited entity eligibility in situations involving 
FOCI when the FOCI is not mitigated or negated; for more information on 
limited entity eligibility in such FOCI cases, see Sec.  2004.34(i)). 
If a CSA permits GCAs to request a limited entity eligibility 
determination, it must set out parameters within its implementing 
policies that are consistent with the requirements below:
    (1) The GCA, or an entity with limited eligibility, must first 
request a limited entity eligibility determination from the CSA for the 
relevant entity and provide justification for limiting eligibility in 
that case;
    (2) Limited entity eligibility is specific to the requesting GCA's 
classified information, and to a single, narrowly defined contract, 
agreement, or circumstance;
    (3) The entity must otherwise meet the requirements for entity 
eligibility set out in this part;
    (4) The CSA documents the requirements of each limited entity 
eligibility determination it makes, including the scope of, and any 
limitations on, access to classified information;
    (5) The CSA verifies limited entity eligibility determinations only 
to the requesting GCA or entity. In the case of multiple limited entity 
eligibility determinations for a single entity, the CSA verifies each 
one separately only to its requestor; and
    (6) CSAs administratively terminate the limited entity eligibility 
when there is no longer a need for access to the classified information 
for which the CSA approved the limited entity eligibility.
    (g) Terminating or revoking eligibility. (1) The responsible CSA 
terminates the entity's eligible status when the entity no longer has a 
need for access to classified information.
    (2) The responsible CSA revokes the entity's eligible status if the 
entity is unable or unwilling to protect classified information.
    (3) The CSA coordinates with the GCA(s) to take interim measures, 
as necessary, toward either termination or revocation.


Sec.  2004.34   Foreign ownership, control, or influence (FOCI).

    (a) FOCI determination. A U.S. entity is under foreign ownership, 
control, or influence (FOCI) when:
    (1) A foreign interest has the power to direct or decide matters 
affecting the entity's management or operations in a manner that could:
    (i) Result in unauthorized access to classified information; or
    (ii) Adversely affect performance of a classified contract or 
agreement; and
    (2) The foreign interest exercises that power:
    (i) Directly or indirectly;
    (ii) Through ownership of the U.S. entity's securities, by 
contractual arrangements, or other similar means;
    (iii) By the ability to control or influence the election or 
appointment of one or more members to the entity's governing board 
(e.g. board of directors, board of managers, board of trustees) or its 
equivalent; or
    (iv) Prospectively (i.e., is not currently exercising the power, 
but could).
    (b) CSA guidance. The CSA establishes guidance for entities on 
filling out and submitting a Standard Form (SF) 328, Certificate 
Pertaining to Foreign Interests (OMB Control No. 0704-0194), and on 
reporting changes in circumstances that might result in a determination 
that the entity is under FOCI or is no longer under FOCI. The CSA also 
advises entities on the Government appeal channels for disputing CSA 
FOCI determinations.
    (c) FOCI factors. To determine whether an entity is under FOCI, the 
CSA analyzes available information to determine the existence, nature, 
and source of FOCI. The CSA:
    (1) Considers information the entity or its parent provides on the 
SF 328 (OMB Control No. 0704-0194), and any other relevant information; 
and
    (2) Considers in the aggregate the following factors about the 
entity:
    (i) Record of espionage against U.S. targets, either economic or 
Government;
    (ii) Record of enforcement actions against the entity for 
transferring technology without authorization;
    (iii) Record of compliance with pertinent U.S. laws, regulations, 
and contracts or agreements;
    (iv) Type and sensitivity of the information the entity would 
access;
    (v) Source, nature, and extent of FOCI, including whether foreign 
interests hold a majority or minority position in the entity, taking 
into consideration the immediate, intermediate, and ultimate parent 
entities;
    (vi) Nature of any relevant bilateral and multilateral security and 
information exchange agreements;
    (vii) Ownership or control, in whole or in part, by a foreign 
government; and
    (viii) Any other factor that indicates or demonstrates foreign 
interest capability to control or influence the entity's operations or 
management.
    (d) Entity access while under FOCI. (1) If the CSA is determining 
whether an entity is eligible to access classified information and 
finds that the entity is under FOCI, the CSA must consider the entity 
ineligible for access to classified information. The CSA and the entity 
may then attempt to negotiate FOCI mitigation or negation measures 
sufficient to permit a favorable eligibility determination.
    (2) The CSA may not determine that the entity is eligible to access 
classified information until the entity has put into place appropriate 
security measures to negate or mitigate FOCI or is otherwise no longer 
under FOCI. If the degree of FOCI is such that no mitigation or 
negation efforts will be sufficient, or access to classified 
information would be inconsistent with national security interests, 
then the CSA will determine the entity ineligible for access to 
classified information.
    (3) If an entity comes under FOCI, the CSA may allow the existing 
eligibility status to continue while the CSA and the entity negotiate 
acceptable FOCI mitigation or negation measures, as long as there is no 
indication that classified information is at risk. If the entity does 
not actively negotiate mitigation or negation measures in good faith, 
or

[[Page 3229]]

there are no appropriate measures that will remove the possibility of 
unauthorized access or adverse effect on the entity's performance of 
contracts or agreements involving classified information, the CSA will 
take steps, in coordination with the GCA, to terminate eligibility.
    (e) FOCI and entities under the CCIPP. DHS may sponsor, as part of 
the CCIPP, a U.S. entity that is under FOCI, under the following 
circumstances:
    (1) The Secretary of DHS proposes appropriate FOCI risk mitigation 
or negation measures (see paragraph (f) of this section) to the other 
CSAs and ensures the anticipated release of classified information:
    (i) Is authorized for release to the country involved;
    (ii) Does not include information classified under the Atomic 
Energy Act; and
    (iii) Does not impede or interfere with the entity's ability to 
manage and comply with regulatory requirements imposed by other Federal 
agencies, such as the State Department's International Traffic in Arms 
Regulation.
    (2) If the CSAs agree the mitigation or negation measures are 
sufficient, DHS may proceed to enter a CCIPP information sharing 
agreement with the entity. If one or more CSAs disagree, the Secretary 
of DHS may seek a decision from the Assistant to the President for 
National Security Affairs before entering a CCIPP information sharing 
agreement with the entity.
    (f) Mitigation or negation measures to address FOCI. (1) The CSA-
approved mitigation or negation measures must assure that the entity 
can offset FOCI by effectively denying unauthorized people or entities 
access to classified information and preventing the foreign interest 
from adversely impacting the entity's performance on classified 
contracts or agreements.
    (2) Any mitigation or negation measures the CSA approves for an 
entity must not impede or interfere with the entity's ability to manage 
and comply with regulatory requirements imposed by other Federal 
agencies (such as Department of State's International Traffic in Arms 
Regulation).
    (3) If the CSA approves a FOCI mitigation or negation measure for 
an entity, it may agree that the measure, or particular portions of it, 
may apply to all of the present and future sub-entities within the 
entity's organization.
    (4) Mitigation or negation options are different for ownership 
versus control or influence; ownership necessitates a stronger 
mitigation or negation measure.
    (5) Methods to mitigate foreign control or influence (unrelated to 
ownership) may include:
    (i) Assigning specific oversight duties and responsibilities to 
independent board members;
    (ii) Formulating special executive-level security committees to 
consider and oversee matters that affect entity performance on 
classified contracts or agreements;
    (iii) Modifying or terminating loan agreements, contracts, 
agreements, and other understandings with foreign interests;
    (iv) Diversifying or reducing foreign-source income;
    (v) Demonstrating financial viability independent of foreign 
interests;
    (vi) Eliminating or resolving problem debt;
    (vii) Separating, physically or organizationally, the entity 
component performing on classified contracts or agreements;
    (viii) Adopting special board resolutions; and
    (ix) Other actions that effectively negate or mitigate foreign 
control or influence.
    (6) Methods to mitigate or negate foreign ownership include:
    (i) Board resolutions. The CSA and the entity may agree to a board 
resolution when a foreign interest does not own voting interests 
sufficient to elect, or is otherwise not entitled to representation on, 
the entity's governing board. The resolution must identify the foreign 
shareholders and their representatives (if any), note the extent of 
foreign ownership, certify that the foreign shareholders and their 
representatives will not require, will not have, and can be effectively 
excluded from, access to all classified information, and certify that 
the entity will not permit the foreign shareholders and their 
representatives to occupy positions that might enable them to influence 
the entity's policies and practices, affecting its performance on 
classified contracts or agreements.
    (ii) Security control agreements (SCAs). The CSA and the entity may 
agree to use an SCA when a foreign interest does not effectively own or 
control an entity (i.e., the entity is under U.S. control), but the 
foreign interest is entitled to representation on the entity's 
governing board. At least one cleared U.S. citizen must serve as an 
outside director on the entity's governing board.
    (iii) Special security agreements (SSAs). The CSA and the entity 
may agree to use an SSA when a foreign interest effectively owns or 
controls an entity. The SSA preserves the foreign owner's right to be 
represented on the entity's board or governing body with a direct voice 
in the entity's business management, while denying the foreign owner 
majority representation and unauthorized access to classified 
information. When a GCA requires an entity to have access to proscribed 
information, and the CSA proposes or approves an SSA as the mitigation 
measure, the GCA must also make a national interest determination (NID) 
before the CSA can determine an entity's eligibility for access. See 
paragraph (h) of this section for more information on NIDs.
    (iv) Voting trust agreements (VTAs) or proxy agreements (PAs). The 
CSA and the entity may agree to use one of these measures when a 
foreign interest effectively owns or controls an entity. The VTA and PA 
are substantially identical arrangements that vest the voting rights of 
the foreign-owned stock in cleared U.S. citizens approved by the CSA. 
Under the VTA, the foreign owner transfers legal title in the entity to 
the trustees approved by the CSA. Under the PA, the foreign owner 
conveys their voting rights to proxy holders approved by the CSA. The 
entity must be organized, structured, and financed to be capable of 
operating as a viable business entity independently from the foreign 
owner. Both VTAs and PAs can effectively negate foreign ownership and 
control; therefore, neither imposes any restrictions on the entity's 
eligibility to have access to classified information or to compete for 
classified contracts or agreements, including those involving 
proscribed information. Both VTAs and PAs can also effectively negate 
foreign government control.
    (v) Combinations of the above measures or other similar measures 
that effectively mitigate or negate the risks involved with foreign 
ownership.
    (g) Standards for FOCI mitigation or negation measures. The CSA 
must include the following requirements as part of any FOCI mitigation 
or negation measures, to ensure that entities implement necessary 
security and governing controls:
    (1) Annual certification and annual compliance reports by the 
entity's governing board and the KMOs;
    (2) The U.S. Government remedies in case the entity is not 
adequately protecting classified information or not adhering to the 
provisions of the mitigation or negation measure;
    (3) Supplements to FOCI mitigation or negation measures as the CSA 
deems necessary. In addition to the standard FOCI mitigation or 
negation measure's requirements, the CSA may require more procedures 
via a supplement, based upon the circumstances of an

[[Page 3230]]

entity's operations. The CSA may place these requirements in 
supplements to the FOCI mitigation or negation measure to allow 
flexibility as circumstances change without having to renegotiate the 
entire measure. When making use of supplements, the CSA does not 
consider the FOCI mitigation measure final until it approves the 
required supplements (e.g., technology control plan, electronic 
communication plan); and
    (4) For agreements to mitigate or negate ownership (PAs, VTAs, 
SSAs, and SCAs), the following additional requirements apply:
    (i) FOCI oversight. The CSA verifies that the entity establishes an 
oversight body consisting of trustees, proxy holders or outside 
directors, as applicable, and those officers or directors whom the CSA 
determines are eligible for access to classified information (see Sec.  
2004.36). The entity's security officer is the principal advisor to the 
oversight body and attends their meetings. The oversight body:
    (A) Maintains policies and procedures to safeguard classified 
information in the entity's possession with no adverse impact on 
classified contract or agreement performance; and
    (B) Verifies the entity is complying with the FOCI mitigation or 
negation measure and related documents, contract security requirements 
or equivalent, and the NISP;
    (ii) Qualifications of trustees, proxy holders, and outside 
directors. The CSA determines eligibility for access to classified 
information for trustees, proxy holders, and outside directors at the 
classification level of the entity's eligibility determination. 
Trustees, proxy holders, and outside directors must meet the following 
criteria:
    (A) Be resident U.S. citizens who can exercise management 
prerogatives relating to their position in a way that ensures that the 
foreign owner can be effectively insulated from the entity or 
effectively separated from the entity's classified work; and
    (B) Be completely disinterested individuals with no prior 
involvement with the entity, the entities with which it is affiliated, 
or the foreign owner;
    (C) No other circumstances that may affect an individual's ability 
to serve effectively; such as, the number of boards on which the 
individual serves, the length of time serving on any other boards.
    (iii) Annual meeting. The CSA meets at least annually with the 
oversight body to review the purpose and effectiveness of the FOCI 
mitigation or negation agreement; establish a common understanding of 
the operating requirements and their implementation; and provide 
guidance on matters related to FOCI mitigation and industrial security. 
These meetings include a CSA review of:
    (A) Compliance with the approved FOCI mitigation or negation 
measure;
    (B) Problems regarding practical implementation of the mitigation 
or negation measure; and
    (C) Security controls, practices, or procedures and whether they 
warrant adjustment; and
    (iv) Annual certification. The CSA reviews the entity's annual 
report; addresses, and resolves issues identified in the report; and 
documents the results of this review and any follow-up actions.
    (h) National Interest Determination (NID). (1) Requirement for a 
NID. When a GCA requires an entity to have access to proscribed 
information, and the CSA proposes or approves an SSA as the FOCI 
mitigation measure, the GCA must determine (with controlling agency 
concurrence when appropriate) whether releasing the proscribed 
information to the entity under an SSA is consistent with the national 
security interests of the United States. This determination is called a 
national interest determination (NID). A favorable NID confirms that an 
entity's access to the proscribed information is consistent with such 
interests and allows the CSA to make a positive entity eligibility 
determination in such cases if the entity meets the other eligibility 
requirements. If the NID is not favorable, an entity may not have 
access to the proscribed information.
    (i) The CSA requests a NID from the GCA for new contracts or 
agreements at any phase that requires access to proscribed information; 
and existing contracts or agreements (or any relevant sub-contracts or 
sub-agreements) when the GCA adds a requirement for access to 
proscribed information or adds a new sub-entity that operates under an 
SSA and requires access to proscribed information. The GCA may initiate 
a NID prior to receiving the request from the CSA, when appropriate.
    (ii) While CSAs normally request NIDs on a case-by-case contract- 
or agreement-specific basis, the CSA, GCA, and applicable controlling 
agency may decide to make a NID on another basis, using criteria the 
CSA establishes. In such cases, the GCA provides the CSA with a written 
statement that the NID covers a specific contract or program and all 
follow-on contracts associated that program, and lists all contracts or 
agreements covered by the NID in cases in which the GCA can identify 
them.
    (iii) When an entity has a favorable NID for a given contract or 
agreement, the CSA does not have to request a new NID for the same 
entity when the access requirements for proscribed information and 
terms remain unchanged for:
    (A) Renewal of the contract or agreement;
    (B) New task orders issued under the contract or agreement;
    (C) A new contract or agreement that contains the same provisions 
as the previous (this usually applies when the contract or agreement is 
for a program or project); or
    (D) Renewal of the SSA.
    (2) Process. (i) The CSA requests the NID from the GCA and provides 
the GCA with pertinent information, such as: The FOCI assessment; a 
copy of the SSA; and any other relevant information that might help the 
GCA make its determination.
    (ii) If another agency (or agencies) controls any category of the 
proscribed information involved, the GCA or CSA also coordinates with 
the controlling agency(ies) to request their concurrence on the GCA's 
NID. In cases involving one or more controlling agencies, a favorable 
NID is not final until the relevant controlling agencies concur with 
the determination in writing for the proscribed information under their 
control. The GCA or CSA provides the relevant controlling agency(ies) 
with: A statement that ``Access to the proscribed information by the 
entity is consistent with the national security interests of the United 
States''; the FOCI assessment; a copy of the SSA; a contract security 
classification specification (or equivalent); justification for access 
and a description of the proscribed information involved; and any other 
relevant information that might help the controlling agency consider 
the request.
    (iii) In cases in which the GCA has authority over all the 
categories of proscribed information involved, the CSA may make an 
entity eligibility determination or upgrade an existing eligibility 
level to top secret only after the GCA notifies the CSA in writing of a 
favorable NID, except as described in paragraph (h)(3)(iii)(A) of this 
section.
    (iv) In cases in which the GCA requests concurrence from one or 
more controlling agencies, it does not notify the CSA of its NID until 
the controlling agency concurs. In cases in which the CSA requests 
concurrence from the controlling agency, the CSA may not act upon a 
favorable GCA NID until it also receives written concurrence from the 
controlling agency(ies). In both cases, the CSA may not make an 
eligibility determination until all the relevant controlling agencies 
concur in writing on a favorable NID and the GCA notifies the CSA in 
writing of its final NID,

[[Page 3231]]

except as described in paragraph (h)(3)(iii)(B) of this section.
    (3) Timing. (i) When the GCA has authority over all of the 
categories of proscribed information involved, the GCA provides a 
final, written NID to the CSA, with a copy to the entity, within 30 
days after the GCA receives the NID request.
    (ii) If a controlling agency controls any of the involved 
categories of proscribed information, the GCA provides a final, written 
NID to the CSA, with a copy to the entity, within 60 days after the GCA 
receives the NID request.
    (A) In such cases, the GCA notifies the relevant controlling 
agency(ies) of its NID in writing within 30 days after it receives the 
NID request, and each controlling agency concurs or non-concurs in 
writing to the GCA or CSA within the next 30 days unless there are 
extenuating circumstances.
    (B) In cases in which there are extenuating circumstances, the 
controlling agency responds to the GCA or CSA within 30 days to explain 
the extenuating circumstances, request additional information as 
needed, and coordinate a plan and timeline for completion.
    (iii) If the GCA cannot make the NID within the 30- or 60-day 
timeframes in paragraphs (h)(3)(i) and (h)(3)(ii) of this section, the 
GCA must notify the CSA in writing and explain the extenuating 
circumstances causing the delay. The GCA must provide written updates 
to the CSA, or its designee, every 30 days until it makes the 
determination. In turn, the CSA provides the entity with updates every 
30 days.
    (A) When the GCA has authority over all the categories of the 
proscribed information involved, if the GCA does not provide the CSA 
with a NID within 30 days, the CSA does not have to delay any longer to 
make the entity eligibility determination or upgrade it to top secret 
and implement an SSA to wait for the NID, as long as the GCA does not 
indicate that the NID might be negative. However, the entity must not 
have access to proscribed information under a new contract until the 
GCA makes a favorable NID.
    (B) In some cases in which one or more controlling agencies have 
authority over any category of the proscribed information involved, the 
GCA or CSA might receive concurrence on a favorable NID from some of 
the controlling agencies within 60 days, but not others. In such cases, 
the CSA may proceed with an eligibility determination or upgrade it to 
top secret eligibility and implement an SSA, but only for those 
categories of proscribed information for which a controlling agency has 
concurred. The entity must not have access to any category of 
proscribed information for which a controlling agency that has not yet 
concurred.
    (iv) Unless cancelled sooner by the GCA that made the NID, a NID 
remains in effect for the duration of the contract or agreement. When a 
NID is not contract- or agreement-specific, the CSA, the GCA, and any 
applicable controlling agency determine how long the NID remains in 
effect based on the criteria used to make the NID.
    (i) Limited eligibility determinations (for entities under FOCI 
without mitigation or negation). (1) In exceptional circumstances when 
an entity is under FOCI, the CSA may decide that limited eligibility 
for access to classified information is appropriate when the entity is 
unable or unwilling to implement FOCI mitigation or negation measures 
(this is not the same as limited eligibility in other circumstances; 
for more information on limited eligibility in other cases, see Sec.  
2004.32(f)).
    (2) The GCA first decides whether to request a limited eligibility 
determination for the entity and must articulate a compelling need for 
it that is in accordance with U.S. national security interests. The GCA 
must verify that access to classified information is essential to 
contract or agreement performance, and accept the risk inherent in not 
mitigating or negating the FOCI.
    (3) The CSA may grant a limited eligibility determination if the 
GCA requests and the entity meets all other eligibility criteria in 
Sec.  2004.32(e).
    (4) A foreign government may sponsor a U.S. sub-entity of a foreign 
entity for limited eligibility when the foreign government desires to 
award a contract or agreement to the U.S. sub-entity that involves 
access to classified information for which the foreign government is 
the original classification authority (i.e., foreign government 
information), and there is no other need for the U.S. sub-entity to 
have access to classified information.
    (5) Limited eligibility determinations are specific to the 
classified information of the requesting GCA or foreign government, and 
specific to a single, narrowly defined contract, agreement, or 
circumstance of that GCA or foreign government.
    (6) The access limitations of a favorable limited eligibility 
determination apply to all of the entity's employees, regardless of 
citizenship.
    (7) A limited eligibility determination is not an option for 
entities that require access to proscribed information when a foreign 
government has ownership or control over the entity. See Sec.  
2004.32(e)(9).
    (8) The CSA administratively terminates the entity's limited 
eligibility when there is no longer a need for access to the classified 
information for which the CSA made the favorable limited eligibility 
determination. Terminating one limited eligibility status does not 
impact other ones the entity may have.


Sec.  2004.36   Determining entity employee eligibility for access to 
classified information.

    (a) Making employee eligibility determinations. (1) The responsible 
CSA:
    (i) Determines whether entity employees meet the criteria 
established in the Revised Adjudicative Guidelines for Determining 
Eligibility for Access to Classified Information issued by White House 
memorandum, December 29, 2005, and in accordance with applicable 
executive branch procedures. Entity employees must have a legitimate 
requirement (i.e., need to know) for access to classified information 
in the performance of assigned duties and eligibility must be clearly 
consistent with the interest of the national security.
    (ii) Notifies entities of its determinations of employee 
eligibility for access to classified information.
    (iii) Terminates eligibility status when there is no longer a need 
for access to classified information by entity employees.
    (2) The responsible CSA maintains:
    (i) SF 312s, Classified Information Nondisclosure Agreements, or 
other approved nondisclosure agreements, executed by entity employees, 
as prescribed by ODNI in accordance with 32 CFR 2001.80 and E.O. 13526; 
and
    (ii) Records of its entity employee eligibility determinations, 
suspensions, and revocations.
    (3) CSAs ensure that entities limit the number of employees with 
access to classified information to the minimum number necessary to 
work on classified contracts or agreements.
    (4) The CSA determines the need for event-driven reinvestigations 
for entity employees.
    (5) CSAs use the Federal Investigative Standards (FIS) issued 
jointly by the Suitability and Security Executive Agents.
    (6) The CSA provides guidance to entities on:
    (i) Requesting employee eligibility determinations, to include 
guidance for submitting fingerprints; and
    (ii) Granting employee access to classified information when the

[[Page 3232]]

employee has had a break in access or a break in employment.
    (7) If the CSA receives adverse information about an eligible 
entity employee, the CSA should consider and possibly investigate to 
determine whether the employee's eligibility to access classified 
information remains clearly consistent with the interests of national 
security. If the CSA determines that an entity employee's continued 
eligibility is not in the interest of national security, the CSA 
implements procedures leading to suspension and ultimate revocation of 
the employee's eligible status, and notifies the entity.
    (b) Consultants. A consultant is an individual under contract or 
agreement to provide professional or technical assistance to an entity 
in a capacity requiring access to classified information. A consultant 
is considered an entity employee for security purposes. The CSA makes 
eligibility determinations for entity consultants in the same way it 
does for entity employees.
    (c) Reciprocity. The responsible CSA determines if an entity 
employee was previously investigated or determined eligible by another 
CSA. CSAs reciprocally accept existing employee eligibility 
determinations in accordance with applicable and current national level 
personnel security policy, and do not duplicate employee eligibility 
investigations conducted by another CSA.
    (d) Limited access authorization (LAA). (1) CSAs may make LAA 
determinations for non-U.S. citizen entity employees in rare 
circumstances, when:
    (i) A non-U.S. citizen employee possesses unique or unusual skill 
or expertise that the agency urgently needs to support a specific U.S. 
Government contract or agreement; and
    (ii) A U.S. citizen with those skills is not available.
    (2) A CSA may grant LAAs up to the secret classified level.
    (3) CSAs may not use LAAs for access to:
    (i) Top secret (TS) information;
    (ii) RD or FRD information;
    (iii) Information that a Government-designated disclosure authority 
has not determined releasable to the country of which the individual is 
a citizen;
    (iv) COMSEC information;
    (v) Intelligence information, to include SCI;
    (vi) NATO information, except as follows: Foreign nationals of a 
NATO member nation may be authorized access to NATO information subject 
to the terms of the contract, if the responsible CSA obtains a NATO 
security clearance certificate from the individual's country of 
citizenship. NATO access is limited to performance on a specific NATO 
contract;
    (vii) Information for which the U.S. Government has prohibited 
foreign disclosure in whole or in part; or
    (viii) Information provided to the U.S. Government by another 
government that is classified or provided in confidence.
    (4) The responsible CSA provides specific procedures to entities 
for requesting LAAs. The GCA must concur on an entity's LAA request 
before the CSA may grant it.


Sec.  2004.38   Safeguarding and marking.

    (a) Safeguarding approval. (1) The CSA determines whether an 
entity's safeguarding capability meets requirements established in 32 
CFR 2001, and other applicable national level policy (e.g., Atomic 
Energy Act for RD). If the CSA makes a favorable determination, the 
entity may store classified information at that level or below. If the 
determination is not favorable, the CSA must ensure that the entity 
does not possess classified information or does not possess information 
at a level higher than the approved safeguarding level.
    (2) The CSA maintains records of its safeguarding capability 
determinations and, upon request from GCAs or entities, and as 
appropriate and to the extent authorized by law, verifies that it has 
made a favorable safeguarding determination for a given entity and at 
what level.
    (b) Marking. The GCA provides guidance to entities that meets 
requirements in 32 CFR 2001.22, 2001.23, 2001.24, and 2001.25, 
Derivative classification, Classification marking in the electronic 
environment, Additional requirements, and Declassification markings; 
ISOO's marking guide, Marking Classified National Security Information; 
and other applicable national level policy (e.g., Atomic Energy Act for 
RD) for marking classified information and material.


Sec.  2004.40   Information system security.

    (a) The responsible CSA must authorize an entity information system 
before the entity can use it to process classified information. The CSA 
must use the most complete, accurate, and trustworthy information to 
make a timely, credible, and risk-based decision whether to authorize 
an entity's system.
    (b) The responsible CSA issues to entities guidance that 
establishes protection measures for entity information systems that 
process classified information. The responsible CSA must base the 
guidance on standards applicable to Federal systems, which must include 
the Federal Information Security Modernization Act of 2014 (FISMA), 
Public Law 113-283, and may include National Institute of Standards and 
Technology (NIST) publications, Committee on National Security Systems 
(CNSS) publications, and Federal information processing standards 
(FIPS).


Sec.  2004.42   International programs security. [Reserved]

Appendix A to Part 2004--Acronym Table

    For details on many of these terms, see the definitions at Sec.  
2004.4.
CCIPP--Classified Critical Infrastructure Protection Program
CCIPP POC--Entity point of contact under the CCIPP program
CIA--Central Intelligence Agency
CSA--Cognizant security agency
CNSS--Committee on National Security Systems
COMSEC--Communications security
CSO--Cognizant security office
DHS--Department of Homeland Security
DoD--Department of Defense
DOE--Department of Energy
EA--Executive agent (the NISP executive agent is DoD)
E.O.--Executive Order
FAR--Federal Aquisition Regulation
FOCI--Foreign ownership, control, or influence
GCA--Government contracting activity
Insider threat SO--insider threat senior official (for an agency or 
for an entity)
ISOO--Information Security Oversight Office of the National Archives 
and Records Administration (NARA)
KMO--Key managers and officials (of an entity)
LAA--Limited access authorization
NID--National interest determination
NISPOM--National Industrial Security Program Operating Manual
NRC--Nuclear Regulatory Commission
NSA--National Security Agency
ODNI--Office of the Director of National Intelligence
PA--Proxy agreement
RD--Restricted data
SF--Standard Form
SAO--Senior agency official for NISP
SAP--Special access program
SCA--Security control agreement
SCI--Sensitive compartmented information
SSA--Special security agreement
TS--Top secret (classification level)
VT--Voting trust

    Dated: January 3, 2017.
David S. Ferriero,
Archivist of the United States.

[FR Doc. 2017-00152 Filed 1-10-17; 8:45 am]
 BILLING CODE 7515-01-P