[Federal Register Volume 83, Number 193 (Thursday, October 4, 2018)]
[Rules and Regulations]
[Pages 50003-50007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21422]


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DEPARTMENT OF STATE

22 CFR Parts 121 and 123

[Public Notice 10349]
RIN 1400-AE52


Regulatory Reform Revisions to the International Traffic in Arms 
Regulations

AGENCY: Department of State.

ACTION: Interim final rule; request for comments.

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SUMMARY: In response to public comments, the Department of State 
removes certain notification requirements from the International 
Traffic in Arms Regulations and revises several entries on the United 
States Munitions List to remove items that do not warrant continued 
inclusion. Specifically, this rule adds notes to USML Category IV and 
V, revises control text in USML Categories VIII, XI and XV, and revises 
a section of the regulations.

DATES: 
    Effective date: This rule is effective on October 4, 2018.
    Comments due date: Interested parties may submit comments by 
November 19, 2018.

ADDRESSES: Interested parties may submit comments by one of the 
following methods:
     Email: [email protected] with the subject line, 
``Regulatory Reform Revisions''
     Internet: At www.regulations.gov, search for this notice 
using Docket DOS-2018-0020.

FOR FURTHER INFORMATION CONTACT:
    Mr. Robert Monjay, Office of Defense Trade Controls Policy, 
Department of State, telephone (202) 663-2817; email [email protected]. 
ATTN: Regulatory Reform Revisions.

SUPPLEMENTARY INFORMATION:

Responses to Regulatory Reform Comments and Other Feedback

    On January 30, 2017, the President issued Executive Order 13771, 
Reducing Regulation and Controlling Regulatory Costs. On February 24, 
2017, the President issued Executive Order 13777, Enforcing the 
Regulatory Reform Agenda.
    On July 14, 2017, the Department published a Request for Comments 
in the Federal Register (82 FR 32493) to get feedback from the public 
on how it could achieve meaningful burden reduction while continuing to 
achieve the Department's statutory obligations. The Department sought 
comments on the Department regulations, guidance documents, and 
collections of information that members of the public believe should be 
removed or modified to alleviate unnecessary burdens. The Department 
also requested economic data to support any proposed changes.
    In response to the July 14, 2017 request for comments, the 
Department received several comments related to the International 
Traffic in Arms Regulations (ITAR). The Department has concluded its 
review of two of the comments and has accepted one of the changes 
suggested. The Department received several additional comments, which 
we are beginning to review. Any response to these additional comments, 
none of which are relevant to this rulemaking, will be done via a 
separate rule. These comments and the Department's responses are set 
forth below. The Department has also received feedback from the public, 
the regulated industry, and other government and private sector 
experts, through a variety of formal and informal channels, that 
several entries on the United States Munitions List (USML) are 
controlling items that are, or soon will be, in normal commercial use. 
The Department has determined that it can revise certain entries in a 
manner consistent with the objectives set forth in Executive Order 
13777 to remove the controls on these items, while maintaining control 
on those items that warrant continued control on the USML.
    One commenter requested that the Department eliminate the 
requirement to return licenses for tech data, in Sec.  123.22(b)(3)(i) 
and (c)(2) (all citations are to 22 CFR). Exporters are required to 
return licenses for the export of technical data to the Department 
after the initial export of all of the approved technical data. 
Exporters are also required to return all licenses that are exported 
against, but not electronically decremented. The Department has 
reviewed the comments and the use of the returned licenses and has 
determined that it can garner the necessary information via other 
means. The Department accepts these changes and will remove the 
relevant language in Sec.  123.22(b)(3)(i) and (c)(2).
    Two commenters requested that the Department eliminate the Initial 
Export Notification in Sec.  123.22(b)(3)(ii). The Department does not 
accept these changes. Section 123.22(b)(3)(ii) requires that prior to 
the initial export of any technical data or defense services under an 
Agreement, the Agreement holder inform DDTC that exports are beginning. 
These notifications are for exports of defense articles and defense 
services that are generally not reported to the U.S. government through 
the Automated Export System and as such, these notifications are often 
the only way that the Department knows that the export has occurred.
    Two commenters requested that the Department eliminate the 
notification of termination in Sec.  124.6. The Department does not 
accept these changes. Section 124.6 requires that an Agreement holder 
inform DDTC of the impending termination of the agreement not less than 
30 days prior to the expiration date of such agreement. The Department 
uses this notification as part of its compliance assessment practices. 
However, the Department is undertaking a modernization of its IT 
systems for export licensing and will review whether an IT solution can 
be put in place to allow the elimination of this notification 
requirement.

[[Page 50004]]

    Two commenters requested that the Department eliminate the annual 
status letter on agreements in Sec.  124.4(a). The Department does not 
accept these changes. Section 124.4(a) requires that if the agreement 
is not concluded within one year of the date of approval, the applicant 
notify DDTC in writing and provide the status of the agreement, unless 
and until the agreement is concluded, or a decision is made not to 
conclude the agreement. The Department uses this notification as part 
of its compliance assessment practices.
    Two commenters requested that the Department eliminate the 
requirement in Sec.  123.1(c)(4) that purchase documents be submitted 
with licenses in furtherance of agreements. The Department does not 
accept these changes. Submitting purchase documentation with a license 
application is an important tool to ensure only bona fide transactions 
are approved and to minimize the risk of diversion of approved exports.
    One commenter requested that the Department eliminate the 
requirement that defense articles be U.S. origin to use the temporary 
import exemption in Sec.  123.4(a)(1). The Department does not accept 
this change. Non-U.S.-origin defense articles sent to the United States 
for repair and maintenance do not require approval from the U.S. 
government for future reexports and retransfers, the way that U.S.-
origin defense articles do. Therefore, the Department does not allow 
non-U.S. origin defense articles to be sent to the United States for 
servicing without individually approving the end-use and end-user.
    One commenter requested that the Department create an exemption for 
temporary exports of defense articles for repair/replacement by foreign 
Original Equipment Manufacturer (``OEM''). The Department believes that 
it may be possible to implement such an exemption in a way that 
maintains U.S. foreign policy and national security interests. The 
Department is working on this effort and any change to the ITAR to this 
effect will be published separately.
    One commenter requested that the Department streamline the Canadian 
Exemption in Sec.  126.5 by integrating the excluded technologies list 
(ETL), currently in Supplement No. 1 to part 126, into Sec.  126.5. The 
Department does not accept this change. The ETL applies to the Canadian 
Exemption, as well as the Defense Trade Cooperation Treaties with 
Australia and the United Kingdom; therefore, the utility of the ETL 
would be reduced if it were moved out of Supplement No. 1 to part 126 
and the Department were required to recreate it in the sections for the 
treaties as well.
    One commenter requested that the Department implement certain 
definitions that were proposed in the Department's June 6, 2015 Federal 
Register proposed rule (80 FR 31525). The Department continues to work 
on the definitions that were not included in the June 3, 2016 interim 
final rule (81 FR 35611) or the September 8, 2016 final rule (81 FR 
62004). Any change to the ITAR to this effect will be published 
separately.
    One commenter requested that the Department establish a definition 
of manufacturing. The Department believes that the implementation of a 
definition for manufacturing is a matter that should be subject to 
public review and comment. Any change to the ITAR to this effect will 
be published separately.
    One commenter asserted that the definition of U.S. person in the 
ITAR does not include U.S. citizens. This is incorrect. Section 120.15 
defines U.S. persons to include protected individuals as defined by 8 
U.S.C. 1324b(a)(3). This provision includes all U.S. citizens within 
the scope of protected individuals.
    One commenter asserted that there is an inconsistency between the 
definition of defense service in Sec.  120.9 and the definition of 
export in Sec.  120.17 and requested that the Department revise them. 
The Department does not accept this change. The definition of defense 
service defines when a defense service occurs. The definition of 
export, in part, describes when the performance of a defense service 
constitutes an export and requires approval from the Department prior 
to performance.
    One commenter noted that there is an inconsistency between the text 
in USML Category IV(i) and XV(f) related to mission integration and 
launch failure analysis, as the text in Category IV(i) includes the 
limiter ``to a foreign person,'' which the text in Category XV(f) does 
not. The commenter suggested resolving this inconsistency. The 
Department accepts this change, and revises USML Category XV(f) to 
achieve consistency between the provisions. However, the Department 
notes that this does not change the scope of the controls. The 
definition of export, as detailed above, provides that an export of a 
defense service occurs when it is performed for, or on behalf of, a 
foreign person.
    One commenter requested that the Department remove the record-
keeping requirement in Sec.  125.6(a) and (b), asserting that they are 
duplicative of the record keeping requirement in Sec.  
123.22(b)(3)(ii). The Department does not accept this change. The 
requirement in Sec.  123.22(b)(3)(ii) is only to maintain records that 
exist. The requirement in Sec.  125.6 is to create documents that 
provide the necessary assurance against diversion and information about 
the transaction to allow these exports to occur under exemptions, 
without individual licenses for each export.
    One commenter requested that the Department implement an IT system 
that includes a single input and single output, to reduce compliance 
burdens. The Department is undertaking to modernize its IT systems for 
export licensing and will review whether an IT solution can be put in 
place to allow a single output document that sufficiently protects U.S. 
foreign policy and national security interests.
    The Department received feedback from industry that industry is not 
certain as to the jurisdiction of certain satellites and spacecraft 
thrusters. Some manufacturers reclassified satellites and spacecraft 
thrusters, formerly controlled under USML Category XV, as rocket 
engines under USML Category IV(d), following the revisions to USML 
Category XV in 2014 and 2017. Some manufacturers reclassified these 
same, or similar, thrusters as subject to the Export Administration 
Regulations (EAR) under ECCN 9A515. Thrusters for satellites and 
spacecraft may meet certain USML Category IV(d) controls, such as based 
on total impulse, but such thrusters are not rocket or missile power 
plants per se. Therefore, the Department is adding Note 2 to USML 
Category IV(d) to clarify that it does not control such thrusters. For 
controls on satellite and spacecraft thrusters, exporters should review 
USML Category XV(e)(12) and ECCN 9A515.
    The Department received feedback from industry that, as currently 
structured, USML Category V maintains control over the items described 
in the EAR on the Commerce Control List (CCL) in Export Control 
Classification Number (ECCN) 1C608, if they include a material 
described in USML Category V. The Department added a new Note 3 to USML 
Category V to clarify that for materials described in USML Category V, 
except for the materials described in paragraph (c)(6), (h), or (i), 
approval from the Department is not required for any export, reexport, 
or retransfer when the defense articles are incorporated into an item 
subject to the EAR and classified under ECCN 1C608.
    The Department received feedback from industry that commercial 
drone technologies have progressed to the state where the industry is 
developing flight control systems for cooperative

[[Page 50005]]

operations, and there is concern that the control text in USML Category 
VIII(h)(12), for unmanned aerial vehicle (UAV) flight control systems 
and vehicle management systems with swarming capability, will capture 
these commercial drone flight control systems and vehicle management 
systems. The Department believes that swarming is a military capability 
that continues to warrant control on the USML. However, the current 
text describes swarming capabilities as UAVs interacting with each 
other to avoid collisions and stay together, or, if weaponized, 
coordinate targeting. The Department believes that this control could 
be more precise.
    Swarming is not simply the ability to avoid collisions, maintain 
formation, and work cooperatively. Swarming requires the ability to 
adapt in real-time to changes in operational/threat environment or to 
deliver munitions on a target. Therefore, the Department updated USML 
Category VIII(h)(12).
    The Department received feedback from industry that commercial 
drones will make use of airborne radars that are currently described by 
the control text in USML Category XI(a)(3)(i) and XI(a)(3)(xii). The 
Department recognizes the importance of commercial drones to the U.S. 
economy and the importance that those drones have effective detect-and-
avoid radar to minimize collisions. Therefore, the Department has added 
a note to USML Category XI(a)(3)(i), to allow commodity jurisdiction 
reviews for radars, such as those meeting the criteria of the 
forthcoming Federal Aviation Administration (FAA) Minimum Operational 
Performance Standards (MOPS) to support sense and avoid operations of 
UAVs, and revised the Note to USML Category XI(a)(3)(xii) to increase 
the power threshold of articles that are not controlled by the 
paragraph.
    The Department received feedback from industry that the control 
text in USML Category XI(c)(4) will capture electronic components 
required for 5G wireless technology. The Department does not intend the 
USML to include civil communications systems. Therefore, the Department 
revised USML Category XI(c)(4) to implement power thresholds that will 
exclude those components necessary for 5G wireless technology, but 
maintain control on those items that do provide the United States a 
critical military or intelligence advantage.

Comment Submissions

    Interested parties may submit comments within 45 days of the date 
of publication. Comments received after that date may be considered if 
feasible, but consideration cannot be assured. Those submitting 
comments should not include any personally identifying information they 
do not desire to be made public or information for which a claim of 
confidentiality is asserted because those comments and/or transmittal 
emails will be made available for public inspection and copying after 
the close of the comment period via the Directorate of Defense Trade 
Controls website at www.pmddtc.state.gov. Parties who wish to comment 
anonymously may do so by submitting their comments via 
www.regulations.gov, leaving the fields that would identify the 
commenter blank and including no identifying information in the comment 
itself.

Regulatory Findings

Administrative Procedure Act

    This rulemaking is exempt from section[thinsp]553 (Rulemaking) and 
section[thinsp]554 (Adjudications) of the Administrative Procedure Act 
(APA) pursuant to 5 U.S.C. 553(a)(1) as a military or foreign affairs 
function of the United States Government. Although the Department is of 
the opinion that this rule is exempt from the rulemaking provisions of 
the APA, the Department is publishing this rule as a final rule with 
45-day provision for public comment, without prejudice to its 
determination that controlling the import and export of defense 
services is a military or foreign affairs function. The Department will 
review and respond to all relevant comments and make any necessary 
amendments.

Regulatory Flexibility Act

    Since the Department is of the opinion that this rule is exempt 
from the provisions of 5 U.S.C. 553, there is no requirement for an 
analysis under the Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

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

Small Business Regulatory Enforcement Fairness Act of 1996

    The Department does not believe this rulemaking is a major rule 
under the criteria of 5 U.S.C. 804.

Executive Orders 12372 and 13132

    This rulemaking does not have sufficient federalism implications to 
require consultations or warrant the preparation of a federalism 
summary impact statement. The regulations implementing Executive Order 
12372 regarding intergovernmental consultation on Federal programs and 
activities do not apply to this rulemaking.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess 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, distributed impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is being treated as a ``significant regulatory 
action,'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget (OMB). The Department believes that 
benefits of the rulemaking, narrowing and clarifying the scope of 
existing USML controls and removing certain notification requirements, 
outweigh any costs to implement these changes.

Executive Order 12988

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

Executive Order 13175

    The Department of State has determined that this rulemaking will 
not have tribal implications, will not impose substantial direct 
compliance costs on Indian tribal governments, and will not preempt 
tribal law. Accordingly, the requirements of Executive Order 13175 do 
not apply to this rulemaking.

Paperwork Reduction Act

    This rulemaking does not impose or revise any information 
collections subject to 44 U.S.C. Chapter 35.

Executive Order 13771

    This final rule is being reviewed as an E.O. 13771 deregulatory 
action. This rule will remove regulatory uncertainty regarding the 
controls on the

[[Page 50006]]

commercial aspects of these technologies that could prevent U.S. 
companies from investing in next generation technologies.

List of Subjects

22 CFR Part 121

    Arms and munitions, Classified information, Exports.

22 CFR Part 123

    Arms and munitions, Exports, Reporting and recordkeeping.

    For reasons stated in the preamble, the State Department amends 22 
CFR parts 121 and 123 as follows:

PART 121--THE UNITED STATES MUNITIONS LIST

0
1. The authority citation for part 121 continues to read as follows:

    Authority: Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); 22 U.S.C. 2651a; Pub. L. 105-261, 112 
Stat. 1920; Section 1261, Pub. L. 112-239; E.O. 13637, 78 FR 16129.


0
2. Section 121.1 is amended as follows:
0
a. In Category IV, redesignate Note to Paragraph (d) as Note 1 to 
Paragraph (d) and add Note 2 to paragraph (d);
0
b. In Category V, add Note 3 to USML Category V;
0
c. In Category VIII, revise paragraph (h)(12);
0
d. In Category XI, add Note to Paragraph (a)(3)(i), revise Note to 
Paragraph (a)(3)(xii), and revise paragraph (c)(4); and
0
e. In Category XV, revise the second and third sentences of paragraph 
(f).
    The additions and revisions read as follows:


Sec.  121.1   The United States Munitions List.

* * * * *
Category IV--Launch Vehicles, Guided Missiles, Ballistic Missiles, 
Rockets, Torpedoes, Bombs, and Mines
* * * * *
    (d) * * *

    Note 2 to Paragraph (d): This paragraph does not control 
thrusters for spacecraft.

* * * * *
Category V--Explosives and Energetic Materials, Propellants, Incendiary 
Agents, and Their Constituents
* * * * *

    Note 3 to USML Category V: Items controlled in this Category, 
except for materials described in paragraph (c)(6), (h), or (i), are 
licensed by the Department of Commerce when incorporated into an 
item subject to the EAR and classified under ECCN 1C608.

* * * * *
Category VIII--Aircraft and Related Articles
* * * * *
    (h) * * *
    (12) Unmanned aerial vehicle (UAV) flight control systems and 
vehicle management systems with swarming capability (i.e. UAVs that 
operate autonomously (without human input) to interact with each other 
to avoid collisions, fly in formations, and are capable of adapting in 
real-time to changes in operational/threat environment, or, if 
weaponized, coordinate targeting) (MT if for an aircraft, excluding 
manned aircraft, or missile that has a ``range'' equal to or greater 
than 300 km);
* * * * *
Category XI--Military Electronics
    (a) * * *
    * (3) * * *
    (i) * * *

    Note to Paragraph (a)(3)(i): This paragraph does not control 
radars that: (1) Are incapable of free space detection of 1 square 
meter Radar Cross Section (RCS) target beyond 8 nautical miles 
(nmi); (2) contain a radar update rate of not more than 1Hz; and (3) 
employ a design determined to be subject to the EAR via a commodity 
jurisdiction determination (see Sec.  120.4 of this subchapter).

* * * * *
    (xii) * * *

    Note to Paragraph (a)(3)(xii): This paragraph does not control 
radars not otherwise controlled in this subchapter, operating with a 
peak transmit power less than or equal to 550 watts, and employing a 
design determined to be subject to the EAR via a commodity 
jurisdiction determination (see Sec.  120.4 of this subchapter).

* * * * *
    (c) * * *
    (4) Transmit/receive modules, transmit/receive monolithic microwave 
integrated circuits (MMICs), transmit modules, and transmit MMICs 
having all of the following:
    (i) A peak saturated power output (in watts), Psat, greater than 
505.62 divided by the maximum operating frequency (in GHz) squared 
[Psat > 505.62 W * GHz2/fGHz2] for any channel;
    (ii) A fractional bandwidth of 5% or greater for any channel;
    (iii) Any planar side with length d (in cm) equal to or less than 
15 divided by the lowest operating frequency in GHz [d <= 15cm * GHz/
fGHz]; and
    (iv) At least one electronically variable phase shifter per 
channel.

    Note 1 to Paragraph (c)(4): A MMIC: (a) Is formed by means of 
diffusion processes, implantation processes, or deposition processes 
in or on a single semiconducting piece of material; (b) can be 
considered as indivisibly associated; (c) performs the function(s) 
of a circuit; and (d) operates at microwave frequencies (i.e., 300 
MHz to 300 GHz).


    Note 2 to Paragraph (c)(4): A transmit/receive module is a 
multifunction electronic assembly that provides bi-directional 
amplitude and phase control for transmission and reception of 
signals.


    Note 3 to Paragraph (c)(4): A transmit module is an electronic 
assembly that provides amplitude and phase control for transmission 
of signals.


    Note 4 to Paragraph (c)(4): A transmit/receive MMIC is a 
multifunction MMIC that provides bi-directional amplitude and phase 
control for transmission and reception of signals.


    Note 5 to Paragraph (c)(4): A transmit MMIC is a MMIC that 
provides amplitude and phase control for transmission of signals.


    Note 6 to Paragraph (c)(4): USML Category XI(c)(4) applies to 
transmit/receive modules and to transmit modules, with or without a 
heat sink. The value of length d in USML Category XI(c)(4)(iii) does 
not include any portion of the transmit/receive module or transmit 
module that functions as a heat sink.


    Note 7 to Paragraph (c)(4): Transmit/receive modules, transmit 
modules, transmit/receive MMICs, and transmit MMICs may or may not 
have N integrated radiating antenna elements, where N is the number 
of transmit or transmit/receive channels.


    Note 8 to Paragraph (c)(4): Fractional bandwidth is the 
bandwidth over which output power remains constant within 3 dB 
(without the adjustment of other operating parameters), divided by 
the center frequency, and multiplied by 100. Fractional bandwidth is 
expressed as a percentage.

* * * * *
Category XV--Spacecraft and Related Articles
* * * * *
    (f) * * * Defense services include the furnishing of assistance 
(including training) to a foreign person in the integration of a 
satellite or spacecraft to a launch vehicle, including both planning 
and onsite support, regardless of the jurisdiction, ownership, or 
origin of the satellite or spacecraft, or whether technical data is 
used. It also includes the furnishing of assistance (including 
training) to a foreign person in the launch failure analysis of a 
satellite or spacecraft, regardless of the jurisdiction, ownership, or 
origin of the satellite of

[[Page 50007]]

spacecraft, or whether technical data is used. * * *
* * * * *

PART 123--LICENSES FOR THE EXPORT AND TEMPORARY IMPORT OF DEFENSE 
ARTICLES

0
3. The authority citation for part 123 continues to read as follows:

    Authority: Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 
U.S.C. 2752, 2778, 2797); 22 U.S.C. 2753; 22 U.S.C. 2651a; 22 U.S.C. 
2776; Pub. L. 105-261, 112 Stat. 1920; Sec. 1205(a), Pub. L. 107-
228; Sec. 520, Pub. L. 112-55; Section 1261, Pub. L. 112-239; E.O. 
13637, 78 FR 16129.


0
4. Section 123.22 is amended by revising paragraphs (b)(3)(i) and 
(c)(2) to read as follows:


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

* * * * *
    (b) * * *
    (3) * * *
    (i) Technical data license. Prior to the permanent export of 
technical data licensed using a Form DSP-5, the applicant shall 
electronically provide export information using the system for direct 
electronic reporting to DDTC of export information and self-validate 
the original of the license. Exports of copies of the licensed 
technical data should be made in accordance with existing exemptions in 
this subchapter. Should an exemption not apply, the applicant may 
request a new license.
* * * * *
    (c) * * *
    (2) Licenses issued by DDTC but not decremented by U.S. Customs and 
Border Protection through its electronic system(s) (e.g., oral or 
visual technical data releases) must be maintained by the applicant in 
accordance with Sec.  122.5 of this subchapter.
* * * * *

Andrea Thompson,
Under Secretary for Arms Control and International Security, U.S. 
Department of State.
[FR Doc. 2018-21422 Filed 10-3-18; 8:45 am]
 BILLING CODE 4710-25-P