[Federal Register Volume 86, Number 101 (Thursday, May 27, 2021)]
[Proposed Rules]
[Pages 28503-28505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11053]


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DEPARTMENT OF STATE

22 CFR Part 120

[Public Notice: 11406]
RIN 1400-AF17


International Traffic in Arms Regulations: Regular Employee

AGENCY: Department of State.

ACTION: Proposed rule.

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SUMMARY: The Department of State proposes to amend the International 
Traffic in Arms Regulations (ITAR) to update the definition of regular 
employee to allow subject persons to work remotely, and to clarify the 
contractual relationships that meet the definition of regular employee.

DATES: Send comments on or before July 26, 2021.

ADDRESSES: Interested parties may submit comments by one of the 
following methods:
     Email: [email protected], with the subject line 
``ITAR Amendment: Regular Employee''
     Internet: At www.regulations.gov, search for this document 
using Docket DOS-2021-0009.
    Comments received after the acceptance date may be considered if 
feasible. 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. 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 submit comments via 
www.regulations.gov, leaving identifying fields blank.

FOR FURTHER INFORMATION CONTACT: Ms. Engda Wubneh, Foreign Affairs 
Officer, Office of Defense Trade Controls Policy, U.S. Department of 
State, telephone (202) 663-1809; email [email protected]. 
ATTN: Regulatory Change, ITAR Section 120.39: Regular Employee.

SUPPLEMENTARY INFORMATION: In March 2020, the President declared a 
national emergency as a result of the COVID-19 pandemic. Subsequently, 
the Department announced a temporary suspension, modification, and 
exception through July 31, 2020, of the requirement that a regular 
employee, for purposes of ITAR Sec.  120.39(a)(2), work at a company's 
facilities. The temporary measure allowed individuals to work remotely 
provided they are not located in Russia or a country listed in ITAR 
Sec.  126.1 (85 FR 25287, May 1, 2020), and still be considered regular 
employees under the ITAR. The Department requested and received 
comments regarding the efficacy and duration of this temporary measure 
(85 FR 35376, June 10, 2020). Many commenters, one industry 
association, and several individual entities endorsed the telework 
provisions and requested that this measure be effective until the end 
of the year, if not extended indefinitely. Additionally, many 
commenters mentioned that this temporary measure allowed industry to 
continue their business activities despite COVID-19 as many employees 
could work remotely. In response, this temporary measure was extended 
until December 31, 2020 (85 FR 45513, July 29, 2020).
    The Department is proposing to amend ITAR Sec.  120.39 permanently 
to allow certain individuals to work remotely, and further proposes to 
clarify the contractual relationships that meet the definition of 
regular employee. The Department recognizes that the workplace 
environment is evolving, therefore, the current ``regular employee'' 
criterion that an individual must work at a company's facilities will 
be removed in the revised definition to allow for remote work. The 
Department also proposes to set forth clear criteria that will allow 
regulated entities to treat certain contractual staff as regular 
employees for the purposes of the ITAR, provided those individuals are 
sufficiently subject to the employer's control such that the Department 
can hold the regulated employer responsible for the individual's 
actions.
    Further, the Department proposes to codify the meaning of a ``long 
term contractual relationship'' in ITAR Sec.  120.39(a)(2) by 
clarifying in the regulations that individuals must be providing 
services to an entity under a contract for a term of one year or more 
(ITAR Sec.  120.39(a)(2)(i)). The goal of this

[[Page 28504]]

provision is to minimize the risk of diversion of U.S. defense 
articles. The delineation of a contract for one year or more was 
selected in part based on the Department's expectation that a long-term 
contractor will receive superior orientation and training from a 
regulated entity upon onboarding, and the ability to absorb and apply 
training materials and adhere to compliance policies and procedures 
(e.g., ITAR-related training) is more likely to occur with at least a 
year of experience on the job. For those individuals not in a ``long 
term contractual relationship'' with a regulated entity (i.e., where 
the contract is less than one year), the Department will allow such 
individuals to be treated as regular employees provided that, in 
addition to the control and non-disclosure considerations described in 
ITAR Sec.  120.39(a)(3), the individual also maintains an active 
security clearance approved by the United States or by the government 
of the entity to which the individual's services are provided. Lastly, 
although employment type is not explicitly referenced in the 
definition, individuals providing services pursuant to a contractual 
relationship can include independent contractors, seconded employees, 
individuals provided by a staffing agency, or contractors provided by a 
contracting agency.

Regulatory Analysis and Notices

Administrative Procedure Act

    The Department of State is of the opinion that controlling the 
import and export of defense articles and services is a foreign affairs 
function of the United States Government and that rules implementing 
this function are exempt from sections 553 (rulemaking) and 554 
(adjudications) of the Administrative Procedure Act (APA), pursuant to 
5 U.S.C. 553(a)(1). Since the Department is of the opinion that this 
rule is exempt from 5 U.S.C 553, it is the view of the Department that 
the provisions of Section 553(d) do not apply to this rulemaking.

Regulatory Flexibility Act

    Since this rule is exempt from the notice-and-comment provisions of 
5 U.S.C. 553(b), it does not require 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 are deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

Executive Orders 12372 and 13132

    This rulemaking will not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this proposed amendment does not 
have sufficient federalism implications to require consultations or 
warrant the preparation of a federalism summary impact statement. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this 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). This 
rule's scope does not impose additional regulatory requirements or 
obligations; therefore, the Department believes costs associated with 
this rule will be minimal. Although the Department cannot determine 
based on available data how many fewer licenses will be submitted as a 
result of this rule, the amendment to the definition will inherently 
relieve the licensing burden for any exporter utilizing it in a 
qualifying scenario. Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility. This rule has not been designated 
a ``significant regulatory action'' by the Office and Information and 
Regulatory Affairs under Executive Order 12866.

Executive Order 12988

    The Department of State has reviewed this rulemaking in light 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, Executive Order 13175 does 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.

List of Subjects in 22 CFR Part 120

    Arms and munitions, Classified information, Exports.

    For the reasons set forth above, title 22, chapter I, subchapter M, 
part 120 of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 120--PURPOSE AND DEFINITIONS

0
1. The authority citation for part 120 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. 2794; 22 U.S.C. 2651a; Pub. L. 
105-261, 112 Stat. 1920; Pub. L. 111-266; Section 1261, Pub. L. 112-
239; E.O. 13637, 78 FR 16129.

0
2. Section 120.39 is revised to read as follows:


Sec.  120.39  Regular employee.

    (a) Regular employee means:
    (1) An individual permanently and directly employed by an entity; 
or
    (2) An individual providing services to an entity:
    (i) Under a contract with a term of one year or more;
    (ii) Who works under the entity's direction and control;
    (iii) Who works full time for the entity;
    (iv) Who is subject to the entity's compliance policies and 
procedures; and
    (v) Who executes a nondisclosure agreement with the entity that 
provides assurances that the individual will not transfer any defense 
articles to persons or entities unless specifically authorized by the 
entity; or
    (3) An individual providing services to an entity:
    (i) Under a contract with a term of less than one year;
    (ii) Who maintains an active security clearance approved by the 
United States or by the government of the entity to which the 
individual is providing services;
    (iii) Who works under the entity's direction and control;
    (iv) Who works full time for the entity;
    (v) Who is subject to the entity's compliance policies and 
procedures; and

[[Page 28505]]

    (vi) Who executes a nondisclosure agreement with the entity that 
provides assurances that the individual will not transfer any defense 
articles to persons or entities unless specifically authorized by the 
entity.
    (4) A secondment from one entity to another meets the definitions 
described in paragraphs (a)(2) and (3) of this section.
    (b) Nothing in this section shall be construed to provide 
authorization for the export, retransfer, or reexport of defense 
articles or defense services.

Choo S. Kang,
Acting Assistant Secretary, Bureau of International Security and 
Nonproliferation, Department of State.
[FR Doc. 2021-11053 Filed 5-26-21; 8:45 am]
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