[Federal Register Volume 88, Number 38 (Monday, February 27, 2023)]
[Rules and Regulations]
[Pages 12210-12213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03828]


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DEPARTMENT OF STATE

22 CFR Parts 120 and 121

[Public Notice: 11918]
RIN 1400-AE27


International Traffic in Arms Regulations: Consolidation and 
Restructuring of Purposes and Definitions--Final

AGENCY: Department of State.

ACTION: Final rule.

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SUMMARY: The Department of State published an interim final rule on 
March 23, 2022, effective September 6, 2022, amending the International 
Traffic in Arms Regulations (ITAR) to better organize the purposes and 
definitions of the regulations. After reviewing the comments received 
in response to that interim final rule, the Department is now 
responding to public comments and finalizing the interim final rule, 
including making minor amendments.

DATES: This rule is effective February 27, 2023.

FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Director, Office of 
Defense Trade Controls Policy, Department of State, telephone (202) 
663-1282; email [email protected]. ATTN: Regulatory Change, 
Consolidation of Definitions and Restructuring of Part 120--Final.

SUPPLEMENTARY INFORMATION: The Directorate of Defense Trade Controls 
(DDTC), U.S. Department of State, administers the International Traffic 
in Arms Regulations (ITAR) (22 CFR parts 120-130). The regulations, 
codified as subchapter M of chapter I, title 22 of the Code of Federal 
Regulations (``the subchapter'') implement those authorities of the 
Arms Export Control Act (AECA) (22 U.S.C. 2751 et seq.) delegated to 
the Secretary of State pursuant to Executive Order 13637. On March 23, 
2022, the Department published an interim final rule at 87 FR 16396, 
with an effective date of September 6, 2022 (the interim final rule), 
to restructure part 120 of the ITAR to better organize the definitions 
previously found in that part and other locations throughout the ITAR 
and to consolidate provisions that provide background information or 
otherwise apply throughout the regulations. In addition, the interim 
final rule added text not previously found in the ITAR and made 
clarifying revisions to existing text. In that interim final rule, the 
Department requested comments from the interested community. The 
Department now provides responses to those comments and amends the ITAR 
through this final rulemaking.
    Before the Department addresses comments received in response to 
the interim final rule, it notes that beginning with 85 FR 25287, May 
1, 2020, as warranted by ``the exceptional and undue hardships and 
risks to safety caused by the public health emergency related to the 
SARS-COV2 pandemic,'' DDTC provided, via a series of notices in the 
Federal Register, for certain temporary suspensions, modifications, and 
exceptions to facilitate telework. The final document in that series, 
86 FR 30778, June 10, 2021, provided, pursuant to ITAR Sec. Sec.  126.2 
and 126.3, ``a temporary suspension, modification, and exception to the 
requirement that a regular employee, for purposes of ITAR Sec.  
120.39(a)(2), work at the company's facilities, to allow the individual 
to work at a remote work location, so long as the individual is not 
located in a country listed in ITAR Sec.  126.1'' and ``a temporary 
suspension, modification, and exception to authorize regular employees 
of licensed entities who are working remotely in a country not 
currently authorized by a technical assistance agreement, manufacturing 
license agreement, or exemption to send, receive, or access any 
technical data authorized for export, reexport, or retransfer to their 
employer via a technical assistance agreement, manufacturing license 
agreement, or exemption so long as the regular employee is not located 
in a country listed in ITAR Sec.  126.1.'' DDTC confirms that the 
temporary suspensions, modifications, and exceptions provided in 86 FR 
30778, June 10, 2021, remain in effect until such time as a document is 
published in the Federal Register explicitly terminating each, 
notwithstanding the movement of former ITAR Sec.  120.39 to new Sec.  
120.64 by republication of ITAR part 120 in the interim final rule.

Response to Comments

    One commenter expressed appreciation for the Department's efforts 
and anticipates a positive impact on compliance and the security and 
foreign policy interests of the Department. Another commenter noted the 
changes make the regulations noticeably more accessible to readers.
    One commenter requested that the policy statement regarding 
registration requirements at new Sec.  120.13 be amended to include in 
paragraph (b) specific reference to available exemptions to 
registration at Sec. Sec.  129.2 and 129.3. The commenter further 
suggested such inclusion would better harmonize the language of Sec.  
120.13(b) with Sec.  120.14(c). The Department believes that it would 
enhance the clarity of Sec.  120.13 to include reference to available 
exemptions to the registration requirement in part 129, as per the 
commenter's suggestion, as well as in part 122, and includes a new 
paragraph (c) to Sec.  120.13 noting the availability of exemptions to 
the registration requirements.
    One commenter recommended the Department include definitions of 
end-use and end-user in Subpart C to part 120 and stated that 
``[u]nderstanding how DOS defines the terms used in the ITAR is 
imperative to complying with the ITAR's requirements.'' The Department 
will take the recommendation under consideration. Because the 
Department's stated aim in the interim final rule was focused on 
movement and consolidation, it is not adding the proposed definitions 
at this time.
    One commenter noted that new Sec.  120.12, describing the procedure 
by which a requestor can obtain a commodity jurisdiction (CJ) 
determination as to whether a particular article or service is covered 
by the USML, consistently uses the term ``determination''. The 
commenter further noted the distinction between determination in the CJ 
process and designation as used regarding identification of defense 
articles and services on the USML. The commenter recommended additional 
revisions, including to Sec. Sec.  120.2 and 120.3, to similarly 
distinguish between designations and determinations. The Department 
notes that it is working to increase clarity regarding terms 
designation and determination, and did so where possible in the interim 
final rule. The preamble discussion to new Sec.  120.12 in the interim 
final rule refers to that effort. The Department notes its expressed 
intent to limit substantive amendments and to focus on

[[Page 12211]]

restructuring and consolidation of existing text in this rulemaking. 
DDTC will make note of the recommendation for consideration in future 
rulemaking.
    One commenter requested that the second use of the term Arms Export 
Control Act in Sec.  120.5 be replaced with the initialism AECA. The 
Department notes that the preamble to the interim final rule states the 
policy that acronyms (or initialisms) and parentheticals will be used 
where a single term capable of shortening appears ``on more than two 
occasions within any one section.'' In this case, the term only appears 
twice, so the policy was not applied.
    One commenter suggested the Department replace the word ``you'' 
where used in Sec.  120.11 with the term ``reviewer'' and make other 
minor conforming revisions. The Department notes that while Sec.  
120.11 is the only section of the ITAR where the word ``you'' appears, 
the word is regularly used in regulation, see e.g., the Export 
Administration Regulations (EAR) (15 CFR parts 730-774) and Bureau of 
Alcohol, Tobacco, Firearms and Explosives (ATFE) regulations, (27 CFR 
parts 447, 478, 479, 555, and 771), and that the text of new Sec.  
120.11(a)(2) was moved directly from prior Sec.  121.1(b). In light of 
the Department's stated aims to keep revisions to existing text to a 
minimum and because it is not aware of any confusion caused by the term 
since adoption, no change is being made at this time.
    One commenter recommended revision to the statement of policy 
regarding incorporation or integration of controlled items into any 
non-controlled item. The commenter recommended: (1) stating 
specifically that such items are subject to ITAR authorization 
requirements; and (2) where multiple controlled items are incorporated 
or integrated into a non-controlled item, that the item must be 
licensed under each applicable category. The Department notes that 
Sec.  120.11(c) is a general statement of policy and not intended to 
provide guidance on how to structure licenses in specific scenarios. 
The statement of policy is that such items do not lose controlled 
status because of incorporation or integration and that the items are 
subject to the subchapter, and all the requirements therein, including 
the requirement to obtain a license or other approval prior to 
transfer.
    One commenter recommended the Department either define the term 
``unfavorable finding'' when used in relation to Blue Lantern end-use 
monitoring in new Sec.  120.18(a)(9), or otherwise remove the 
paragraph. The commenter stated that the significant action of denial, 
revocation, etc. of an authorization should not be predicated on the 
use of an undefined term and that the previous list of reasons for 
denial, revocation, etc. at former Sec.  120.27 are sufficient to 
address determinations based on end-use monitoring. The Department 
notes that in the supporting information to the interim final rule and 
posted on the DDTC website there is the statement that new Sec.  
120.18(a)(9) is a ``[g]eneral statement of existing policy not 
previously explicit.'' The Department confirms here that paragraph 
(a)(9) is an accurate statement of existing practice and is 
memorializing the policy as one of the factors the Department may 
consider when implementing its broad discretionary authority to 
disapprove, deny, revoke, suspend, or amend without prior notice 
licenses or approvals, as described in paragraphs (a)(1) and (a)(2). 
The term ``unfavorable finding'' is adequate to express the finding of 
an end-use monitoring check in which the Department lacks the 
assurances necessary to issue a license or other approval or to 
otherwise modify or halt controlled transactions under such an 
authorization. The Department's annual ``Report to Congress on End-Use 
Monitoring of Defense Articles and Defense Services'' is publicly 
available on the DDTC website at pmddtc.state.gov and provides 
additional information regarding unfavorable Blue Lantern findings.
    One commenter recommended the Department add the terms executables, 
source code, and object code to the definition of software at Sec.  
120.40(g). The Department notes its expressed intent to limit 
substantive amendments and to focus on restructuring and consolidation 
of existing text in this rulemaking. DDTC will make note of the 
recommendation for consideration in future rulemaking.
    One commenter recommended the Department revise the numbering of 
notes to Sec.  120.41 from notes 2 and 3 to paragraph (b) to notes 1 
and 2 to paragraph (b). The Department notes that it has revised the 
numbering of notes in Sec.  120.41 in accordance with the Office of the 
Federal Register publication requirement that all notes to a section be 
numbered sequentially. Similar revisions to notes to other ITAR 
sections can be expected in future rulemakings.
    One commenter recommended the Department provide additional 
commentary regarding the movement of definitions of development and 
production from Sec.  120.41 (specially designed) to stand alone 
definitions applicable to the ITAR entirely. The commenter suggested 
there may be unintended consequences resulting from this transition. 
The commenter raised two specific concerns. First, ``that a party 
engaged only in the `assembly and testing of prototypes' 
(`development') may not trigger the registration requirement in ITAR 
Sec.  122.1, which requires `only one occasion of manufacturing' for 
registration (`manufacture' is a subset of `production').'' DDTC 
acknowledges that not all persons in the United States that may come 
into contact with defense articles and technical data are required to 
register with the Department. Persons who are not engaged in the 
business of manufacturing, exporting, or temporarily importing defense 
articles are not required by Sec.  122.1 to register. The Department, 
however, believes that the clarity of the expanded definition outweighs 
the risk that a person solely engaged in assembly of products in 
development, and no other controlled activity, would no longer register 
with the Department.
    Second, the commenter suggested that there may be an unintended 
reduction in the scope of technical data designated as Significant 
Military Equipment (SME). The commenter was concerned that ``technical 
data associated with `development' activities such as `assembly and 
testing of prototypes' would not be treated as SME, even if virtually 
indistinguishable from the data eventually used in `production' 
activities, including manufacture.'' The Department notes that it 
considered the impact of movement of definitions to universal 
application and that the language of new Sec.  120.10(c) is not new or 
revised. The same language appears in the former Sec.  121.1(a)(2) and 
has been included in various sections of the ITAR since at least 1993. 
The movement of the definition of development from Note 2 to paragraph 
(b) of Sec.  120.41, where it was limited to ``specially designed'', to 
a single instance definition applicable to the entire subchapter at 
Sec.  120.43 does not alter the relationship between the language of 
Sec.  120.10(c) (formerly Sec.  121.1(a)(2)) and the definition of 
technical data at Sec.  120.33 (formerly Sec.  120.10). The Department 
notes that the limitation to manufacture and production in Sec.  120.33 
(formerly Sec.  120.10) is unchanged by this rulemaking. Technical data 
that is not directly related to the manufacture or production of a 
defense article designated as SME is not designated as SME. In this 
respect, however, the Department notes that technical data

[[Page 12212]]

associated with development activities, such as assembly and testing of 
prototypes, that is indistinguishable from technical data used in 
manufacturing or production activities would be directly related to the 
manufacture or production of a defense article and therefore would be 
designated as SME if the defense article is SME. The Department further 
notes that the definitions of development and production identify the 
point at which a commodity transitions from development to production, 
and the point at which it subsequently re-enters development, as those 
terms are used in multiple locations within the regulation to reference 
specific points in the manufacturing process. The Department is not 
defining manufacture at this time. For these reasons, the Department is 
not revising the text of the interim final rule.
    One commenter requested the Department provide notice through 
Federal Register document or an FAQ that existing authorizations do not 
require an immediate update but can be updated at the next ``major 
revision'' and that DDTC allow submissions with citations to outdated 
sections where the intent of the reference is clear for at least six 
months after the effective date of this rule. The Department notes that 
it provided a six-month delayed effective date for this rule to allow 
regulated entities time to accommodate the revisions. The Department 
further notes that it is aware that existing agreements may have 
citations to ITAR sections effective at time of approval and had DDTC 
intended to require immediate amendments to revise outdated citations 
in all existing agreements, it would have so instructed in the interim 
final rule. Therefore, while the Department is not requiring existing 
authorizations to be amended merely to effect citation revisions, it 
expects submissions for licenses and other approvals received after the 
effective date of the rule to reference the ITAR as effective at the 
time of submission.
    In addition to comments addressed above, the Department received 
comments outside the scope of this rulemaking, including comments 
proposing substantive revisions to existing text, including text not 
otherwise moved or amended by this rule. As the rule ``moves and 
reorganizes existing regulatory text without revision'' wherever 
possible for the purpose of organizational clarity, the Department 
takes note of these comments, but is not entertaining substantive 
revisions to existing text in this rulemaking.

Amendments

    In Sec.  120.13, for the reasons described above, the Department 
adds a new paragraph (c) to provided notice of the availability of 
exemptions to registration.
    In Sec.  120.40(g) (formerly found at Sec.  120.45(f)), the 
Department amends the final clause of the second sentence to revise 
reference from ``a technical data license'' to ``a license.'' This 
revision is in accordance with a future rulemaking, RIN 1400-AE26, to 
revise descriptions of licenses in order to bring usage into better 
conformity with the definition of license at Sec.  120.57(a) (formerly 
found at Sec.  120.20) and the approved information collections from 
which licenses are issued, and which was not included in that 
rulemaking. In Sec.  121.1, the Department amends Category XIII(l), by 
correcting the closing parenthetical to the paragraph by removing an 
errant close parenthesis within the parenthetical.

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 military or 
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 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.

Congressional Review Act

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

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 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). Because 
the scope of this rule does not impose additional regulatory 
requirements or obligations, the Department believes costs associated 
with this rule will be minimal. This rule has 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 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 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 rule does not impose or revise any information collections 
subject to 44 U.S.C. chapter 35.

List of Subjects in 22 CFR Parts 120 and 121

    Arms and munitions, Classified information, Exports.

    Accordingly, for the reasons set forth in the preamble and under 
the authority of 22 U.S.C. 2778, the interim final rule

[[Page 12213]]

amending title 22, chapter I, subchapter M, which was published at 87 
FR 16396 on March 23, 2022, is adopted as final with the following 
changes:

PART 120--PURPOSE AND DEFINITIONS

0
1. The authority citation for part 120 continues to read as follows:

    Authority:  22 U.S.C. 2651a, 2752, 2753, 2776, 2778, 2779, 
2779a, 2785, 2794, 2797; E.O. 13637, 78 FR 16129, 3 CFR, 2013 Comp., 
p. 223.


0
2. Amend Sec.  120.13 by adding paragraph (c) to read:


Sec.  120.13  Registration.

* * * * *
    (c) The registration requirements as set forth in parts 122 and 129 
of this subchapter include limited exemptions.


Sec.  120.40  [Amended]

0
3. In Sec.  120.40 paragraph (g), remove the phrase ``a technical data 
license'' and add in its place ``a license''.

PART 121--THE UNITED STATES MUNITIONS LIST

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

    Authority:  22 U.S.C. 2752, 2778, 2797; 22 U.S.C. 2651a; Sec. 
1514, Pub. L. 105-261, 112 Stat. 2175; E.O. 13637, 78 FR 16129, 3 
CFR, 2013 Comp., p. 223.


Sec.  121.1  [Amended]

0
5. In Sec.  121.1, Category XIII, paragraph (l), remove the phrase 
``(see Sec.  120.32) of this subchapter)'' and add in its place ``(see 
Sec.  120.32 of this subchapter)''.

Bonnie Jenkins,
Under Secretary, Arms Controls and International Security, Department 
of State.
[FR Doc. 2023-03828 Filed 2-24-23; 8:45 am]
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