[Federal Register Volume 89, Number 161 (Tuesday, August 20, 2024)]
[Rules and Regulations]
[Pages 67270-67292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18043]


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DEPARTMENT OF STATE

22 CFR Parts 123, 124, and 126

[Public Notice: 12468]
RIN 1400-AF84


International Traffic in Arms Regulations: Exemption for Defense 
Trade and Cooperation Among Australia, the United Kingdom, and the 
United States

AGENCY: Department of State.

ACTION: Interim final rule; request for comments.

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SUMMARY: The Department of State (the Department) is amending the 
International Traffic in Arms Regulations (ITAR) to facilitate defense 
trade and cooperation among Australia, the United Kingdom, and the 
United States through a new exemption, pursuant to section 38(l) of the 
Arms Export Control Act; adding an expedited licensing process for 
certain defense article and defense service exports to Australia, the 
United Kingdom, and Canada; adding a list of defense articles and 
defense services excluded from eligibility for transfer under the new 
exemption for Australia, the United Kingdom, and the United States; and 
adding to the scope of the exemption for intra-company, intra-
organization, and intra-governmental transfers to allow for the 
transfer of classified defense articles to certain dual nationals who 
are authorized users within the United Kingdom and Australia. The 
Department also seeks further public comment on these changes and 
whether they support the stated goals of this rulemaking. This interim 
final rule adopts the proposed rule published on May 1, 2024, with 
additional changes described below and implemented herein.

DATES: 
    Effective date: The rule is effective on September 1, 2024.
    Comments due date: Comments due on or before November 18, 2024.

ADDRESSES: Interested parties may submit comments by one of the 
following methods:
     Email: [email protected], with the subject line 
``Australia, the United Kingdom, and the United States ITAR Exemption''

[[Page 67271]]

     Internet: At www.regulations.gov, search for this notice 
using Docket DOS-2024-0024.
    Those submitting comments should not include any personally 
identifiable 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 (DDTC) 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 (771) 205-9566; email [email protected], 
ATTN: Regulatory Change, ITAR Section 126.7 Australia, the United 
Kingdom, and the United States Exemption.

SUPPLEMENTARY INFORMATION: On May 1, 2024, the Department of State (the 
Department) published a proposed rule with request for comments (89 FR 
35028) to create an exemption designed to implement the provisions of 
section 38(l) of the Arms Export Control Act (AECA) (22 U.S.C. 
2778(l)), as added by section 1343 of the National Defense 
Authorization Act (NDAA) for Fiscal Year 2024 (Pub. L. 118-31). The 
proposed rule at Sec.  126.7 stated that no license or other approval 
would be required for the export, reexport, retransfer, or temporary 
import of defense articles; the performance of defense services; or 
engagement in brokering activities between or among authorized users 
within Australia, the United Kingdom, and the United States provided 
certain requirements and limitations are met. The rule also proposed a 
new supplement no. 2 to part 126, which is an Excluded Technology List 
(ETL) designed to limit certain defense articles and defense services 
from being eligible for the provisions of Sec.  126.7. Further, the 
Department proposed Sec.  126.18(e) for transfers of classified defense 
articles to dual nationals, who are citizens of Australia and the 
United Kingdom and another country, provided all other criteria are met 
in this exemption. Lastly, the proposed Sec.  126.15(c) and (d) aimed 
to implement a separate provision, section 1344 of the NDAA for Fiscal 
Year 2024, for expedited licensing for exports of defense articles and 
defense services to Australia, the United Kingdom, and Canada.
    The Department acknowledges and appreciates the comments submitted 
in response to the proposed rule identified as 89 FR 35028 (herein 
``proposed rule'') and is now publishing this interim final rule, which 
contains revisions to certain provisions of the proposed rule and 
additions to certain ITAR sections. The Department welcomes further 
public comment on the regulatory text of this interim final rule.
    The main changes to regulatory text in this rule, compared to the 
proposed rule, are as follows:
     In Sec.  123.10(a), the phrase ``pursuant to a license or 
other authorization, except for the exemptions in Sec. Sec.  126.5 and 
126.7'' is added to the statement that a nontransfer and use 
certificate (i.e., Form DSP-83) generally is required for the export of 
significant military equipment and classified articles regardless of 
the form of the applicable export authorization while simultaneously 
clarifying that no nontransfer and use certificate is required for 
exports pursuant to the specified exemptions.
     In Sec.  124.8(a)(5), Sec.  126.7 was added to clarify 
that the exemption may be used to retransfer and reexport defense 
articles pursuant to this exemption that were originally exported via 
an agreement.
     In Sec.  126.1(a), Sec.  126.18(e) was added to the list 
of excepted exemptions from the section's country-based prohibitions.
     In Sec.  126.7(b)(1), the term ``activity'' replaced the 
term ``transfer'' in order to more clearly express the inclusion of 
defense services and brokering activities under this exemption.
     In Sec.  126.7(b)(2), the term ``broker'' was added to 
clarify that depending on the activity, the transferor, recipient, or 
broker all would need to register with DDTC, as appropriate. Further, 
language was added to clarify that a U.S. Government department or 
agency are authorized users of this exemption.
     For Sec.  126.7(b)(4), the recordkeeping requirements in 
proposed Sec.  126.7(b)(4) are removed in this interim final rule. The 
Departments notes recordkeeping requirements in Sec.  120.15(e) apply 
to this exemption as they do for all other ITAR exemptions.
     For Sec.  126.7(b)(6), this proposed provision was removed 
in this interim final rule. The proposed text was redundant and simply 
listed a number of ITAR requirements to which users are already 
subject. Further the proposed text to obtain nontransfer and use 
assurances was removed from the Sec.  126.7 exemption, as these 
assurances are incorporated into the authorized user process.
     In Sec.  126.7(b)(8), the reference to Restricted Data and 
the Atomic Energy Act of 1954, as amended, was removed as it is 
duplicative and is already referenced in Sec.  120.5(c).
     In Sec.  126.7(b)(8), the requirements for handling 
classified were changed to a note to Sec.  126.7(b), and the industrial 
security requirement reference was updated for Australia.
     In Sec.  126.15(c), the ITAR defined term ``person'' 
replaced the phrase ``corporate entities'' to clarify that individuals 
and entities are included in this provision.
     In Sec.  126.15(d), the phrase ``To the extent practicable 
. . .'' was added to align with the NDAA for Fiscal Year 2024.
     In, Sec.  126.18(e), the phrase ``retransfer or reexport'' 
replaces the term ``transfer'' in this provision to clarify more 
explicitly the types of transfers that are allowed.
     In supplement no. 2 to part 126, the Excluded Technologies 
List (ETL), is clarified and adjusted to better address the necessary 
and intended scope of exclusions:
    [cir] The Missile Technology Control Regime (MTCR) exclusion no 
longer applies to unmanned aerial vehicle (UAV) flight control systems 
and vehicle management systems described in United States Munitions 
List (USML) Category VIII(h)(12).
    [cir] The anti-tamper exclusion is clarified.
    [cir] The exclusion specific to source code is removed in its 
entirety.
    [cir] The exclusion of classified manufacturing know-how for 
certain articles described in USML Categories XI and XII is removed in 
its entirety.
    [cir] The entry for articles in USML Categories IV(a)(3), (9), 
(10), and (11), (b)(2), (h)(5), and (i) was refined to exclude 
launchers for man-portable air defense systems (MANPADS), but not other 
articles described in paragraph (b)(2).
    [cir] Excluded articles described in USML Categories XI and XIII 
are now described across multiple entries to better implement the 
intent of that entry, as follows:
    [ssquf] All articles described in USML Category XI(a)(1)(i) and 
(ii) are excluded, as are articles described in paragraph (c) or (d) of 
USML Category XI that are specially designed for the excluded paragraph 
(a)(1) articles, and directly related technical data and defense 
services.
    [ssquf] The exclusion of classified countermeasures and counter-

[[Page 67272]]

countermeasures is refined and split into multiple entries as follows:
     Classified articles described in USML Category XI(a)(2), 
other than underwater acoustic decoy countermeasures; classified 
articles described in paragraphs (c)(1) through (3) or paragraph (d) of 
USML Category XI specially designed therefor; and classified, directly 
related technical data and defense services are excluded.
     Classified articles described in USML Category 
XI(a)(3)(xviii), classified countermeasures and counter-countermeasures 
described in Category XI(a)(4)(iii), and classified articles described 
in Category XI(a)(5)(iii); classified articles described in paragraphs 
(c)(1) through (3) and (18) or paragraph (d) of USML Category XI 
specially designed therefor; and classified, directly related technical 
data and defense services are excluded.
     Classified articles described in USML Category XI(c) or 
(d) that implement countermeasures or counter-countermeasures for 
defense articles described in Category XI(a), and classified, directly 
related technical data and defense services, are excluded.
    [ssquf] The exclusion of classified articles described in USML 
Category XI(b), which also excludes classified, directly related 
technical data and defense services, is split out into a separate 
entry.
    [ssquf] Classified articles described in USML Category XI(c) 
specially designed for articles described in Category XIII(b); and 
classified, directly related technical data and defense services; are 
excluded. This replaces the previously proposed exclusions of articles 
specially designed for Category XIII(b) articles and classified 
articles for cryptographic systems.
    [ssquf] The exclusion of classified articles described in USML 
Category XIII(b) is split out into a separate entry, along with 
classified, directly related technical data and defense services.
    [cir] Following consultations with the Department of Defense (DoD), 
the Department is adding classified articles described in USML Category 
XI(a)(4)(i), certain classified articles specially designed for those 
articles, and classified, directly related technical data and defense 
services to the previously proposed exclusions. The excluded articles 
and services relate to intelligence capabilities. Technology for 
integrating or incorporating U.S. National Security Administration data 
used in these electronic support articles requires case-by-case review 
to assess the sensitivity and releasability of the specific technology.
    [cir] The exclusion of classified articles described in USML 
Category XII(d)(3) and directly related technical data and defense 
services is removed.
    [cir] The exclusion of source code and classified technical data 
and defense services directly related to certain night vision 
commodities is removed in its entirety.
    [cir] Classified articles in paragraphs (f)(7) and (12) of USML 
Category XIX, specially designed for excluded articles in paragraph 
(f)(1) or (2) of that category, and directly related technical data and 
defense services, are now excluded.
    [cir] The entry for USML Category XX manufacturing know-how is 
modified to remove the exclusion for manufacturing know-how directly 
related to classified uncrewed vessels, and to also exclude design 
methodology and engineering analysis for crewed vessels, articles used 
only in crewed vessels, classified payloads, and classified uncrewed 
underwater vessel (UUV) signature reduction techniques.
    A review and response to the public comments submitted on the 
proposed rule, organized by applicable proposed section of the ITAR, is 
as follows.

Public Comments and Responses

ITAR Sec.  126.7: Exemption for Defense Trade and Cooperation Among 
Australia, the United Kingdom, and the United States

General Comments on the Proposed Rule

    Several commenters expressed support for the proposed rulemaking 
effort and the Department acknowledges that support, while two 
commenters noted that they opposed the exemption outright as they 
assessed it could result in unsecured trade in munitions. The 
Department notes the terms of the exemption support secure defense 
trade and the trilaterally shared security standards associated with 
the protection of defense technology.
Section 126.7(a)
    Two commenters recommended regulators commit to additional industry 
review for this exemption. The Department notes this rulemaking takes 
the form of an interim final rule, which allows for further public 
comment.
    Two commenters proposed a specific exemption to allow government 
contractors from Australia, the United Kingdom, and the United States 
to work together more effectively without needing a license or other 
approval from DDTC. The Department notes the previously proposed 
exemption in Sec.  126.7 allows for designated parties, including 
government contractors, from those three countries to use the exemption 
in support of their work, provided the terms of the exemption are met.
    Two commenters recommended the addition of ``classified and 
unclassified'' before the phrase ``defense articles'' to more clearly 
include the type of export allowed and instructions given in Sec.  
126.7(a) and (b)(8), respectively. The Department notes throughout the 
ITAR, unless specified, the term ``defense articles'' applies to both 
unclassified and classified articles. For example, where a given 
provision refers specifically to ``unclassified defense articles,'' the 
scope of the provision applies only to unclassified defense articles. 
However, a reference to ``defense articles'' should be read to apply to 
both unclassified and classified defense articles.
    Similarly, another commenter wanted confirmation that the Sec.  
126.7 exemption included technical data. The Department confirms the 
exemption includes technical data and notes that technical data is 
included in the ITAR definition of ``defense article'' found at Sec.  
120.31.
    One commenter requested clarification as to whether retransfers are 
allowed under the Sec.  126.7 exemption if the defense article was 
exported to Australia or the United Kingdom under another ITAR 
exemption. Similarly, another commenter asked whether one has to be an 
authorized user for retransfers under the Sec.  126.7 exemption. The 
Department confirms such retransfers are permitted under Sec.  126.7 
provided all the criteria are met, including Sec.  126.7(b)(2)(ii)--
requirements associated with the transferor, recipient, or broker.
    Two commenters requested clarification as to whether the original 
U.S. exporter, the original equipment manufacturer, and the recipient 
of a defense article exported under the Sec.  126.7 exemption could 
apply for a retransfer or reexport authorization to a territory outside 
of Australia or the United Kingdom. The Department confirms that any of 
the three may apply for a retransfer or reexport authorization. 
Similarly, another commenter also recommended the creation of a new 
Open General License to allow for authorized users to reexport 
unclassified defense articles to destinations outside of Australia, the 
United Kingdom, and the United States. The Department acknowledges this 
comment and may consider this recommendation in the future.
    One commenter recommended the Department set out in Sec.  126.7(a) 
that activities described in the section are

[[Page 67273]]

not subject to a requirement for licensing or other approvals, rather 
than referring to the provision as an exemption. The Department 
declines to accept this recommendation and notes the exemption 
authorizes, without further licenses or other approvals from DDTC, 
activities authorized by the exemption, provided the criteria for use 
of the exemption are met.
Section 126.7(b)
    One commenter suggested modifying Sec.  126.7(b) to add the phrase 
``Except as provided in Sec.  120.54, the exemption described in 
paragraph (a) . . .''. The commenter also advised finalizing and 
incorporating the text from the proposed rule (87 FR 77046) to this 
interim final rule, especially Sec.  120.54(a)(6) regarding the taking 
of defense articles subject to this subchapter on deployment or 
training exercises to countries not previously approved. The Department 
notes this activity generally is already allowed, presuming there is no 
change in end-user or end-use, and is the subject of a separate 
rulemaking (87 FR 77046, Dec. 16, 2022) (proposed) and FR Doc. 2024-
18249, scheduled to publish on August 15, 2024 (RIN 1400-AF26). As for 
the expressed reference to Sec.  120.54, the Department declines to 
adopt this suggestion, as no other ITAR provision outside of part 120 
references Sec.  120.54. That provision is definitional and therefore 
applies to the entire ITAR. Including a specific reference in this one 
instance could lead to confusion as to whether other provisions of the 
ITAR must specifically reference that or other definitional provisions.
    Three commenters asserted proposed Sec.  126.7(b)(4), (6), and (7) 
are additional limitations and requirements not specified in AECA 
section 38(l)(4). The commenter further claimed this statutory 
exemption also states that it ``exempt[s]'' the applicable transfers 
``from the licensing and other approval requirements'' of the AECA and 
that it should not be called an exemption, but rather something else. 
The Department disagrees with this commenter's interpretation. While an 
exemption is a type of authorization and a type of other approval, the 
statutory language in AECA section 38(l) states that the Department 
``shall immediately exempt from the licensing or other approval 
requirements of this section exports and transfers . . . .'' The 
Department interprets the provision to refer to creating an exemption 
from the requirement to obtain, prior to a regulated activity, either a 
license or other approval, i.e., a written document DDTC may issue in 
lieu of a license, such as a Technical Assistance Agreement, to approve 
a regulated activity. Further, the Department does not interpret the 
provision as creating an exemption while restricting its ability to 
issue an exemption. ``Exemption'' is the term the statute repeatedly 
uses, and what Sec.  126.7 will create is an exemption consistent with 
the definition in Sec.  120.57(c).
    Similarly, another commenter asserted that Sec.  120.11(c) does not 
apply to this provision, and the Department cannot impose requirements 
on reexport and retransfers. The Department disagrees. The requirements 
of the ITAR, including but not limited to registration, recordkeeping 
requirements, Sec.  120.11(c), and penalties for violations continue to 
apply to this exemption as they do with other exemptions, such as the 
Canadian exemptions. The part of the law the commenter relies upon to 
support their argument, 22 U.S.C. 2778(l)(2), is not an independent 
export authority. Instead, that provision simply empowers the 
Department to issue a country-based exemption under its other core 
unaltered authorities in section 2778(a) and (b). This is further 
supported by the fact that in section 2778(f)(2) the Department's 
ability to issue a country-based exemption under its core existing 
authorities were at one point restricted before being allowed again for 
the United Kingdom (UK) and Australia by section 1345(a) of the NDAA 
for Fiscal Year 2024. Consequently, the Department is required to issue 
an exemption only from the AECA and ITAR requirements to obtain a 
license or other approval for exports and various transfers, not from 
other ITAR provisions, which still do and will apply.
Section 126.7(b)(1)
    Several commenters recommended expansion of the scope of transfers 
allowed in Sec.  126.7(b)(1) to include transfers (1) to or within the 
physical territory of Australia, the United Kingdom, or the United 
States; (2) to members of the armed forces of Australia, the United 
Kingdom, or the United States acting in their official capacity or 
while on deployment; (3) to government employees of Australia, the 
United Kingdom, and the United States; (4) to Sec.  126.7 authorized 
users deployed in support of such armed forces, to include maintenance, 
repair, and overhaul providers; (5) to international waters when in 
support of AUKUS testing or operations; and (6) by Australian, U.S., 
and UK persons to export or transfer defense articles for end use by 
the armed forces of Australia, the United Kingdom, or the United States 
outside of their physical territories. Commenters expressed that the 
proposed Sec.  126.7 precludes support in various ways, including to 
the three countries' armed forces when deployed outside their physical 
territories, and restricts contractors in support of those armed forces 
while deployed. This exemption is subject to statutory implementation 
requirements mandating its introduction in relatively short timeframes. 
The scope of the suggested changes is significant and additional time 
is required to consider them. The Department has determined that an 
interim final rule with another round of public comments will support 
continued refinement of the exemption to ensure the exemption works for 
the regulated community and supports the goals of this rulemaking.
    One commenter recommended revising the proposed Sec.  126.7(b)(1) 
text to include the clarifying phrase ``. . . the transfer of defense 
articles or performance of defense services must be to or within the 
physical territory . . .'' to clarify that transfers applies to defense 
articles and defense services. The Department accepts this comment in 
part and amends Sec.  126.7(b)(1) to clarify that the term ``activity'' 
includes brokering and the provision of defense services within the 
scope of the exemption.
    Two commenters recommended the creation of a definition of 
Australia and the United Kingdom in the ITAR, similar to how the United 
States is defined in Sec.  120.60. The Department declines to adopt a 
specific definition for any one foreign country. Longstanding practice 
and the ordinary meaning of a country's physical territory has been 
understood in both the ITAR and the Department of Commerce's Export 
Administration Regulations (EAR). Should an unusual and country-
specific question as to physical territory arise, the Department 
recommends asking it within an advisory opinion request pursuant to 
ITAR Sec.  120.22.
    One commenter sought clarification regarding the scope of the 
exemption with respect to ``cyber physical space'' managed by 
Australia, the United Kingdom, or the United States. The Department 
clarifies that servers hosting technical data in one of the three 
countries would still be within the physical territory of Australia, 
the United Kingdom, or the United States; however, transfers of 
technical data must be to or from those that meet the criteria set out 
in Sec.  126.7(b)(2). Further, the Department notes the text of Sec.  
120.54, which lists activities that are not exports, reexports, 
retransfer, or temporary imports, including sending,

[[Page 67274]]

taking, or storing of certain encrypted unclassified technical data 
that meet the specific criteria provided there.
    Another commenter sought clarification as to whether a U.S. person 
who works for a U.S. company can utilize the Sec.  126.7 exemption 
while traveling outside the United States. The Department notes that, 
per the proposed Sec.  126.7(b)(1), the transfer must be to or within 
the physical territory of Australia, the United Kingdom, or the United 
States. Similarly, the Department again notes the text of Sec.  120.54, 
which lists activities that are not exports, reexports, retransfer, or 
temporary imports.
    Three commenters asked whether retransfers or reexports are allowed 
under Sec.  126.7 if an ITAR-controlled defense article is exported 
from a non-authorized user to an authorized user. The Department 
clarifies that both transferors and recipients would need to be 
authorized users, in addition to meeting all other criteria in Sec.  
126.7, before retransfers or reexports would be allowed under this 
exemption.
Section 126.7(b)(2)
    Several commenters requested more information regarding the 
authorized user process. While additional information and guidance on 
the enrollment process will be provided separately, the Department 
notes that Australian and UK entities will manage the authorized user 
enrollment process through their respective governments.
    Several commenters asked how often the authorized user list in the 
proposed Sec.  126.7(b)(2)(ii) will be updated, as well as whether 
there will be an annual reevaluation process to remain on the 
authorized user list. Some commenters recommended the list be published 
on a public website, rather than within a user-restricted website such 
as the Defense and Export Control Compliance System (DECCS). Further, 
one commenter requested guidance to confirm that ``a transferor should 
require no additional due diligence steps beyond checking the list . . 
.'', and another asked if industry will need to provide notice and then 
wait for approval from DDTC before each transfer of a defense article. 
The Department notes it is developing separate guidance on the use and 
administration of the authorized user list and based off of 
consultations with representatives from Australia and the UK, that will 
be released shortly through the DDTC website.
    Similarly, another commenter suggested the inclusion of validity 
dates with the list of authorized users and provide a process to notify 
current authorized users when persons are removed from the list of 
authorized users. The Department reiterates that it is developing 
separate guidance on the use and administration of the authorized user 
list, including these points, that will be released shortly through the 
DDTC website.
    One commenter expressed concern that the authorized users for 
Australia and the UK would only include those that chose to enroll, and 
this is not the case for other ITAR exemptions. The Department cannot 
require Australian or UK entities to become authorized users as that is 
a business decision for them to make. The Department is designing the 
authorized user process, in coordination with the UK and Australian 
governments, to encourage interest to use the Sec.  126.7 exemption.
    One commenter inquired if foreign entities who are authorized users 
could access DECCS and if they could apply for a Technical Assistance 
Agreement through DECCS or would need to submit a General 
Correspondence request. The Department affirms non-U.S. authorized 
users will have access to DDTC's website after enrolling and will be 
able to view the authorized user list. The Department is not designing 
additional functionality for non-U.S. authorized users in DECCS. 
Further, under 22 U.S.C. 2778(g)(5), the Department is prohibited from 
issuing export licenses to foreign persons. As a result, the Department 
does not accept the commenter's suggestion to modify DECCS to allow 
foreign persons to apply for Technical Assistance Agreements and other 
types of export authorizations. Foreign persons can submit General 
Correspondence requests seeking authorization to reexport and 
retransfer defense articles, and foreign persons owned or controlled by 
U.S. persons may seek approval to engage in brokering activities.
    Two commenters requested the Department work with industry to 
publish an authorized user list in a form that can be directly accessed 
by industry-standard automated screening software just as it does for 
denied parties. The Department, in coordination with the UK and 
Australian governments, is designing the list to be as simple as 
possible to use, while maintaining certain security protocols. The 
Department does not develop or support third-party screening software 
and cannot speak to its integration with the authorized user list.
    One commenter asserted that the Department should not confirm the 
eligibility of U.S. registrants who are not utilizing the exemption for 
defense trade and cooperation among Australia, the United Kingdom, and 
the United States. The Department clarifies DDTC will not confirm to 
third parties a U.S. registrant's eligibility to participate in a 
transfer via the Sec.  126.7 exemption. Similarly, another commenter 
asserted the Department should not vet entities that the Australian and 
UK governments have already vetted as it is counterproductive. The 
Department disagrees with the premise that its vetting of parties is 
counterproductive as approval by both governments ensures comprehensive 
vetting of entities.
    Two commenters recommended members of the Australian, UK, and U.S. 
governments be separately enumerated within Sec.  126.7(b)(2) so one 
does not need to check the authorized user list. The commenters added 
the enumerated list should include all departments and agencies, and 
contractor support personnel thereof, of the Australian, UK, and U.S. 
governments. The Department requires the Australian and UK governments' 
department or agencies be identified on the authorized user list, 
instead of the regulatory text itself, to provide agility and 
flexibility in implementing updates. The Department further clarifies 
that the exemption would cover ``contractor support personnel thereof'' 
if the contractor personnel are authorized users.
    Two commenters warned that certifying authorized users for the 
Sec.  126.7 exemption will be overly complex and recommended against 
using a ``positive'' list of authorized users. Conversely, another 
commenter supported identifying U.S. registrants on a list accessible 
to exporters and reexporters on an official website. Further, two 
commenters suggested the Department have a help desk to aid entities 
with inquiries about the registration status of a company. The 
Department notes that only authorized users of Australia and the UK 
will be identified on the authorized user list on DECCS. Further, the 
Department is developing separate guidance on use and administration of 
the authorized user list that will be released shortly through the DDTC 
website.
    Two commenters suggested certain entities should immediately be 
presumed eligible to be authorized users. These include government 
agencies and organizations of Australia and the United Kingdom, foreign 
subsidiaries of U.S. registered companies, and any party previously 
authorized for the export of defense article. Further, another 
commenter suggested to identify UK and Australian companies by business 
registry numbers

[[Page 67275]]

and for the Department to align changes to the authorized user list 
with the general correspondence process for Foreign Entity Name Changes 
to ensure that both lists remain current. The Department notes because 
defense articles and defense services provide a critical military or 
intelligence advantage, vetting of eligible parties is vital to 
maintaining secure defense trade. The Department acknowledges these 
comments and notes it will publish separate guidance on the use and 
administration of the authorized user list that will be released 
shortly through the DDTC website. For prospectively eligible private 
entities, subsidiaries and affiliates might be included under the 
parent entity's authorized user status, depending on the parent 
entity's corporate structure and place of incorporation.
    Three commenters requested confirmation that individual U.S. 
persons, including U.S. persons working abroad (USPABs), can be 
authorized users. Further, several commenters wanted confirmation that 
furnishing a defense service under Sec.  126.7 is allowed by authorized 
users so separate USPAB authorization is not needed, and the defense 
services provided will not cause a foreign-produced defense article to 
become ITAR controlled. The Department affirms that all U.S. persons, 
as defined in Sec.  120.62, including individual persons, are eligible 
to become authorized users. The Sec.  126.7 exemption is a unique 
authorization not to be conflated with a USPAB authorization issued 
under Sec.  120.22(b), which authorizes the export of limited defense 
services only. The Department reconfirms that the mere presence or 
involvement of a U.S. person during the design, development, etc. of a 
foreign-origin defense article, or the provision of limited defense 
services authorized via a USPAB authorization, does not subject a 
resultant foreign-origin defense article to the ITAR or its reexport 
and retransfer requirements. However, to utilize the Sec.  126.7 
exemption, a U.S. person must be an authorized user--and defense 
services provided via the exemption subjects technical data and any 
resulting defense article to the ITAR, including retransfer and 
reexport restrictions outside the authorized user community. The 
Department will provide guidance on the authorized user process 
separate from this rulemaking. Transferors are best positioned to 
determine whether the Sec.  126.7 exemption or a USPAB authorization 
best suits their needs. Similarly, another commenter requested 
confirmation that UK or Australian citizens, including dual nationals, 
can be authorized users such that their employers can transfer 
technical data to them under this exemption. The Department clarifies 
that UK and Australian dual nationals can be authorized users and Sec.  
126.18(e) outlines the exemption available to them for transferring 
classified defense articles.
    One commenter recommended clarification that registration is 
required only for the applicable activity being conducted (e.g., 
exporting or brokering). One does not need both unless they are 
conducting both activities. The commenter suggested to amend the 
proposed Sec.  126.7(b)(2)(i) with U.S. persons registered with the 
applicable registration type (i.e., manufacturer, exporter, and/or 
broker) and not debarred under Sec.  127.7. The Department accepts this 
comment in part and has amended the regulatory text herein.
    Several comments were submitted pertaining to brokering 
requirements under the new exemption. These included:
     whether brokering registration as described in part 129 is 
required for proposed Sec.  126.7(b)(2)(i);
     whether Sec. Sec.  129.4 and 129.10(b) should be revised 
to clarify if entities that engage in brokering under this exemption 
need to register and furnish reports to DDTC;
     if the brokering recipient must be an authorized user that 
is supporting AUKUS; and
     if a foreign broker needs to be an authorized user and be 
registered as a broker;
    The Department confirms that brokering registration is required per 
Sec.  129.3, with certain exceptions. The Department also notes that 
the brokering requirements covering exemptions are already specified in 
Sec.  129.4, and there is a reporting requirement in Sec.  129.10(b) 
that still applies with this exemption. The recipient of any defense 
article must be an authorized user or registered U.S. person per 
proposed Sec.  126.7(b)(2)(i); however, the proposed exemption is 
available for use between and among Australia, the United Kingdom, and 
the United States, and need not be in support of AUKUS. Lastly, the 
Department clarifies that foreign persons who are brokers as defined in 
Sec.  129.2 must register with the Department to engage in brokering 
activities and must be an authorized user, per proposed Sec.  
126.7(b)(2), to use this exemption. The Department amends the proposed 
Sec.  126.7(b)(2) to clarify that U.S. and foreign persons must be 
registered with DDTC pursuant to Sec. Sec.  122.1 and 129.3, as 
appropriate.
    Relatedly, several commenters made requests for more outreach 
events regarding the Sec.  126.7 exemption and the authorized user 
process as well as guidance materials, including Frequently Asked 
Questions (FAQs) to be shared with the regulated community. The 
Department agrees and notes that it intends to conduct outreach and 
issue further guidance and FAQs on the exemption.
    One of these commenters sought clarification as to whether freight 
forwarders, carriers, and warehousing companies need to be authorized 
users. The commenter similarly asked if subcontractors need to be 
authorized users if they receive documentation in relation to a defense 
article from an existing authorized user. The Department clarifies 
that, for purposes of Sec.  126.7(b)(2), anyone who has access to a 
defense article would need to be an authorized user. We note that many 
carriers and other service providers do not require such access; 
however, freight forwarders often do as they require access to the 
defense articles they are processing.
    Four commenters recommended expansion of the scope of the Sec.  
126.7 exemption to include British and Australian persons employed by 
an authorized user in the United States to avoid the need for a Foreign 
Person Employment (FPE) license, and to expand the exemption to include 
U.S. persons working abroad (USPABs) who provide defense services to an 
employer who is an authorized user. The Department notes that an 
expansion of the exemption is not needed as the existing text may be 
used by Australian or British FPEs or USPABs who can satisfy the 
elements of Sec.  126.7, including by becoming an authorized user. 
However, the Department clarifies that any defense article produced or 
manufactured from U.S.-origin technical data or defense service(s) 
transferred via Sec.  126.7 may only be transferred pursuant to a DDTC 
license or other authorization, which may include the Sec.  126.7 
exemption itself. In other words, any defense article that is designed, 
developed, engineered, manufactured, produced, assembled, tested, 
repaired, maintained, modified, operated, demilitarized, destroyed, 
processed, or used by an FPE or USPAB pursuant to Sec.  126.7 becomes 
subject to the ITAR.
    Another commenter sought clarification regarding how USPAB 
authorizations intersect with the Sec.  126.7 exemption, in particular 
for dual nationals or those with Australian permanent residency. The 
Department notes a USPAB authorization is for limited defense services. 
For dual

[[Page 67276]]

nationals, the Department notes there are ITAR exemptions available, 
such as in Sec.  126.18.
    One commenter requested clarification regarding the text ``. . . 
DDTC will confirm eligibility of parties under this exemption prior to 
the transfer . . . . of defense articles or defense services'' in the 
proposed rule and if this was a requirement prior to each transfer and 
what the process is for confirming eligibility of parties. The 
Department clarifies there is no requirement to check with the 
Department prior to each transfer and additional guidance on how this 
process will work will be released shortly through the DDTC website.
Section 126.7(b)(3)
    One commenter recommended the addition to Sec.  126.15 of a list of 
defense articles for which the U.S. Government requires a license for 
national security reasons and recommended the public have an 
opportunity to comment on that list. The Department notes the list, 
called the Excluded Technology List (ETL), in supplement no. 2 to part 
126 articulates those defense articles and defense services that are 
not eligible for the exemption in Sec.  126.7. This list was created 
based on a combination of statutory obligations and policy decisions, 
including national security reasons. The public had an opportunity to 
comment on that list when the proposed rule published on May 1, 2024. 
Further, the public may continue to comment on that list with this 
interim final rule.
    Many commenters asked how often the ETL will be updated, and some 
asked if there would be an opportunity for industry input. The 
Department notes that it is statutorily required to conduct a review of 
the USML every three years and any applicable changes resulting from 
those reviews will be reflected in the ETL. Further, the U.S. 
Government has also committed to ensure that the items on the ETL will 
be specifically reviewed on a more frequent basis, annually for the 
first five years from implementation and periodically thereafter, and 
changes will be made to the ETL, depending on the outcome of each 
review.
    One commenter asked whether transfers of third-country origin 
(e.g., South African-origin; German-origin) defense articles between 
and among authorized users is allowed under Sec.  126.7, provided such 
transfer occurs to or within the physical territory of Australia, the 
United Kingdom, and the United States and the defense articles are not 
listed on the Excluded Technology List. The Department notes the ETL 
describes defense articles, which includes foreign-origin defense 
articles, and if the foreign-origin defense articles are subject to the 
ITAR, are not on the ETL, and all other criteria are met, one may elect 
to use the Sec.  126.7 exemption.
Section 126.7(b)(4)
    Several commenters asked if the recordkeeping requirements in Sec.  
120.15(e) apply to the proposed Sec.  126.7 exemption and how the 
proposed Sec.  126.7(b)(4) differs. Similarly, several commenters 
recommended the replacement of Sec.  126.7(b)(4) with Sec.  120.15(e), 
and another commenter recommended confirmation that ITAR recordkeeping 
requirements are satisfied if the recordkeeper meets the recordkeeping 
obligations of the comparable national export control system in their 
nation. Because the recordkeeping requirements are already present in 
Sec.  120.15(e) and are applicable to any kind of exemption, including 
the one at Sec.  126.7, the Department will remove Sec.  126.7(b)(4) 
from Sec.  126.7 to avoid suggesting the recordkeeping requirements for 
the new exemption are any different than those for any other exemption. 
The requirements set out in the proposed Sec.  126.7(b)(4) were similar 
to Sec.  120.15(e), with the exception of criteria such as recording 
the Electronic Export Information (EEI) Internal Transaction Number 
(ITN) in one's records. Of note, the EEI number required in Sec.  
120.15(e) is only applicable to certain transfers as it is the 
electronic export data filed in the U.S. Customs and Border 
Protection's Automated Export System (AES). If your transaction 
required an EEI filing, then you should maintain it in your records; if 
it did not, then that is not part of the record. The Department also 
declines to accept a different nation's recordkeeping requirements as 
meeting the ITAR's requirements.
    One commenter claimed there is nothing established regarding 
processes and procedures to track and report defense articles received 
under this exemption and differentiate between this exemption and other 
ITAR exemptions. The Department acknowledges this comment; however, the 
standard recordkeeping requirements under this exemption are the same 
as the standard recordkeeping requirements other ITAR exemptions are 
subject to (see Sec.  120.15(e)). How companies wish to document and 
track and report ITAR-controlled technical data releases or transfers 
of defense articles is at the discretion of each company. The 
Department does not set expectations about what processes or procedures 
to use to meet that requirement.
    Several commenters raised a concern that recording an individual's 
personal information and associated data has privacy implications and 
suggested recording the details of the entity rather than the natural 
person. The Department clarifies maintaining internal records of ``the 
name of the natural person responsible for the transaction'' refers to 
the transferor, not the recipient. Understanding who is responsible for 
executing a transfer is standard in a compliance program, allowing 
entities to identify problems and self-correct, and supports audits. 
Similarly, several commenters raised concerns that tracking certain 
information required for record keeping may violate the European 
Union's General Data Protection Regulation if shared with the 
Department and sought clarification as to what the term ``transaction'' 
means in this provision. The Department notes that these are the 
standard recordkeeping procedures that exist today and with which 
companies must comply with to operate under the provisions of the ITAR. 
Review of these recordkeeping requirements is not the subject of this 
rulemaking, but the Department may use the information obtained here to 
inform a future rulemaking. Further, the Department clarifies that term 
``transaction'' in the proposed Sec.  126.7(b)(4) referred to the 
transfer of the defense article or provision of the defense service; 
however, that proposed provision has been removed in this interim final 
rule since recordkeeping requirements are already captured in Sec.  
120.15(e).
    One commenter requested confirmation that the Sec.  126.7 exemption 
requires the authorized user to keep all shipping information pursuant 
to the exemption. The Department notes that Sec.  120.15(e) articulates 
the recordkeeping requirements for ITAR exemptions, to include shipping 
information.
    One commenter requested clarification as to who is responsible for 
keeping records and what constitutes a sufficient record for a 
technical data exchange. The Department notes technical data releases 
are subject to recordkeeping requirements. The Department further 
confirms it is removing the previously proposed Sec.  126.7(b)(4), as 
Sec.  120.15(e) sufficiently articulates the recordkeeping requirements 
for the Sec.  126.7 exemption and Sec.  120.15(e) is the provision to 
which a transferor should refer.
    One commenter sought clarification regarding the phrase ``. . . and 
such records must be made available to DDTC upon request . . .'' in 
Sec.  126.7(b)(4). The

[[Page 67277]]

Department acknowledges this comment while noting that the subject 
subparagraph is removed in this rule, as explained above.
Section 126.7(b)(5)
    One commenter suggested modification of the proposed Sec.  
126.7(b)(5) to state that ``The value of the transfer does not exceed 
the amounts described in Sec.  123.15 and does not enable the 
manufacturing abroad of significant military equipment as described in 
Sec.  124.11.'' The Department notes there are separate statutory 
requirements for congressional certifications (sometimes referred to as 
congressional notifications), which are based on value thresholds 
associated with the transaction, including those for exports of major 
defense equipment, as described in Sec.  123.15. Further, manufacturing 
abroad of significant military equipment is not allowed under this 
exemption, as this activity is subject to congressional certification 
requirements. To the extent the commenter suggests replacing the word 
``involve'' with ``enable'' in the regulatory text, the Department 
declines that suggestion and will keep the former term, which is also 
the one used in the controlling statute, 22 U.S.C. 2776(d).
    Two commenters noted there is an opportunity to reform how 
congressional certifications are handled with the Sec.  126.7 
exemption. Similarly, another commenter suggested changing the 
congressional certification process for transfers eligible for 
expedited licensing but subject to reporting to Congress. The commenter 
stated 22 U.S.C. 2276(c) and (d) set requirements for the President to 
report to Congress when licenses are submitted, and both provisions 
grant the President the opportunity to use an emergency certification 
to waive the requirement and instead issue the license. The commenter 
further recommended furnishing an annual report for the AUKUS-related 
licenses to Congress. The Department presumes the commenter intended to 
cite 22 U.S.C. 2776(c) and (d) and not 2276(c) and (d). Given the type 
of transfers the Department anticipates being eligible for the 
exemption at Sec.  126.7, the Department does not assess it could 
certify that each transfer constitutes the type of emergency 
contemplated under 22 U.S.C. 2776. The Department appreciates feedback 
on how it may expedite existing processes and will use the information 
provided as appropriate.
    Four commenters suggested the Department remove Sec.  126.7(b)(5) 
and eliminate unnecessary congressional certification requirements 
because the commenters asserted that, under 22 U.S.C. 2778(l)(2), 
Congress explicitly required that the Department exempt certain defense 
articles from export license requirements. Thus, by failing to 
eliminate corresponding congressional certification requirements for 
these covered defense articles, the proposed rulemaking will require 
exporters to apply for licenses to ensure that congressional 
certifications are submitted. Further, the commenters suggest, the 
Department will be notifying Congress of exports Congress already 
exempted from the export licensing requirements and any associated 
congressional certification requirements. The Department disagrees with 
the comment and assesses that the exemption at Sec.  126.7 is 
consistent with both the scope of 22 U.S.C. 2778 and with the 
Department's obligations under 22 U.S.C. 2776 to provide notification 
to Congress of the types of exports described in 22 U.S.C. 2776(c) and 
2776(d). Within 22 U.S.C. 2778(l)(6), Congress specifically made the 
congressional certification requirements of 22 U.S.C. 2753 not 
applicable to items transferred under the exemption but did not mention 
22 U.S.C. 2776. Furthermore, the authority to issue the exemption under 
22 U.S.C. 2778(l) is modeled after many provisions in 22 U.S.C. 2778(j) 
and 2778(j)(3)(C), which requires that congressional certifications 
continue to be notified regardless of any exemption issued under 22 
U.S.C. 2778(j). One commenter suggested to task the State Department's 
Defense Trade Advisory Group (DTAG) to explore whether congressional 
approval requirements should remain in place under the Arms Export 
Control Act for exports to (Sec.  123.15) and manufacturing of 
significant military equipment (SME) (Sec.  124.11). The Department 
notes it is unnecessary to task the DTAG with assessing the 
Department's legal obligations, as that is the Department's 
responsibility. The Department assessed, consistent with 22 U.S.C. 
2778(j)(3)(C) and (l)(6) the congressional certification obligations 
contained in 22 U.S.C. 2776 apply to exports conducted under the 
exemption in Sec.  126.7.
    Two commenters sought clarification regarding the Sec.  126.7 
exemption and congressional certification given the fact that both 
existing Australia and UK Defense Trade Cooperation Treaties (DTCT) 
exemptions contain an entire section on congressional certifications. 
Similarly, another commenter recommended inclusion of a provision 
similar to the procedures for legislative notification described under 
Sec.  126.16(o) as the commenter asserts it allows for the 
congressional certification process to be executed without a license 
application. The Department notes the statutorily authorized Sec.  
126.7 exemption is separate from the Australia and UK DTCT exemptions, 
which were authorized under treaties. Comparing the criteria and 
conditions of Sec.  126.7 to those articulated in Sec. Sec.  126.16 and 
126.17 is not appropriate because those sections implement the DTCT, 
rather than exemptions to the routine ITAR license requirements. The 
congressional certification requirements for transfers conducted 
pursuant to the DTCTs are unique and distinct from those articulated in 
22 U.S.C. 2776 and ITAR Sec. Sec.  123.15 and 124.11. Further, 
transfers that do not meet all of the criteria articulated in Sec.  
126.7 are not eligible for the exemption. This includes transfers that 
exceed a certain dollar value threshold or those that involve the 
manufacture of significant military equipment abroad. Those transfers 
will continue to require licenses or other authorizations consistent 
with the routine procedures and requirements, and the export 
authorization for those transfers will be the applicable license or 
agreement rather than the exemption.
    One commenter sought clarification as to how the values of 
intangibles, such as conversations involving technical data, should be 
calculated. The Department confirms that the value of every transfer 
should be calculated because transfers that exceed certain values are 
not eligible under Sec.  126.7(b)(5) and may require congressional 
certification in line with the provisions of ITAR Sec. Sec.  123.15 and 
124.11. The Department defers to exporters on the most appropriate 
formula to calculate the value of intangible transfers. When 
establishing the value of a transfer, exporters should strive for 
consistency regardless of whether a transfer will occur pursuant to a 
license, agreement, or exemption.
    One commenter sought confirmation as to whether a license is 
required if a contract was modified and the values exceeded the 
congressional certification thresholds articulated in Sec.  
126.7(b)(5). The Department confirms a license or other authorization 
would be required for exports exceeding the congressional certification 
value thresholds or involving the manufacture of significant military 
equipment abroad.
    One commenter suggested the Department provide information 
regarding the use of the Sec.  126.7 exemption and the congressional 
certification requirement pursuant to Sec.  123.15. The Department 
confirms the Sec.  126.7 exemption may not be used to

[[Page 67278]]

conduct exports that require congressional certification as described 
in Sec.  123.15.
    One commenter recommended that congressional certification values 
be calculated separately for each transfer under the exemption provided 
the transfer is not split or structured to avoid exceeding applicable 
notification dollar value limits. The Department does not dispute this 
approach.
Section 126.7(b)(6)
    One commenter recommended replacing Sec.  120.16 with Sec.  
120.16(c) in the proposed Sec.  126.7(b)(6) text. The Department 
rejects this comment, as all of Sec.  120.16 applies to the Sec.  126.7 
exemption. The same commenter suggested Sec.  126.7(b)(6) is redundant 
and the Department should consider its removal. The Department accepts 
this comment and removed this provision; however, the Department notes 
that use of the exemption still requires adherence to all applicable 
sections in the ITAR, including registration and recordkeeping 
requirements.
    Three commenters asked if part 130 reports are required with the 
proposed Sec.  126.7 exemption, how those reports should be provided to 
DDTC with no associated license application in DECCS, and whether ITAR 
exemptions in general require part 130 reporting. The Department 
clarifies that ITAR exemptions do not require part 130 reporting, as 
exemptions do not require an applicant to seek authorization from DDTC 
pursuant to Sec. Sec.  130.2 and 130.9.
    Four commenters recommended removal of the requirement to obtain 
nontransfer and use assurances through the DSP-83 form from the Sec.  
126.7 exemption and incorporation of those assurances in the authorized 
user process. The Department accepts this comment and amends Sec.  
123.10(a) with a clarification to that effect. Similarly, five 
commenters requested removal of the DSP-83 signature requirement for 
Australia and the United Kingdom, similar to how the Canadian 
government is treated. The Department accepts this comment. The 
Department notes that the Canadian government is not required to sign 
DSP-83s because the government has communicated the necessary 
assurances to the Department through other means. The UK and Australia 
governments have also provided the necessary assurances through other 
means. Two commenters recommended that Australia, the United Kingdom, 
and the United States agree to one common format for nontransfer and 
use assurances. Lastly, one commenter asked if nontransfer and use 
assurances require ink signature and original copies to be maintained 
and are electronic signatures and/or scanned copies allowed. As 
previously mentioned, the Department has incorporated the nontransfer 
and use assurances into the authorized user process. Separately, the 
Department accepts the use of electronic, digital, or wet signatures 
provided the name of the individual signing is clearly legible (e.g., 
printed below the electronic signature), and there is a date provided 
with the signature.
Section 126.7(b)(7)
    One commenter requested clarification on how Sec.  123.9(b) works 
with this exemption, particularly in the case where a recipient is 
receiving an intangible, e.g., certain technical data. The Department 
clarifies that Sec.  123.9(b) refers to tangible items only and it sets 
the requirement that the exporter must notify the end user of certain 
criteria, including the exemption citation, if an exemption is used.
Section 126.7(b)(8)
    One commenter recommended the addition of a note to Sec.  
126.7(b)(8) stating: ``NOTE: Refer to the Atomic Energy Act of 1954 for 
any transfers of Restricted Data as defined in that Act'' since the 
proposed exemption appears to imply that Restricted Data could be 
exported under the exemption. The Department acknowledges and partly 
accepts the comment. The Department deleted reference to Restricted 
Data and the Atomic Energy Act of 1954 from the regulatory text, given 
it is already referenced in Sec.  120.5(c). Because that text regarding 
Restricted Data was deleted from what was originally proposed in Sec.  
126.7(b)(8), there is no need for the clarifying note. Relatedly, the 
Department takes this opportunity to remind the public that the ITAR 
exemption does not authorize permanent imports of defense articles and 
defense services described on the U.S. Munitions Import List (USMIL). 
Regulations pertaining to permanent imports are administered by the 
Bureau of Alcohol, Tobacco, Firearms, and Explosives and are found at 
27 CFR part 447.
    One commenter asked if Sec.  126.7(b)(8) was necessary to include 
in the exemption given the handling of classified materials are subject 
to other laws, and it should be a note to paragraph (b) rather than a 
limitation or requirement, especially since it is not specified by AECA 
section 38(l)(4). The Department accepts this comment and amends the 
regulatory text with the addition of a note to paragraph (b).

ITAR Sec.  126.15: Expedited Processing of License Applications for the 
Export of Defense Articles and Defense Services to Australia, the 
United Kingdom, or Canada

Section 126.15(c)
    Two commenters recommended revision and expansion of the expedited 
license process to include the armed forces of Australia, the United 
Kingdom, or the United States acting in their official capacity outside 
the physical territory of the countries and to entities deployed in 
support of the armed forces of Australia, the United Kingdom, or the 
United States acting in their official capacity. Further, the 
commenters suggested the term ``corporate entities'' in the proposed 
Sec.  126.15(c) is confusing, leading one commenter to recommend 
replacing that term with ``person'' as defined in Sec.  120.61. This 
would, the commenter suggested, clarify that natural persons and 
academia qualify for expedited licensing too. The Department declines 
to accept the comment to expedite the license processing timelines for 
exports to members of the armed forces of Australia, the United 
Kingdom, or the United States and entities that support those armed 
forces while deployed outside the physical territories of these 
countries. That would expand the expedited licensing application 
processing timelines beyond that which Congress required. Moreover, the 
ability for a country's armed forces to take defense articles to third 
countries is the subject of a different rulemaking (87 FR 77046, Dec. 
16, 2022) (proposed) and FR Doc. 2024-18249, scheduled to publish on 
August 15, 2024 (RIN 1400-AF26). However, the Department does accept 
the recommendation to replace ``corporate entities'' with ``person'' in 
Sec.  126.15(c).
    Four commenters recommended expanding the expedited licensing 
process beyond exports to also include reexports, retransfers, and 
temporary imports of defense articles; the performance of defense 
services; and brokering to, among or within Australia, the United 
Kingdom, Canada, or the United States. The Department appreciates the 
comment but declines to expand the scope of Sec.  126.15(c) as it 
implements the provisions of section 1344 of NDAA for Fiscal Year 2024, 
which require the Department to expedite export license applications 
and do not extend to reexports, retransfers, brokering, or temporary 
import requests.
    Three commenters recommended the Department create a policy of 
``presumption of approval'' in Sec.  126.15 for all AUKUS-related 
applications;

[[Page 67279]]

where the ultimate end user is the Government of Australia or the 
Government of the United Kingdom and where all parties to the 
transaction, with the exception of freight forwarders and brokers, are 
incorporated in the United States, United Kingdom, Canada, New Zealand, 
or Australia who have previously received a DDTC approval for the same 
articles. The Department acknowledges this comment; however, it is 
outside the scope of the rulemaking. The Department is implementing the 
provisions of section 1344 of NDAA for Fiscal Year 2024. Three 
commenters suggested the Department make public how it intends to 
facilitate the expedited licensing process, including the U.S. 
Government's adjudication timeframes. Further, one commenter 
recommended the Department update its licensing guidelines, including 
the Agreement Guidelines, with standardized language to easily identify 
which applications meet the expedited licensing criteria. Two 
commenters suggested that DDTC create a dedicated, internal AUKUS 
coordination office. The Department declines to publish detailed 
information about the deliberative license adjudication process. 
Further, the Department notes it is not necessary to update the 
Agreements Guidelines to identify license applications that qualify for 
expedited treatment under Sec.  126.15 as the Agreements Guidelines and 
other licensing instructions already require submission of any 
information necessary to determine whether Sec.  126.15 applies to a 
specific submission. The Department also can confirm that National 
Security Presidential Directive-56 has already established defined 
timeframes for U.S. Government adjudication of all license requests, 
including those licenses that involve Australia, the United Kingdom, 
and Canada. Adherence to those existing timeframes will enable the 
expedited processing of license applications consistent with Sec.  
126.15. Lastly, the Department notes the recommendation to establish a 
AUKUS coordination office is outside the scope of this rulemaking.
    Another commenter recommended that DDTC provide standardized 
provisos for these expedited license applications to alleviate 
uncertainty on the scope of activities, technical exchanges, and 
defense services that are authorized. The Department appreciates the 
comment; however, the Department has endeavored to create the Sec.  
126.7 exemption with the broadest possible applicability and 
predictability. The transfers that cannot be undertaken pursuant to the 
exemption at Sec.  126.7 or another exemption within the ITAR are 
likely to be more unique transfers that may not lend themselves to 
standard provisos. To the extent the commenter is encouraging the 
Department to standardize provisos more generally, the Department 
recognizes the value in that line of effort and is already undertaking 
steps to ensure provisos are applied more consistently on licenses in 
the future.
    Another commenter recommended that AUKUS-related licenses be free 
of provisos and conditions. The Department notes a commitment by DDTC 
to expedite the licensing review timeline should not be confused with a 
commitment by DDTC to approve the scope and content of all license 
requests for Australia, the UK, or Canada. The Department is still 
required to vet license applications for foreign policy and national 
security considerations. This requires vetting individual parties on 
license applications to assess risks of diversion and to ensure 
proposed exports are consistent with the United States's multilateral 
regime commitments, including those articulated in the Missile 
Technology Control Regime (MTCR). Occasionally, that vetting will 
require DDTC to include provisos or conditions when approving a 
license.
    Four commenters recommended that AUKUS-related license applications 
not be staffed to the interagency for review when they are ``in 
furtherance of'' (IFO) licenses, or licenses that require congressional 
certification. Additionally, one commenter stated that licenses that do 
require congressional certification should be subject to a shorter 
processing period, for example, less than five business days. These 
commenters suggest that those applications, including relevant IFO 
licenses, were already reviewed when the existing agreement was 
adjudicated and as part of the congressional certification process. 
Another commenter suggested removing the current increase in value 
thresholds or scope expansions that prompt re-notification of 
previously notified programs. The Department notes these comments are 
outside the scope of the rulemaking as they offer recommendations 
regarding the Department's internal deliberative process for 
adjudicating licenses and not the previously proposed regulatory text. 
However, the Department takes this opportunity to note that the types 
of license applications that trigger congressional certification 
thresholds or involve the manufacture of SME abroad are generally the 
types of cases that warrant case-by-case review and consideration. As a 
result, it would not be appropriate to short-circuit the interagency 
staffing process for these cases or to mandate that they be notified to 
Congress in five business days or less. Furthermore, the Department has 
a long-standing arrangement and practice with Congress regarding the 
timeframe afforded for informal congressional review of license 
applications prior to formal certification. These suggestions would be 
inconsistent with that long-standing expectation and practice.
    One commenter questioned whether anything should be notated in a 
license application submission to make it eligible for expedited 
review. The Department notes applicants are encouraged to submit any 
information that they believe would help facilitate an expeditious and 
streamlined review by the Department. Additionally, license application 
submissions are regularly reviewed to identify cases that qualify for 
expedited processing consistent with the provisions of Sec.  126.15.
    Two commenters requested retention of the ability to make licensing 
requests from Australia and the United Kingdom to the Department 
directly because U.S. exporters, at times, are no longer available to 
submit a reexport or retransfer authorization request. The Department 
confirms that Australian and UK companies are free to submit reexport 
and retransfer requests. To the extent that such requests by Australian 
and UK companies are intended to change the scope of existing active 
agreement, those amendments should be submitted by the U.S. exporter in 
order to ensure that the Department has a single record and 
authorization of the full scope of activities necessary to support a 
given line of effort. This is necessary, among other reasons, to ensure 
that the Department complies with applicable congressional 
certification requirements under 22 U.S.C. 2776.
    One commenter requested confirmation that a UK company could rely 
on Sec.  126.15(a) for expedited processing of a license application. 
The Department notes that the expedited licensing procedures outlined 
in Sec.  126.15 apply to export licenses, not licenses for reexports, 
retransfers, or temporary imports. Because foreign companies are not 
permitted to submit export license applications under 22 U.S.C. 
2778(g)(5), a UK company would not be able to request expedited 
processing under Sec.  126.15. The same commenter inquired if there 
could be expedited processing for General Correspondence requests. The 
Department notes that the NDAA for

[[Page 67280]]

Fiscal Year 2024 requirements being implemented by this section apply 
to export licenses, not reexport or retransfer authorizations. The 
Department, therefore, will not commit to expediting such requests in 
this section of the ITAR but will continue to process them as 
appropriate.
Section 126.15(d)
    Five commenters recommended the Department clarify whether 
Memorandums of Understanding (MOUs) and Foreign Military Sales (FMS) 
benefit from the expedited licensing process described in Sec.  
126.15(d). Expedited licensing is not applicable to MOUs or FMS cases 
as the ITAR only regulates direct commercial sales (DCS) and does not 
govern the government-to-government process for concluding MOUs or 
Letter of Offer and Acceptances (LOAs) for FMS cases.
    Further, two commenters asserted that expedited processing is 
reserved for license applications ``that are not covered'' by an ITAR 
exemption; however, the proposed rule stated, ``describing an export 
that cannot be undertaken under an exemption'' and recommends the 
provision be modified by replacing ``cannot be undertaken'' with ``is 
not covered.'' The Department declines to accept this recommendation 
because the Department assesses that the phrases ``cannot be undertaken 
under an exemption'' and ``is not covered by an exemption'' would apply 
equally to the scenarios presented by the commenters. In particular, if 
the U.S. Government has declined to take some step that is necessary 
for an exporter to rely on any exemption within the ITAR for a proposed 
export, that proposed export cannot be undertaken under an exemption 
and is not covered by an exemption.
    One commenter recommended additional resources be committed to 
support the expedited licensing process because historically the 
proposed timeframes proposed in Sec.  126.15(d) have not materialized. 
The Department disagrees, as data collected on license processing 
timelines does not support the commenter's statement. The same 
commenter also recommended the Department include in the annual report 
required by section 1344 of the NDAA for Fiscal Year 2024 a 
certification that the expedited timelines have been satisfied. This 
comment is outside of the scope of this rulemaking and section 1344 of 
the NDAA does not have an annual report requirement. The Department 
believes that the commenter may have meant to refer to section 1341 of 
the NDAA, which does require a related annual report. When preparing 
and submitting the report required by 22 U.S.C. 10411(e) (the location 
to which section 1341 of the NDAA for Fiscal Year 2024 was classified) 
the Department will include all required information.
    Three commenters noted the expedited licensing timeframes proposed 
in this provision could result in cases being returned without action 
(RWA) if an agency is not ready to position the case and provide a 
response back to the DDTC within 30 or 45 days. Similarly, another 
commenter suggested the Department implement a process to hold a 
license for a specified period of time to permit minor changes and 
adjustments to a license that would otherwise be returned without 
action. The Department accepts these comments and amends Sec.  
126.15(d) with the qualifying phrase ``to the extent practicable'' in 
order to better reflect the statutory NDAA language in section 1344(c) 
(classified to 22 U.S.C. 10423(c)) to expedite certain applications and 
avoid unnecessary and burdensome RWAs when adjudication in the 30- or 
45-day timeframe is not practicable.
    Three commenters suggested the inclusion of a provision stipulating 
the automatic approval of licenses exceeding the 45-day review period 
and to identify which USML categories should trigger staffing to 
certain intra- and interagency offices/agencies that participate in the 
licensing review process, including the Defense Technology Security 
Administration (DTSA) for AUKUS-related cases instead of staffing all 
license requests to these offices/agencies. The Department declines to 
accept the recommendation to automatically approve licenses after 45 
days. A commitment by the Department to expedite the license is not a 
commitment by the Department to approve all license requests for 
Australia, the United Kingdom, or Canada. The Department is still 
required to vet license applications for foreign policy and national 
security considerations. This requires vetting individual parties on 
license applications to assess risks of diversion and to ensure propose 
exports are consistent with the United States's multilateral regime 
commitments, including those articulated in MTCR. Additionally, 
recommendations regarding the policies and procedures the Department 
and the interagency apply to the deliberative process of reviewing 
individual license applications are outside the scope of this 
rulemaking.
    One commenter sought clarification as to what constitutes a 
government-to-government agreement and how would the regulated 
community know if a government-to-government agreement exists. A 
government-to-government agreement is used to authorize Foreign 
Military Sales (FMS), coproduction agreements, or other authorizations 
between governments to export defense articles and defense services 
outside of the ITAR or direct commercial sales (DCS) framework. Parties 
to exports that are related to such agreements would have such 
information from their company or contractor and would identify it on 
their license applications to qualify for the expedited process.
    Two commenters suggested the Department provide expectations 
regarding the Department of Defense's Technology Security & Foreign 
Disclosure (TSFD) review process and Low Observable and/or Counter Low 
Observable (LO/CLO) review process and mandate that interagency review 
for AUKUS applications include expedited TSFD and LO/CLO approvals to 
ensure meeting the statutory timelines. The Department notes that the 
comment is outside the scope of the rulemaking as it offers recommended 
changes to the U.S. Government's internal deliberative process. The 
Department has, however, relayed this comment to the Department of 
Defense.
    One commenter asked how AUKUS-related licenses would be identified 
to be subject to expedited licensing; requested Canada be included for 
expedited licensing; inquired if other countries will be considered for 
expedited licensing aside from those listed in Sec.  126.15(c) and (d); 
and suggested to update DDTC's Agreement Guidelines to enable the quick 
identification of licenses subject to expedited processing. The 
Department notes that all export license applications meeting the 
requirements of Sec.  126.15(d) are subject to expedited review, not 
just those in support of AUKUS-related programs. Additionally, licenses 
that include parties from countries other than those listed in Sec.  
126.15(c) and (d) will not benefit from the expedited license 
processing timelines. Lastly, the Department confirms that Canada was 
already included in the proposed Sec.  126.15(c) and (d) text as 
section 1344 of the NDAA for Fiscal Year 2024 applies to applications 
to export to Australia, the United Kingdom, and Canada.
    The same commenter recommended the inclusion of technical data in 
Sec.  126.15(d) and a stipulation that any license application that is 
returned or denied must be done so within 14 days of receipt with an 
explanation for the return or denial, with an opportunity for the 
applicant to resubmit if the reason

[[Page 67281]]

for return or denial can be addressed. The Department declines to 
accept these suggestions as it is not possible to guarantee that all 
license applications will be returned or denied within 14 days of 
receipt because DDTC is not always able to determine within 14 days how 
a specific license will be adjudicated. The Department is committed to 
expediting export license applications for Australia, the UK, and 
Canada to the greatest extent possible and to meeting 30- and 45-day 
processing timelines for those applications. It is not currently 
possible to shorten that timeframe to 14 days. Additionally, the 
Department will not add the term ``technical data'' to this provision 
as ``technical data'' is already covered by the term ``defense 
article,'' as defined in Sec.  120.31.
    One commenter requested the term ``review'' be replaced with 
``approved, returned, or denied'' in Sec.  126.15(d) to ensure final 
adjudications of a license applications are provided to the applicant 
within the 45-calendar day timeframe. The Department declines to accept 
this comment as the proposed text already states ``. . . any review 
shall be completed no later than 45 calendar days . . . ,'' which is 
the equivalent of the proposed change.

ITAR Sec.  126.18: Exemptions Regarding Intracompany, Intra-
Organization, and Intragovernmental Transfers to Employees Who Are Dual 
Nationals or Third-Country Nationals

Section 126.18(e)
    Three commenters asked if a dual national with Australian 
citizenship who was born in a Sec.  126.1 country, who holds an 
Australian security clearance and works for a U.S. or Australian 
company, can have classified technical data under this exemption. The 
Department notes if the criteria in Sec.  126.18(e) are met then no 
additional authorization is required and the dual national can receive 
classified technical data. Similarly, another commenter requested the 
U.S. Government provide details regarding multilateral efforts to 
ensure personnel and facilities' security clearance processes in all 
three countries can support the final implementation of the proposed 
exemption. The Department notes this comment is outside the scope of 
this rulemaking.
    Three commenters wanted clarification as to several aspects of the 
Sec.  126.18(e) exemption: if this exemption is only available for use 
in relation to the Sec.  126.7 exemption, or if one can just be an 
authorized user; if Sec.  126.18(e) can be used with existing ITAR 
agreements that involve classified technical data; if Sec.  126.18(e) 
can be used for FMS transfers and MOU/Cooperative Armament Programs; if 
Sec.  126.18(e) can be used by contractors who are not ``regular 
employees'' as defined in Sec.  120.64; whether one needs approval from 
a U.S. original equipment manufacturer (OEM) to use the exemption; and 
if there are provisos in an existing DDTC authorization, whether this 
exemption supersedes those provisos. The Department notes the Sec.  
126.18(e) provision is not just available for use in relation to the 
Sec.  126.7 exemption and can be used with existing ITAR agreements 
provided the terms of the provision are met. Further, for clarity, the 
Department amends Sec.  126.18(e) by replacing ``transfer'' with 
``reexport'' and ``retransfer.'' The exemptions within the ITAR are not 
applicable to FMS cases or MOU/Cooperative Armament Programs (unless 
the MOU/Cooperative Armament Programs are executed under the 
authorities of the ITAR). The Department notes the exemption cannot be 
used by contractors that are not regular employees and suggests 
reviewing the definition of ``regular employee'' in Sec.  120.64. The 
Department further notes ITAR exemptions are self-certifying, so no 
additional approval is needed from a U.S. OEM to utilize this provision 
of the ITAR; however, this exemption does not supersede any existing 
provisos placed on authorizations issued by DDTC. To the extent an 
exporter chooses to rely on a particular export authorization to 
conduct a transfer, including exemptions, the provisos, conditions, and 
limitations that were applied to that authorization continue to govern 
the transfer.
    Two commenters wanted confirmation that Sec.  126.18(e) was not 
limited by the ETL and requested that ``regular employee'' be removed 
from this provision. The Department declines to accept the comment to 
remove ``regular employee'' from this provision and notes that Sec.  
126.18(e) is not limited by the ETL.
    Finally, in light of the comments received about this subsection, 
the Department made certain clarifying but minor and non-substantive 
changes to its phrasing and presentation.
Section 126.18(e)(1)
    One commenter wanted clarification that ``dual nationals of another 
country'' in Sec.  126.18(e)(1) includes Sec.  126.1 countries. The 
Department acknowledges this comment and notes Sec.  126.1(a) is 
amended by this rule to include Sec.  126.18(e).
    One commenter sought clarification regarding whether Sec.  
126.18(e)(1) applies to third-country nationals, and if not, what 
authorization is needed to receive classified defense articles. The 
Department confirms that this provision only applies to dual nationals 
and not third-country nationals. There are other provisions within 
Sec.  126.18 that apply to third-country nationals for transfers of 
unclassified defense articles; however, to transfer classified 
technical data to third-country nationals, separate DDTC authorization 
would be required.
Section 126.18(e)(2)
    Two commenters recommended the removal of the criteria of ``regular 
employees of an authorized user of the exemption in Sec.  126.7'' as 
the individuals are still required to hold a security clearance under 
the Sec.  126.18(e) exemption and limiting the criteria to an 
individual being a regular employee of an authorized user provides no 
additional assurances for the Department. Similarly, another commenter 
requested clarification on what constitutes a regular employee. The 
Department declines to accept the comment to remove ``regular 
employee'' from Sec.  126.18(e) as previously mentioned and clarifies 
that ``regular employee'' is defined in Sec.  120.64.
Section 126.18(e)(4)
    One commenter asked if UK and Australian militaries can take 
defense articles transferred under the Sec.  126.18 exemption outside 
their physical territories while on deployment in other countries. The 
Department clarifies that this provision is only applicable to dual 
nationals and one must meet all other criteria in Sec.  126.18(e) 
before it may be used, but the Department confirms that military 
members acting in their official capacity can transfer classified 
defense articles to dual nationals who are citizens of Australia and 
the United Kingdom. Of note, this provision is only for classified 
defense articles and not for unclassified defense articles. For either 
unclassified or classified defense articles, this comment is the 
subject of a separate rulemaking (87 FR 77046, Dec. 16, 2022) 
(proposed) and FR Doc. 2024-18249, scheduled to publish on August 15, 
2024 (RIN 1400-AF26).

Supplement No. 2 to Part 126--Excluded Technology List

General Comments on the ETL
    Several commenters requested that the Department reduce the overall 
size of the ETL to facilitate AUKUS Pillar II objectives and that the 
list of exclusions be defined as narrowly as possible,

[[Page 67282]]

including limiting the list to those articles required by law or 
critical to national security and citing the relevant USML entries as 
specifically as possible. The Department's initial development of the 
ETL included a detailed review of statutory obligations, coordination 
with its Australian and UK partners, and coordination across the U.S. 
Government to ensure exclusion of only those technologies required by 
statute or otherwise determined to require continued licensing review 
for national security reasons. The Department, in coordination with the 
Department of Defense, has now reviewed concerns raised in the public 
comments regarding the need to update the list of exclusions as 
described in this rule and has made reductions in the scope of 
exclusions. The exclusions represent the technologies that require 
continued--and now expedited--licensing review for statutory or 
national security reasons.
    Two commenters noted that the proposed ETL was in some ways more 
restrictive than the Canadian exemptions in Sec.  126.5 and recommended 
that the ETL not be more restrictive than that exemption. The 
Department, in coordination with the Department of Defense, reviewed 
the ETL in light of this concern. The Department has removed the entry 
restricting certain source code. Further, the Department notes that the 
ETL's exclusion of classified Category XIII(b) articles and classified 
cryptographic devices is not more restrictive than the Canadian 
exemptions, which is limited to unclassified articles. The Department 
declines to remove the other ETL entries highlighted by the commenters 
because they are based on legal requirements or other policy factors.
    One commenter suggested carving out certain DoD programs, such as 
the F-35 aircraft program, from the exclusions in the ETL because those 
programs are already subject to significant U.S. Government involvement 
and oversight. The Department declines to adopt this suggestion, as the 
license review process is an important mechanism for such oversight and 
the excluded technologies have been identified as warranting continued 
license review.
    Several commenters requested guidance on how to read the ETL. For 
example, one commenter asked if technical data and defense services 
excluded by the ETL row for USML Categories XIV(a), (b), (c)(5), 
(f)(1), (i), and (m) are limited to technical data and defense services 
directly related to articles described in the other specified 
paragraphs. The Department affirms that this row excludes Category 
XIV(m) technical data and defense services directly related to articles 
described in paragraph (a), (b), (c)(5), (f)(1), or (i) of Category 
XIV. It does not affect the availability of the Sec.  126.7 exemption 
for other Category XIV(m) technical data and defense services, such as 
those directly related only to articles described in Category 
XIV(f)(2).
    The Department also offers the following example of how to utilize 
the ETL. This example considers the use of the Sec.  126.7 exemption to 
export a part that (1) is classified, (2) is described only in USML 
Category XI(c)(18), (3) is specially designed for a radio described in 
USML Category XI(a)(5)(iii), (4) does not have anti-tamper features, 
and (5) does not implement countermeasures or counter-countermeasures. 
To review the requirement in Sec.  126.7(b)(3) that the part not be 
identified on the ETL as ineligible for transfer, first review each row 
of the ETL to determine which entries include USML Category XI(c)(18) 
in the first column. Second, for each of those entries that include 
USML Category XI(c)(18) in the first column, determine whether the 
second column of the entry excludes the part specific article. In this 
example, only five ETL entries include USML Category XI(c)(18) in the 
first column. If none of those five ETL entries identifies the part, 
then this example part is not excluded by the ETL:
     The first three applicable entries don't apply, as the 
part does not have an ``MT'' designation in paragraph (c)(18), is not 
an article with anti-tamper features, and is designed for a radio (not 
a cluster munition).
     The next applicable entry begins with ``XI(a)(5)(iii).'' 
If the part is specially designed for a classified radio described in 
USML Category XI(a)(5)(iii), then it is described by the second clause 
in the second column (``classified articles specially designed [for] 
classified articles described in USML Category XI(a)(5)(iii)'') and 
thus is excluded by this entry. In that case, the review stops, as it 
is excluded by at least one entry on the ETL.
     The last applicable entry, for ``XI(c) and (d),'' would 
not apply, as the part is specially designed for a radio described in 
XI(a)(5)(iii)--and is thus not described in the second column of this 
entry.
    One commenter suggested improving the readability of the ETL by 
including the full names of the USML Categories and the full text of 
excluded USML entries in the ETL entries. The Department to declines to 
adopt this suggestion. The Department refers to USML Category numbers 
and entries in the ETL to keep the text concise and to require fewer 
updates when USML language may be revised in the future. Furthermore, 
to assess whether a defense article or defense service is described in 
a USML entry, it is often necessary to view the USML entry noted in the 
ETL in the context of other USML entries and applicable notes and 
definitions. Therefore, the Department declined to fully reproduce USML 
text in the ETL entries, to simplify interpretation and clearly 
identify instances wherein the scope of a USML entry and an ETL entry 
are the same.
    Several commenters noted difficulty understanding various 
terminology used in the ETL. Some terminology referenced by commenters 
is defined in ITAR part 120 (e.g., ``commodity'' and ``specially 
designed''). While the ITAR does not define ``directly related,'' this 
term has been used throughout the USML for decades and is implemented 
daily by the regulated community. However, the entry excluding certain 
underwater equipment has been updated to use the term ``specially 
designed'' instead of ``directly related'' in relation to specially 
designed articles. Similarly, the entry for USML Category XX(d) has 
been revised to refer to articles ``used only in,'' rather than 
``directly related to,'' classified payloads and classified underwater 
unmanned vehicle signature reduction techniques. Commenters also 
recommended that, to improve clarity, the ETL should refer only to 
specific USML subentries instead of broader categories. For most ETL 
entries, the Department referenced USML entries and terms defined in 
the ITAR instead of using novel regulatory language. However, in some 
entries, it was necessary to use terminology not defined in the ITAR 
(e.g., ``cluster munitions'') to more narrowly specify an exclusion not 
coextensive with the related USML entries.
    One commenter asserted that using the term ``article'' instead of 
``hardware'' or ``defense article'' is ``undefined, unclear, and/or 
subjective,'' and that doing so unintentionally expands the scope of 
the ETL. The Department disagrees and retains the term ``article'' as a 
more concise equivalent for ``defense article'' in this context. 
Specifically, as only defense articles are described on the USML and 
the ETL, and all defense articles are articles (by definition), all ETL 
entries referring to ``articles'' refer to all ``defense articles'' 
otherwise described by the ETL entry.
    A commenter also asked whether it may use the Sec.  126.7 exemption 
for programs that involve defense articles eligible for the exemption 
and other defense articles identified on the ETL as ineligible for the 
exemption. Articles

[[Page 67283]]

and services identified on the ETL are not eligible for export under 
the exemption, regardless of whether they are packaged with eligible 
articles. Provided that all other conditions of the Sec.  126.7 
exemption are met, an exporter may use the exemption for the articles 
not described on the ETL but must obtain a license or an authorization 
other than the Sec.  126.7 exemption for articles identified on the 
ETL.
    One commenter asked whether articles in USML Categories XI and XII 
are excluded from export when packaged as spares or kits for larger 
assemblies or end items. Unless otherwise specified in the relevant ETL 
entry (e.g., the anti-tamper entry), the Department confirms excluded 
articles are ineligible for use of the Sec.  126.7 exemption, 
irrespective of whether those articles are shipped individually, 
packaged with other articles, or already incorporated and integrated 
into a larger assembly. For example, a classified article described in 
Category XI(b) is ineligible for the exemption, either as a spare or 
when installed in an aircraft.
    Several commenters encouraged the Department to work with its AUKUS 
partners to implement consistent lists of excluded articles and 
services. The Department appreciates these comments and anticipates 
continued efforts by all three nations to harmonize the lists to the 
extent feasible and consistent with national legislation and notes that 
there will still be nuanced differences in definitions and regulatory 
structures between Australia, the United Kingdom, and the United 
States.
    One commenter suggested the creation of a single table of excluded 
technologies with the applicable categories from the USML and the 
Australian and United Kingdom munitions lists. The Department 
acknowledges this comment but declines to adopt this recommendation. 
Though consistency across the three nations' exclusion lists is 
desirable, the lists do not perfectly align, and each partner must 
maintain its own list to account for separate national legal and policy 
requirements and to remain agile in adapting to revisions to its own 
national regulations.
    Several commenters requested that the Department implement a 
process to confirm for exporters whether a particular defense article 
or defense service is identified on the ETL. The Department declines to 
accept this request, as exporters must conduct a case-by-case review to 
validate whether all requirements to use an exemption have been 
satisfied. The Department does not provide exemption validation as 
exporters are best positioned to make their own determination based on 
the particular conditions associated with any controlled event, to 
include exports. The Department notes the advisory opinion process 
described in Sec.  120.22(c) is available to request an interpretation 
of the language used in the ETL, but not whether a specific technology 
is described.
    Two commenters suggested renaming the ETL to ``Excluded Defense 
Article List.'' The Department declines this suggestion and notes the 
list applies not only to defense articles, but also to defense 
services, and novice exporters could misinterpret ``defense articles'' 
as applying only to hardware.
    Two commenters requested that the Department publish the rationale 
for each exclusion in the ETL, which the Department declines to do. 
Some ETL entries are required by law, while others are based on policy 
assessments that involve ongoing internal deliberative processes. The 
Department notes it continues to discuss iterative improvements to the 
ETL with its interagency and AUKUS partners.
    One commenter asked if articles will be removed from the ETL 
automatically as they are removed from the Wassenaar Arrangement 
Munitions List or the MTCR Annex. The Department notes the ETL will 
only be updated by established rulemaking processes. The ETL will 
remain as specified in supplement no. 2 to part 126 until modified by 
the Department.
    The same commenter requested a 90-day prior notice to removal of 
items from the ETL to allow industry to secure alternate authorizations 
(DSP-5, TAA, etc.). The Department declines to do so because removing 
something from the ETL does not impose additional licensing 
requirements. Rather, items described in any ETL entry are not eligible 
for the exemption provided at Sec.  126.7, while items not described in 
any ETL entry may be transferred without additional licensing provided 
the other requirements of Sec.  126.7 are met.
    The same commenter also asked what criteria are used to determine 
inclusion or exclusion of items on the ETL. The Department declines to 
provide specific criteria, noting that some ETL entries are required by 
law, while others are based on policy assessments that consider a 
variety of factors.
Missile Technology Control Regime
    Several commenters noted the Department of Commerce does not 
require a license for many exports of MTCR-controlled articles to 
Australia and the United Kingdom. In contrast, most MT-designated 
articles on the USML continue to require a license. The Department 
notes there is no requirement for the Departments of State and Commerce 
to perfectly align their licensing requirements, as the agencies derive 
their authorities and mandates from separate sources and regulate 
technologies of differing importance to U.S. national security and 
foreign policy interests.
    Several commenters noted that the MTCR entry on the ETL is broader 
than required by law, with one recommending the Department use the 
language from the MTCR and AECA instead. The Department declines to 
rely on the regulated community to interpret elements of the AECA and 
MTCR, including the term ``for use in rocket systems.'' The Department 
has not included USML entries with an ``MT'' designation in the MTCR 
entry on the ETL when the USML entry (1) does not include MTCR Category 
I commodities and (2) does not include MTCR Category II commodities for 
use in rockets. USML Category XIX is an example from the proposed rule. 
In this interim final rule, the Department also removes the ETL 
exclusion for MT-designated articles described in paragraph (h)(12) of 
Category VIII, as the defense articles described therein are 
demonstrably for use in UAVs, not rockets (flight control systems for 
rockets are described in paragraph (h)(1) of Category IV and remain 
excluded). The Department appreciates the intent of these comments and 
is reviewing other ways to facilitate collaboration on MTCR 
technologies among and between Australia, the United Kingdom, and the 
United States.
    Similarly, two commenters observed the MTCR entry on the USML 
treats USML Category IV propulsion differently than Category XIX, 
asserting technologies excluded from one category but not the other 
will introduce conflicts and recommending removal of Category IV 
propulsion from the ETL. Another commenter asked why MT-designated 
articles in Category XIX are not excluded. The Department notes this 
was intentional, as engines described in USML Category XIX are 
generally not for use in rocket systems (including ballistic missiles, 
space launch vehicles, and sounding rockets, while excluding cruise 
missiles, target drones, and reconnaissance drones), and therefore are 
not excluded. Engines described in USML Category IV with an MT 
designation are excluded from eligibility due to their use in rocket 
systems.
    One commenter recommended the Department ``declare a general policy 
exception for MT cooperation'' with

[[Page 67284]]

Australia and the United Kingdom, and another suggested clearing 
specific programs that involve the transfer of MT-designated defense 
articles. The Department acknowledges these comments; however, policies 
of this nature are outside the scope of this rulemaking.
    One commenter asserted the distinction between hypersonic kinetic 
energy weapons and MT-designated defense articles is unclear and 
requested clarification that hypersonic systems are not excluded from 
the Sec.  126.7 exemption. The Department declines this request as 
beyond the scope of the current rulemaking. The ETL specifies excluded 
technologies based upon their USML categories, and a case-by-case 
review is necessary to assess whether, and in which USML paragraph(s), 
any particular hypersonic system is described on the USML. Multiple 
USML paragraphs may describe a given commodity, and the commodity 
jurisdiction process described in Sec.  120.12 is available for 
resolving doubt with regard to the jurisdiction and classification of a 
particular defense article or defense service.
    One commenter suggested limiting the MTCR exclusion to classified 
articles or creating a separate exemption for MTCR commodities. The 
Department declines to limit the MTCR exclusion to classified articles, 
as the underlying reasons for the ETL exclusion, including 22 U.S.C. 
2778(j)(1)(C)(ii)(I) through (III), are not limited to classified 
articles. A separate exemption for MTCR commodities is outside the 
scope of this rulemaking.
Anti-Tamper
    Several commenters asked the Department to define ``anti-tamper'' 
and ``readily identifiable'' as used in the anti-tamper exclusion. 
Following consultations with DoD, the Department has clarified the 
exclusion, which is intended to apply to articles developed in 
accordance with a DoD Program Protection Plan. Companies that implement 
anti-tamper methodologies to protect DoD Critical Program Information 
are well versed in this area. The Department has also deleted the term 
``readily identifiable'' from the entry. The Department confirms that 
the anti-tamper exclusion does not apply to commodities protected by 
incorporated anti-tamper mechanisms but not otherwise listed on the 
ETL. For these reasons, the Department declines to define ``anti-
tamper.''
    One commenter asked where anti-tamper articles are described on the 
USML. Such articles may be described in multiple USML entries, 
depending upon their characteristics and functions, and commonly in 
catch-all controls. The exclusion applies to all anti-tamper articles 
described on the ETL, regardless of which USML entry describes them.
Source Code
    Five commenters requested removal, limitation, or clarification of 
the ETL entry that excluded certain source code. Commenters noted the 
necessity of source code for co-development and integration efforts, 
and they noted certain inconsistencies with the Canadian exemption. The 
Department accepts these comments and, after interagency consultation, 
deletes that entry from the ETL, as well as the entry that excluded 
source code pertaining to certain night vision commodities in USML 
Category XII.
Manufacturing Know-How
    Commenters recommended removing the exclusion of certain 
manufacturing know-how in USML Categories II(k), III(e), IV(i), X(e), 
and XIX(g), particularly with regard to hypersonic weapons capabilities 
and kinetic energy weapons. The Department concurs that some 
manufacturing know-how is critical to the success of AUKUS Pillar II 
objectives concerning hypersonics. However, the specific technologies 
excluded by the ETL have been identified, following consultations with 
DoD, as warranting continued licensing review.
    One commenter asserted that the exclusion of USML Category XIX 
manufacturing know-how is overly restrictive. The Department disagrees 
with the commenter's assessment that manufacturing know-how for 
Category XIX engines is ``relatively low-level technology.'' Following 
consultations with the Department of Defense, the Department of State 
confirms that the technology in question continues to require exclusion 
from the exemption for national security reasons and the Department 
declines to modify the exclusion of manufacturing know-how for Category 
XIX articles.
    Several commenters requested the Department remove the exclusion of 
classified manufacturing know-how for articles described in USML 
Categories XI(a)(3) or (4), or XII(d). Commenters asserted these 
exclusions would impede AUKUS goals with regard to electronic warfare 
(EW) and other collaborative efforts such as position, navigation, and 
timing (PNT) capabilities. The Department has removed this exclusion, 
while noting the remaining ETL entries (such as the MTCR exclusion and 
the exclusion pertaining to Category XI) may continue to restrict use 
of the exemption for some of these systems.
USML Category II
    Four commenters requested clarification or removal of the ETL entry 
for USML Category II(j)(9) through (11) and (k). The Department 
clarifies that this ETL entry exists to ensure that articles described 
in Category II(j)(9) through (11), and directly related technical data 
and defense services, are not transferred under the Sec.  126.7 
exemption unless they are elements of armaments, weapons, or military 
platforms. This ETL entry does not affect the use of the Sec.  126.7 
exemption for articles designed for integration into, or incorporated 
as elements of, platforms such as military aircraft, or technical data 
and defense services directly related to such articles.
    One commenter requested clarification for USML Category II(j) and 
referred to ``difficulties carving out items in [USML Categories] XI 
and XII.'' The Department cannot respond because it does not understand 
this comment.
USML Category IV
    Multiple commenters requested the Department further limit the ETL 
scope when able. Consistent with that request, the Department further 
revised one ETL entry to continue to exclude launchers for MANPADS 
described in USML Category IV(b)(2), while removing the exclusion of 
other articles described in Category IV(b)(2).
Naval Nuclear Propulsion
    One commenter objected to the ETL excluding articles described in 
USML Category VI(e) or (f)(5) and Category XX, asserting that excluding 
support for nuclear propulsion may be ``counter to the whole purpose of 
AUKUS.'' The Department disagrees and notes naval nuclear propulsion 
capabilities must be transferred pursuant to a mutual defense agreement 
such as the one required for AUKUS Pillar I. Such agreements are 
described in sections 91(c), 123, and 144(c) of the Atomic Energy Act 
of 1954 (AEA) (42 U.S.C. 2121(c), 2153, 2143(c)), as well as section 
1352(d)(3) of the 2024 NDAA (22 U.S.C. 10431(d)(3)).
    One commenter suggested the establishment of a new Naval Nuclear 
Propulsion Plant Information (NNPI) agreement between the United 
States, Australia, and the United Kingdom. Another commenter proposed a 
secure data management program to enable the safe and secure sharing of 
submarine data, including NNPI and Alternate and Compensatory Control 
Measures (ACCM). The Department acknowledges

[[Page 67285]]

these comments; however, they are outside the scope of the rulemaking.
    One commenter opined that the ``boundaries'' defining naval nuclear 
propulsion items require further clarification because such items may 
be interconnected with the overall operation and maintenance of 
military vessels. The Department declines to further define such 
boundaries, as the ETL entry excluding naval nuclear propulsion items 
clearly identifies specific USML entries and uses established ITAR 
terms. If doubt exists as to the export classification of an item, the 
Commodity Jurisdiction process at Sec.  120.12 is available.
USML Category VIII
    One commenter incorrectly asserted that the ETL does not exclude 
articles for the F-22 aircraft, such as the mission computer and 
engine, which are described in USML entries other than paragraphs 
(a)(2), (h)(1), and (i) of USML Category VIII, because they are 
described in other USML paragraphs. The Order of Review in Sec.  120.11 
identifies that an item may be described in multiple entries. Paragraph 
(h)(1) of Category VIII describes parts, components, accessories, and 
attachments specially designed for the F-22 aircraft, subject to the 
Note to that paragraph, irrespective of whether those articles are also 
described in other USML entries. As such, the Department rejects the 
comment and resulting recommendation to exclude further F-22 parts 
described elsewhere on the USML, as a redundancy.
USML Categories XI and XIII(b)
    Several commenters observed that the previously proposed ETL entry 
for USML Categories XI(a) through (d); and XIII(b) and (l) appeared to 
exclude technical data and defense services only if they are directly 
related to naval acoustic spectrum control and awareness and asked the 
Department to revise the entry to clarify its intent. Having consulted 
with DoD, the Department clarifies the intent was to exclude all 
technical data and defense services directly related to unclassified 
articles excluded in this ETL entry and to exclude only classified 
technical data and defense services directly related to classified 
articles excluded in this entry.
    Two commenters recommended separating USML Category XIII(b) and (l) 
onto a separate row from Category XI or placing them with other 
Category XIII exclusions. The Department accepts this comment. This 
entry has been split into multiple rows to address different exclusions 
and to more clearly specify the relevant USML entries.
    Many commenters advocated clarifying, eliminating, or narrowing the 
scope of the exclusion for articles directly related to naval acoustic 
spectrum control and awareness. One commenter asked whether this phrase 
describes all of USML Category XI(a)(1)(i). Two commenters suggested 
limiting the exclusion to classified articles. Another proposed 
removing the phrase ``and awareness.'' Following consultations with 
DoD, the Department declines to narrow the scope of this exclusion, as 
these articles continue to require (now expedited) case-by-case review 
for export. The Department has modified this entry to clarify the 
exclusion applies to all articles described in USML Category 
XI(a)(1)(i) and (ii), specially designed articles therefor, and 
directly related technical data and defense services.
    Several commenters requested clarification as to whether the 
exclusion of classified countermeasures and counter-countermeasures in 
USML Category XI applies to unclassified hardware designed for a 
classified system. They noted that in some cases, the only classified 
element of the system is software provided on a government-to-
government basis and installed onto the hardware after export. 
Furthermore, one commenter requested the Department review whether the 
exclusion would prevent collaboration on aspects of a defense article 
not related to the classified portions of the defense article. Another 
commenter asserted that Sec.  120.11(c) should not apply to excluded 
defense articles--specifically, that end items incorporating classified 
countermeasures or counter-countermeasures should be eligible for 
export. Yet another commenter requested clarification as to which USML 
entries describe the specially designed parts, components, accessories, 
and attachments excluded under this entry. And one commenter expressed 
confusion on how to interpret the term ``classified.''
    The Department has revised the proposed countermeasures and 
counter-countermeasures exclusion both for greater clarity and to focus 
the exclusion more precisely on relevant, classified defense articles. 
Such revisions include distributing the contents of the proposed entry 
across multiple narrower entries, more clearly identifying the relevant 
USML entries, and removing unclassified articles designed for 
classified articles. Classified, directly related technical data and 
defense services are also excluded. Articles excluded from the 
exemption at Sec.  126.7 remain excluded even when incorporated into an 
article that is not otherwise excluded. The Department also confirms 
that an exclusion of classified articles and classified, directly 
related technical data and defense services, does not prevent use of 
the exemption to transfer unclassified articles used in the classified 
article, or unclassified technical data and defense services. The 
Department further notes the term ``classified'' is defined within the 
ITAR in Sec.  120.38.
    One commenter requested removal of USML Category XIII(b) 
cryptographic devices, software, and components from the ETL, asserting 
they are authorized for transfer under the Canadian exemptions in Sec.  
126.5. The Department notes that the Canadian exemptions are distinct 
from the Sec.  126.7 exemption. Nonetheless, the classified articles 
described in Category XIII(b) previously proposed for exclusion are 
today excluded from the Sec.  126.5 Canadian exemptions, as it is 
limited to the transfer of unclassified articles.
    One commenter objected to the exclusion of classified articles 
described in USML Category XIII(b), asserting it will prevent the use 
of the exemption for UK, Australian, North Atlantic Treaty Organization 
(NATO), and other allied classified cryptography that is not used to 
access U.S. Top Secret or Sensitive Compartmented Information (SCI) 
information, some of which is provided by the U.S. Defense Industrial 
base. Following consultation with DoD, including the National Security 
Agency, the Department declines to limit this entry. Classified 
cryptography, even that which is shared with U.S. allies, must remain 
subject to significant oversight and distribution limits, including 
that which is provided by the (now expedited) licensing process.
    Many commenters observed the proposed rule excluded classified 
articles described in USML Category XIII(b), but excluded all articles 
specially designed for a Category XIII(b) article, regardless of 
classification status. Commenters were uncertain how to interpret this 
exclusion and asked whether the Department intended to exclude only 
classified articles, and which USML paragraphs describe the specially 
designed articles that are excluded. The Department recognizes the 
requested clarifications of this entry. Following consultations with 
DoD, the Department revises the scope consistent with the intent to 
exclude (1) classified articles described in USML Category XIII(b), (2) 
classified articles in USML Category XI specially designed for the 
excluded Category XIII(b) articles and

[[Page 67286]]

(3) classified, directly related technical data and defense services.
    In a section of its comment devoted to the ETL, one commenter 
advocated for ``more harmonization on cryptographic technology.'' The 
Department assesses any actionable response to this comment falls 
outside the scope of the proposed rule.
    One commenter requested confirmation that the Department is not 
asserting jurisdiction over articles not described on the USML. As an 
example, the commenter noted the use of the phrase ``specially designed 
parts, components, accessories, and attachments therefor'' in the ETL 
entry that excludes classified countermeasures and counter-
countermeasures, incorrectly asserting there is no catch-all entry on 
the USML for such items. The Department confirms it does not assert 
regulatory jurisdiction via the ETL, which only identifies the articles 
and services already under the Department's jurisdiction that are 
excluded from transfer via the Sec.  126.7 exemption. The Department 
notes the proposed exclusion, which would have applied to paragraphs 
(a) through (d) of USML Category XI, in addition to paragraphs (b) and 
(l) of USML Category XIII, would have applied to articles described in 
USML Category XI(c)(1) through (19) that are specially designed for 
classified countermeasures or counter-countermeasures.
USML Category XII
    One commenter requested narrowing of the exclusion for source code 
and classified technical data and defense services pertaining to night 
vision-related items. After further review and consultation with DoD, 
the Department removed this exclusion.
    Also, consistent with commenters' requests to narrow the ETL, the 
Department has, after consultation with DoD, removed the exclusion for 
classified articles described in Category XII(d)(3).
USML Category XV
    Two commenters welcomed the ability to transfer unclassified 
Category XV(f) technical data and defense services under the exemption 
because such transfers will facilitate initial unclassified discussions 
related to the bid phase for novel space-based power generation 
systems. They and three other commenters requested complete or partial 
removal of the ETL entry excluding classified articles described in 
Category XV(a) or (e); and directly related classified technical data 
and defense services. Based on interagency consultations, the 
Department declines to do so. Such articles necessitate a case-by-case 
review prior to export, which is inherent in the licensing process.
    One commenter requested that the Department confirm that 
information collected by excluded defense articles in USML Category XV 
is not subject to the ITAR, or that such information falls within the 
scope of the Sec.  126.7 exemption. The Department declines this 
request as a case-by-case review is necessary to assess whether such 
information is described on the USML or the ETL. The requested carve-
outs are overly broad and not actionable within this rulemaking. The 
Department notes that just because information was ``collected by a 
defense article'' does not make that information ``directly related to 
the defense article that collected it''; and most ETL entries exclude 
information only as technical data directly related to excluded defense 
articles.
    One commenter requested removal of ``cooperative docking'' 
capability from the list of technologies described in USML Category XV. 
The Department notes that this comment is outside the scope of this 
rulemaking, as the rule does not contemplate changes to the USML.
USML Category XVI
    One commenter requested the Department specify the relevant 
paragraphs within USML Category XVI that are excluded; the Department 
confirms all articles described in USML Category XVI are excluded, and 
thus declines to specify each paragraph individually.
USML Category XVIII
    One commenter requested removal of the ETL entry that excludes 
classified articles in Category XVIII specially designed for counter-
space operations, asserting this would improve the relationship between 
the three countries' Space Commands and facilitate collaboration 
between their industrial bases. The Department, based on U.S. 
Government review, declines to remove this entry at this time, as the 
excluded technologies warrant continued, and now expedited, case-by-
case review for national security concerns.
USML Category XIX
    One commenter noted that it would be unable to take advantage of 
the proposed exemption for exports related to classified parts for use 
in the engine for the F-35 aircraft. The Department confirms this, 
based on the description of those parts in an excluded entry.
    One commenter suggested that paragraphs (f)(6) and (7) of USML 
Category XIX should be added to the exclusion for classified articles 
described in paragraphs (e) and (f)(1) and (2) of USML Category XIX, as 
those paragraphs describe production commodities directly related to 
the technologies excluded by the existing Category XIX entry. The 
Department appreciates this comment and notes that excluding the 
articles described in paragraphs (f)(7) and (12) for manufacturing the 
excluded articles is consistent with the Department's intent to exclude 
articles not yet integrated and their technical data. Following 
consultations with DoD, the Department declines to add defense articles 
described in paragraph (f)(6), as the Category XIX classified defense 
articles warranting exclusion are already described in the ETL entry. 
Thus, following consultations with DoD, State is excluding the articles 
described in paragraphs (f)(7) and (12) for manufacturing the excluded 
articles in paragraphs (f)(1) and (2).
USML Category XX
    Multiple commenters recommended the Department eliminate or narrow 
the exclusions in USML Category XX. Commenters noted that exchange of 
Category XX articles, including manufacturing know-how, will be 
necessary to support AUKUS Pillar I, which is intended to enable 
Australia to safely and effectively operate nuclear-powered submarines 
and establish a corresponding manufacturing industrial base in 
Australia. One commenter noted that the exclusion of certain Category 
XX manufacturing know-how is not required by AECA and asserted that 
exclusions of articles not otherwise restricted by law or other 
international obligations is contrary to the premise that Australia and 
the UK have comparable systems with the United States. Commenters 
specifically cited the need for transfer of information regarding 
processes necessary to meet materials specifications, instruction with 
regard to test and commissioning software, and design models that may 
contain manufacturing know-how. One commenter recommended eliminating 
the exclusion for manufacturing know-how pertaining to classified UUV 
signature reduction techniques or making the exclusion specific to 
current U.S.-fielded technologies in programs of record. One commenter 
also estimated that, without an exclusion for manufacturing know-how, 
approximately 200 manufacturing

[[Page 67287]]

license agreements would be necessary to support the anticipated 
transfers of submersible manufacturing capabilities. Another commenter 
suggested restricting the exclusions in Category XX to classified 
technologies.
    The Department affirms the articles and services described in USML 
Category XX(d) are critical to the success of AUKUS Pillar I and 
further notes this exemption is not the only means of facilitating the 
safe and effective operation or manufacture of nuclear-powered 
submarines. The specific technologies excluded by the ETL have been 
identified as warranting continued (and now expedited) licensing 
review. Having consulted with DoD, the Department further amends the 
USML Category XX(d) entry to (1) remove manufacturing know-how directly 
related to uncrewed vessels, (2) clarify the entry, and (3) further 
exclude design methodology and engineering analysis directly related to 
certain USML Category XX commodities for the same reasons manufacturing 
know-how is excluded for those commodities.
    One commenter requested clarification whether manufacturing know-
how is excluded if it pertains to a USML Category XX(c) defense article 
used in both crewed vessels and classified UUVs. The Department has 
revised the manufacturing know-how entry for Category XX, which no 
longer specifically excludes all manufacturing know-how for classified 
UUVs. Manufacturing know-how directly related to crewed vessels remain 
excluded. For Category XX(c) defense articles used both in crewed and 
uncrewed vessels, exporters must assess whether the information under 
consideration is directly related to crewed vessels and is therefore 
excluded. The Department further notes that technical data directly 
related to a Category XX(c) commodity may be excluded by other ETL 
entries. For example, other ETL entries exclude technical data directly 
related to Category XX(c) articles specially designed for articles in 
Categories XX(b)(1) and (2).

Other Public Comments

    Several commenters cautioned against finalizing a Sec.  126.7 
exemption that hampers collaboration and innovation for technological 
development in support of future AUKUS programs. The Department notes 
that the exemption was developed by the U.S. Government cognizant of 
the goals of AUKUS and the exemption was designed to support these 
goals while maintaining individual licensing requirements for the most 
sensitive items subject to the ITAR.
    Multiple commenters argued that, because section 38(l) of the AECA 
(22 U.S.C. 2778(l)) requires all three nations to have ``comparable'' 
export control systems, an exporter should not need U.S. authorization 
to retransfer or reexport defense articles previously exported via the 
Sec.  126.7 exemption outside of the authorized user community or 
outside of the three AUKUS nations. Instead, these commenters 
recommended a license or other authorization from Australia or the 
United Kingdom from which the defense article is to be retransferred or 
reexported should suffice. DDTC declines to accept this recommendation. 
The Sec.  126.7 exemption does not authorize the reexport or retransfer 
of defense articles outside its scope for several reasons. The 
Department was provided legal authority under section 38(l) of the AECA 
to implement such license-free defense trade for Australia and the 
United Kingdom and only under certain conditions. Having comparable 
export controls ensures that all three nations are using similar 
systems to protect technologies within their territory from being 
transferred illicitly. However, government decisions to authorize the 
export of defense articles implicate a range of national security and 
foreign policy interests of a nation.
    Multiple commenters also requested the Department eliminate the 
effect of Sec.  120.11(c) (commonly referred to as the ``see-through 
rule'') for transactions that take place under the proposed Sec.  126.7 
exemption or the proposed Sec.  126.15 expedited licensing process, to 
simplify export compliance for Australian and UK exporters. The 
Department declines this request, for the same reasons it requires 
entities to obtain a license or other authorization for retransfers or 
reexports outside the authorized user community. The underlying reasons 
for ITAR regulation of defense articles do not change following 
incorporation or integration into another item, unless specifically 
provided otherwise in the ITAR (e.g., see USML Category XV, Note 2 to 
paragraph (e)).
    Several commenters requested clarification that Sec.  124.8(a)(5) 
does not apply to the proposed exemption. ITAR Sec.  124.8(a)(5) 
requires certain agreements to include a clause specifying that 
technical data or defense services exported from the United States in 
furtherance of the agreement, and any defense article which may be 
produced or manufactured therefrom, may not be transferred to a foreign 
person except pursuant to Sec.  126.18, as specifically authorized in 
the agreement, or where prior written approval of the Department of 
State has been obtained. While Sec.  124.8(a)(5) does not apply, the 
Department notes that a similar provision is included in the authorized 
user process. Use of the Sec.  126.7 exemption does not eliminate the 
equities underlying Sec.  124.8(a)(5) regarding transfers outside of 
Australia, the United Kingdom, or the United States. Moreover, 
maintaining this regulatory provision is key to ensuring know-how 
transferred under the exemption is not repurposed for use in defense 
articles not described in Australia and the UK's munitions lists. 
Without this provision, AECA section 38(j)(1)(C)(ii)(VI) and (VII) 
would require the Department to substantially expand the ETL to prevent 
unlicensed exports of U.S. technological capabilities outside of the 
United Kingdom and Australia. However, to further facilitate trade 
within the approved user community, and for clarity, the Department is 
amending Sec.  124.8(a)(5) to affirm the exemption at Sec.  126.7 may 
be used to retransfer and reexport articles and services within the 
authorized user community that were originally exported via an 
agreement subject to Sec.  124.8(a)(5).
    One commenter inquired when the Department plans to certify that 
Australia and the United Kingdom have comparable export controls. The 
Department notes that such a certification must occur prior to the 
effective date of this final rule implementing the exemption.
    One commenter supported the passing of the Australian Defence Trade 
Controls Amendment Act 2024; however, expressed concern that the law 
will increase compliance requirements for Australian industry. The 
Department notes that this comment is outside the scope of this 
rulemaking regarding the ITAR exemption that the United States 
Government proposed.
    One commenter requested clarification as to whether the term 
``export'' in the proposed rule refers to both permanent and temporary 
exports. The Department clarifies that, consistent with how the term 
``export'' is used elsewhere in the ITAR, unless otherwise specified, 
the term ``export'' refers to both permanent and temporary exports.
    One commenter sought clarification as to whether the Sec.  126.7 
exemption would supersede an existing license or other authorizations 
already issued by DDTC, and if provisos in an existing license or other 
authorization include tighter restrictions than the Sec.  126.7 
exemption, which authorization should

[[Page 67288]]

the exporter refer to. Another commenter suggested the Department 
clarify that provisos in an existing authorization no longer apply if 
the Sec.  126.7 exemption is available for use. Similarly, two 
commenters inquired if there is a transition period for existing 
license or other authorizations to using the Sec.  126.7 exemption. The 
Department notes that use of the Sec.  126.7 exemption in lieu of an 
existing license or other authorization is allowed effective 
immediately upon the effective date of this interim final rule provided 
all exemption criteria are met, consistent with the application of 
other ITAR exemptions. There is no transition period required for this 
exemption. The Department notes ITAR exemptions do not automatically 
invalidate previously authorized licenses or agreements. For example, 
to the extent an exporter chooses to rely on a particular authorization 
to export, the provisos, conditions, and limitations that were applied 
to that authorization continue to govern the authorization.
    One commenter sought clarification if this exemption could be used 
for a defense article originally shipped via FMS and what the 
requirements were for continued transfers. The Department confirms that 
the ITAR authorizes commercial exports of defense articles and defense 
services, also known as direct commercial sales or DCS. Defense 
articles transferred via government-to-government channels such as FMS 
are conducted pursuant to separate and distinct authorities. Those 
separate authorities continue to govern the export, reexport, and 
retransfer of those defense articles. This means that defense articles 
originally exported pursuant to an FMS case continue to be subject to 
the terms and conditions of the FMS Letter of Offer and Acceptance and 
are not eligible for retransfer or reexport under Sec.  126.17 or any 
other provision of the ITAR.
    One commenter sought clarification on the proposed rule's impact on 
the existing United Kingdom and Australian DTCTs and if this rule will 
replace or alter Sec. Sec.  126.16 and 126.17. The Department notes 
that the existing United Kingdom and Australian DTCTs will not be 
altered. The Sec.  126.7 exemption is new and a separate exemption.
    One commenter expressed concern about arms transfers and money 
laundering. The Department notes that this comment is outside the scope 
of this rulemaking.
    One commenter expressed that all defense trade and cooperation 
should exclude Israel. The Department notes the Sec.  126.7 exemption 
is solely for Australia, the United Kingdom, and the United States and 
that the comment is otherwise outside the scope of this rulemaking.
    Two commenters recommended the Department waive agreement 
signatures and nondisclosure agreements (NDA) for authorized users who 
are a party to ITAR agreements which are for end-use by AUKUS 
governments and include non-AUKUS parties and suggested that the NDA 
requirement be included in the authorized user enrollment process to 
mitigate administrative hurdles. Similarly, one commenter recommended 
the same waivers but for end-use by AUKUS governments, authorization to 
export defense articles on the ETL, and only include authorized users. 
The commenter acknowledges that the latter recommendation requires a 
license but asserts that without these waivers it is burdensome and 
does not support AUKUS objectives. The Department notes that these 
recommendations exceed the scope of the proposed rulemaking insofar as 
it recommends changing requirements that apply to transfers that are 
not described within the Sec.  126.7 exemption being proposed or the 
expedited processing timelines that would apply under Sec.  126.15. The 
Department also does not agree with the commenter's suggestion that 
signatures on approved agreements are ``administrative hurdles.'' A 
party's signature to an agreement is an acknowledgement that the party 
has been made aware of and agrees to comply with the terms and 
conditions of the specific agreement to which the party has affixed its 
signature. Further, exports of defense articles on the ETL especially, 
these specific assurances are an important measure designed to help 
ensure that all parties to the transaction, including authorized user 
understand their specific obligations.
    Similarly, another commenter suggested to remove the NDA 
requirement for sublicensees when transfers are on the ETL and require 
licensing. The Department notes that these recommendations exceed the 
scope of the proposed rulemaking.
    One commenter noted classified and FMS are not captured in the 
Sec.  126.7 exemption and recommended the Department consider 
harmonizing licensing pathways for users of the exemption. The 
Department acknowledges this comment; however, classified is not 
prohibited in the Sec.  126.7 exemption provided all criteria in that 
section are met, and regarding different licensing pathways, the ITAR 
does not regulate FMS. The Department acknowledges that continued 
efforts to streamline and facilitate defense trade generally and may 
consider this comment within other efforts.
    Two commenters recommended to create an exception similar to Sec.  
120.54(a)(3) for authorized users. While this is outside the scope of 
this particular rulemaking, the Department may consider it in a future 
rulemaking.
    Two commenters acknowledged this is outside the realm of export 
controls but recommended all three nationals have harmonized cyber 
security standards. The Department notes that this comment is outside 
the scope of this rulemaking.
    The same commenter inquired how controlled unclassified information 
(CUI) will be handled with AUKUS, what upcoming AUKUS-related 
streamlining of the FMS system are being considered and requested the 
creation of a non-U.S. Defense Trade Advisory Group (DTAG). The 
Department notes that this comment is outside the scope of this 
rulemaking, however there are several mechanisms for foreign industry 
to provide comments to the U.S. Government on defense trade matters, 
including through their governments. These comments were passed to the 
U.S. Government entities overseeing CUI and FMS processes.
    One commenter expressed that efforts to expedite transfers to NTIB 
(National Technology and Industrial Base) partners is still important. 
The Department notes that this comment is outside the scope of this 
rulemaking.
    One commenter suggested to amend Sec.  123.9(c)(4) to include the 
proposed Sec.  126.7 exemption to reflect Australian and UK authorized 
users are allowed to submitted retransfer authorizations. The 
Department declines to accept this comment as the Sec.  123.9(c)(4) 
provision imposes conditions on reexports and retransfers of defense 
articles originally exported pursuant to the Defense Trade Cooperation 
Treaties in Sec. Sec.  126.16 and 126.17, which impose unique 
requirements, including on reexports and retransfers.
    One commenter suggested DDTC work with the Office of Regional 
Security and Arms Transfers (RSAT), the Defense Security Cooperation 
Agency (DCSA), and other government entities to inform the public about 
changes to DCS and FMS processes within the AUKUS framework, including 
activities done through FMS channels which can transition to be handled 
through the Sec.  126.7 exemption. The Department reemphasizes that the 
ITAR regulates DCS only and ITAR exemptions cannot be used for FMS 
transfers. However, the Department

[[Page 67289]]

recognizes the need for continued outreach and education on defense 
trade process more generally and will aim to coordinate outreach 
between the DCS and FMS communities.
    One commenter applauded the Department of State and the Department 
of Commerce for aligning its export controls, in particular the 
inclusion of the AUKUS exemption and conforming authorizations in the 
Export Administration Regulations (EAR). The commenter further 
suggested both agencies consider revising the treatment of nationality 
to ensure that national security concerns and risks relating to dual- 
and third-country nationals are consistent across the ITAR and the EAR, 
particularly with respect to technology transfers and ``deemed 
exports.'' The Department notes that the Department of State and 
Department of Commerce have different authorities for export controls 
and thus the ITAR and EAR have different scopes of technology, with the 
ITAR controlling more sensitive defense articles and defense services. 
As such, the ITAR control may be more stringent than those implemented 
by the EAR.
    One commenter proposed to have a series of tabletop exercises with 
the governments of Australia, the United Kingdom, and the United States 
to better streamline policies or regulations, conduct gap analyses, and 
support harmonization prior to the finalization of this rule. The 
Department notes it continues to coordinate with the United Kingdom and 
Australia on this rulemaking and the reciprocal exemptions being 
created by the United Kingdom and Australia.
    One commenter wanted clarification if the requirements set out in 
Sec.  126.18(a), (b), and (c)(2) apply to Sec.  126.7. The Department 
notes that those provisions are separate and do not apply to Sec.  
126.7 but are still available for use if all the criteria are met. 
Moreover, the Department notes that these provisions are for dual and 
third-country nationals.
    One commenter recommended Canada be included in Sec. Sec.  126.7 
and 126.18(e). The Department notes its focus on implementing the 
requirements set forth in section 38(l) of the AECA, which are specific 
to Australia and the United Kingdom.
    One commenter suggested the Department align subject matter experts 
to specific AUKUS pillars, each country would have an administrator 
that manages those pillars, and the administrator is responsible for 
vetting entities as authorized users. The Department notes that this 
comment is outside the scope of the rulemaking in terms of how future 
AUKUS programs will be structured and which countries will collaborate 
on those projects or programs.
    One commenter recommended that DoD and the intelligence community 
conduct a comprehensive review of classification policy to ensure 
defense articles are not routinely marked with classifications that 
limit sharing with Australian and UK partners. The Department notes 
this comment is outside the scope of this rulemaking.

Regulatory Analysis and Notices

Administrative Procedure Act

    This rulemaking is exempt from the notice-and-comment rulemaking 
requirements 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. Good cause also exists under 5 U.S.C. 
553(b)(B) and (d)(3) to issue this final rule with an immediate 
effective date, as 22 U.S.C. 2778(l)(2) requires that this rule 
implementing an exemption be immediately issued upon an assessment of 
comparability. The Department believes that the statutory directive is 
a result of congressional intent and recognition that the foreign 
affairs function exception to the requirements of 5 U.S.C. 553 apply to 
ITAR rules. E.g., 22 CFR 120.20. Moreover, since Australia and the 
United Kingdom have implemented a comparable exemption from their 
export control requirements for the United States in furtherance of the 
trilateral trade concept envisioned by statute, and have made changes 
and commitments regarding their own laws and processes, good cause 
exists to quickly issue a final rule, have certain limitations to the 
exemption based on security and shared objectives, ensure it goes into 
effect on or near a certain coordinated date, and otherwise facilitate 
the enhanced trilateral partnership envisioned by AUKUS.

Regulatory Flexibility Act

    Since this rule is exempt from the notice-and-comment provisions of 
5 U.S.C. 553 as a military or foreign affairs function, and based on 
the Department's finding of good cause, the rule 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 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, 14094 and 13563

    Executive Order 12866, as amended by Executive Order 14094, and 
Executive Order 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. 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. Regarding the exemption, Australia and the United 
Kingdom, as set forth in the section 655 reports required annually by 
the Foreign Assistance Act of 1961, as amended, are ordinarily among 
the most commonly licensed destinations for transfers subject to the 
ITAR. The Department expects that fewer license applications will be 
submitted as a result of this rule for authorized users that meet the 
criteria of the exemption, for eligible transfers of defense articles 
and defense services to and between Australia, the United Kingdom, and 
the United States. Consequently, this exemption will relieve licensing 
burdens for some exporters. Regarding the expedited licensing review 
process when an ITAR exemption is not available for use, the Department 
expects minimal costs associated with this provision for the

[[Page 67290]]

public, with the benefit of license applications involving Australia, 
the United Kingdom, or Canada being subject to faster adjudication. The 
Department is seeking public comment on its assessment of the costs and 
benefits of this interim final rule. This rule has been designated as 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 Parts 123, 124, and 126

    Arms and munitions, Exports, Reporting and recordkeeping 
requirements, Technical assistance.
    For the reasons set forth above, title 22, chapter I, subchapter M, 
parts 123, 124, and 126 of the Code of Federal Regulations are amended 
as follows:

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

0
1. 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
2. Amend Sec.  123.10 by revising the section heading and paragraph (a) 
to read as follows:


Sec.  123.10  Nontransfer and use assurances.

    (a) A nontransfer and use certificate (i.e., Form DSP-83) is 
required for the export of significant military equipment and 
classified articles, including classified technical data, pursuant to a 
license or other authorization, except for the exemptions in Sec. Sec.  
126.5 and 126.7 of this subchapter. A license will not be issued until 
a completed Form DSP-83 has been received by the Directorate of Defense 
Trade Controls. This form is to be executed by the foreign consignee, 
foreign end-user, and the applicant. The certificate stipulates that, 
except as specifically authorized by prior written approval of the 
Department of State, the foreign consignee and foreign end-user will 
not reexport, resell, or otherwise dispose of the significant military 
equipment enumerated in the application outside the country named as 
the location of the foreign end-use or to any other person.
* * * * *

PART 124--AGREEMENTS, OFF-SHORE PROCUREMENT, AND OTHER DEFENSE 
SERVICES

0
3. The authority citation for part 124 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; 22 U.S.C. 2776; 
Section 1514, Pub. L. 105-261; Pub. L. 111-266; Section 1261, Pub. 
L. 112-239; E.O. 13637, 78 FR 16129.

0
4. Amend Sec.  124.8 by revising paragraph (a) to read as follows:


Sec.  124.8  Clauses required both in manufacturing license agreements 
and technical assistance agreements.

    (a) * * *
    (5) ``The technical data or defense service exported from the 
United States in furtherance of this agreement and any defense article 
which may be produced or manufactured from such technical data or 
defense service may not be transferred to a foreign person except 
pursuant to 22 CFR 126.7 or 126.18, as specifically authorized in this 
agreement, or where prior written approval of the Department of State 
has been obtained.''
* * * * *

PART 126--GENERAL POLICIES AND PROVISIONS

0
5. The authority citation for part 126 is revised to read as follows:

    Authority:  22 U.S.C. 287c, 2651a, 2752, 2753, 2776, 2778, 2779, 
2779a, 2780, 2791, 2797, 10423; sec. 1225, Pub. L. 108-375, 118 
Stat. 2091; sec. 7045, Pub. L. 112-74, 125 Stat. 1232; sec. 1250A, 
Pub. L 116-92, 133 Stat. 1665; sec. 205, Pub. L. 116-94, 133 Stat. 
3052; and E.O. 13637, 78 FR 16129, 3 CFR, 2013 Comp., p. 223.

0
6. Amend Sec.  126.1 by revising paragraph (a) to read as follows:


Sec.  126.1  Prohibited exports, imports, and sales to or from certain 
countries.

    (a) General. It is the policy of the United States to deny licenses 
and other approvals for exports and imports of defense articles and 
defense services, destined for or originating in certain countries. The 
exemptions provided in this subchapter, except Sec.  123.17 of this 
subchapter and Sec. Sec.  126.4(a)(1) or (3) and (b)(1) (paragraph 
(a)(2) or (b)(2) when the export is destined for Russia and in support 
of government space cooperation), 126.6, and 126.18(e), or when the 
recipient is a U.S. Government department or agency, do not apply with 
respect to defense articles or defense services originating in or for 
export to any proscribed countries, areas, or persons. (See Sec.  129.7 
of this subchapter, which imposes restrictions on brokering activities 
similar to those in this section.)
* * * * *

0
7. Add Sec.  126.7 to read as follows:


Sec.  126.7  Exemption for defense trade and cooperation among 
Australia, the United Kingdom, and the United States.

    (a) No license or other approval is required for the export, 
reexport, retransfer, or temporary import of defense articles, the 
performance of defense services, or engaging in brokering activities as 
described in part 129 of this subchapter, between or among authorized 
users of this exemption, subject to the requirements and limitations in 
paragraph (b) of this section.
    (b) The exemption described in paragraph (a) of this section is 
subject to the following requirements and limitations:
    (1) The activity must be to or within the physical territory of 
Australia, the United Kingdom, or the United States;
    (2) The transferor, recipient, or broker must each be:
    (i) U.S. persons registered with the applicable Directorate of 
Defense Trade Controls (DDTC) registration pursuant to Sec. Sec.  122.1 
and 129.3 of this subchapter, and not debarred under Sec.  127.7 of 
this subchapter;
    (ii) A U.S. Government department or agency; or
    (iii) Authorized users identified through the DDTC website and, if 
engaging in brokering activities, registered with DDTC pursuant to 
Sec.  129.3 of this subchapter;
    (3) The defense article or defense service is not identified in 
supplement no. 2 to this part as ineligible for transfer under the 
exemption in paragraph (a) of this section;
    (4) The value of the transfer does not exceed the amounts described 
in Sec.  123.15 of this subchapter and does not involve the 
manufacturing abroad of significant military equipment as

[[Page 67291]]

described in Sec.  124.11 of this subchapter; and
    (5) Transferors must comply with the requirements of Sec.  123.9(b) 
of this subchapter.
    Note 1 to paragraph (b): The exemption in paragraph (a) of this 
section does not remove other applicable U.S. statutory and regulatory 
requirements. For example, for U.S. authorized users, transfers of 
classified defense articles and defense services must still meet the 
requirements in 32 CFR part 117, National Industrial Security Program 
Operating Manual (NISPOM), in addition to all other applicable laws. 
Australian authorized users must, for example, meet the requirements in 
the Australian Protective Security Policy Framework, including 
appropriate security risk management for contracted providers. United 
Kingdom authorized users must, for example, meet the requirements in 
the Government Functional Standards GovS 007: Security.

0
8. Amend Sec.  126.15 by revising the section heading and adding 
paragraphs (c) and (d) to read as follows:


Sec.  126.15  Expedited processing of license applications for the 
export of defense articles and defense services to Australia, the 
United Kingdom, or Canada.

* * * * *
    (c) Any application submitted for authorization of the export of 
defense articles or defense services to Australia, the United Kingdom, 
or Canada, describing an export that cannot be undertaken under an 
exemption provided in this subchapter, will be expeditiously processed 
by the Department of State. The prospective export must occur wholly 
within, or between the physical territories of Australia, the United 
Kingdom, Canada, or the United States, and between governments or 
persons from such countries.
    (d) To the extent practicable, any application in paragraph (c) of 
this section to export defense articles and defense services related to 
a government-to-government agreement between Australia, the United 
Kingdom, or Canada, and the United States must be approved, returned, 
or denied within 30 days of submission. For all other license 
applications, any review shall be completed no later than 45 calendar 
days after the date of the application. The provisions of this 
paragraph (d) do not apply to any applications which require 
congressional certification.

0
9. Amend Sec.  126.18 by adding paragraph (e) to read as follows:


Sec.  126.18  Exemptions regarding intra-company, intra-organization, 
and intra-governmental transfers to employees who are dual nationals or 
third-country nationals.

* * * * *
    (e) Notwithstanding any other provisions of this subchapter, no 
license is required for the retransfer or reexport of classified 
defense articles to citizens of Australia or the United Kingdom, 
provided such individuals:
    (1) Are dual nationals of another country;
    (2) Are authorized users or regular employees of an authorized user 
of the exemption in Sec.  126.7;
    (3) Hold a security clearance approved by Australia, the United 
Kingdom, or the United States that is equivalent to the classification 
level of SECRET or above in the United States; and
    (4) Are either:
    (i) Within the physical territory of Australia, the United Kingdom, 
or the United States; or
    (ii) A member of the armed forces of Australia, the United Kingdom, 
or the United States acting in their official capacity.
    10. Add supplement no. 2 to part 126 to read as follows:

Supplement No. 2 to Part 126--Excluded Technology List

    This supplement lists the defense articles and defense services 
excluded from the scope of the exemption provided at Sec.  126.7. The 
United States Munitions List (USML), see 22 CFR 121.1, entries in 
column 1 represent the location of the excluded defense articles and 
defense services within the USML and does not indicate the entire USML 
entry in column 1 is excluded; only the portions of those entries that 
are further described in column 2 are excluded.

 
------------------------------------------------------------------------
            USML entry                            Exclusion
------------------------------------------------------------------------
I through XV, and XX..............  Missile Technology Control Regime
                                     (MTCR) articles, as annotated on
                                     the USML by an ``MT'' designation,
                                     except for articles described in
                                     USML Category VIII(h)(12); and
                                     directly related technical data and
                                     defense services.
I through XX......................  Articles having anti-tamper features
                                     developed in accordance with a U.S.
                                     Department of Defense (DoD) Program
                                     Protection Plan, not already
                                     installed in the commodity they are
                                     intended to protect; and directly
                                     related technical data and defense
                                     services.
II(k), III(e), IV(i), X(e), and     Manufacturing know-how (see Sec.
 XIX(g).                             120.43(e) of this subchapter)
                                     directly related to:
                                    --articles described in USML
                                     Categories II(d), III(d)(1) or (2),
                                     IV(a), (b), (d), (g), or (h),
                                     X(a)(1) or (2), or XIX; or
                                    --parts, components, accessories, or
                                     attachments that are only used in
                                     those articles.
II(j)(9) through (11), and (k)....  Articles described in USML Category
                                     II(j)(9) through (11) that are not
                                     an element of an armament, weapon,
                                     or military platform; and directly
                                     related technical data and defense
                                     services.
III(a)(9) and (e); IV(a)(5) and     Cluster munitions and articles
 (6), (b)(2), (c), (g), (h), and     specially designed for cluster
 (i); VI(f)(6) and (g); VIII(h)(6)   munitions; and directly related
 and (i); XI(c) and (d); XII(a),     technical data and defense
 (d), (e), and (f); and XX(c) and    services.
 (d).
IV(a)(3), (9), (10), and (11),      Articles described in USML Category
 (b)(2), (h)(5), and (i).            IV(a)(3), (9), (10), or (11), or
                                     (h)(5); launcher mechanisms for
                                     MANPADS; and directly related
                                     technical data and defense
                                     services.
V(a)(13)(iii) and (iv),             Articles described in USML Category
 (a)(23)(iii), (d)(3), (i), and      V(a)(13)(iii) or (iv),
 (j).                                (a)(23)(iii), or (d)(3); articles,
                                     other than propellants, described
                                     in USML Category V(i); and directly
                                     related technical data and defense
                                     services.
VI(e), (f)(5), and (g); and         Articles described in USML Category
 XX(b)(1), (c), and (d).             VI(e) or (f)(5), or XX(b)(1);
                                     articles specially designed for
                                     articles described in USML Category
                                     XX(b)(1); and directly related
                                     technical data and defense
                                     services.
VIII(a)(2), (h)(1), and (i).......  The F-22 aircraft and articles
                                     specially designed for the F-22,
                                     other than those also used in
                                     aircraft other than the F-22; and
                                     directly related technical data and
                                     defense services.
X(a)(7)(ii), (d)(2) and (3), and    Articles described in USML Category
 (e).                                X(a)(7)(ii); articles specially
                                     designed therefor; and directly
                                     related technical data and defense
                                     services.

[[Page 67292]]

 
XI(a)(1)(i) and (ii), and (d).....  Articles described in USML Category
                                     XI(a)(1)(i) or (ii); and directly
                                     related technical data and defense
                                     services.
XI(a)(2),(c)(1) through (3), and    Classified articles described in
 (d).                                USML Category XI(a)(2), other than
                                     underwater acoustic decoy
                                     countermeasures; classified
                                     articles specially designed
                                     therefor; and classified, directly
                                     related technical data and defense
                                     services.
XI(a)(3)(xviii),(c)(1) through      Classified articles described in
 (3), and (d).                       USML Category XI(a)(3)(xviii);
                                     classified articles specially
                                     designed therefor; and classified,
                                     directly related technical data and
                                     defense services.
XI(a)(4)(i),(c)(1) through (3),     Classified articles described in
 and (d).                            USML Category XI(a)(4)(i);
                                     classified articles specially
                                     designed therefor; and classified,
                                     directly related technical data and
                                     defense services.
XI(a)(4)(iii),(c)(1) through (3),   Classified countermeasure and
 and (d).                            counter-countermeasure equipment
                                     described in USML Category
                                     XI(a)(4)(iii); classified articles
                                     specially designed therefor; and
                                     classified, directly related
                                     technical data and defense
                                     services.
XI(a)(5)(iii),(c)(1) through (3)    Classified articles described in
 and (18), and (d).                  USML Category XI(a)(5)(iii);
                                     classified articles specially
                                     designed therefor; and classified,
                                     directly related technical data and
                                     defense services.
XI(b) and (d).....................  Classified articles described in
                                     USML Category XI(b); and
                                     classified, directly related
                                     technical data and defense
                                     services.
XI(c) and (d).....................  (1) Articles described in USML
                                     Category XI(c) or (d) specially
                                     designed for articles described in
                                     USML Category XI(a)(1)(i) or (ii);
                                     and directly related technical data
                                     and defense services.
                                    (2) Classified articles described in
                                     USML Category XI(c) or (d) that
                                     implement countermeasures or
                                     counter-countermeasures for defense
                                     articles described in USML Category
                                     XI(a); and classified, directly
                                     related technical data and defense
                                     services.
                                    (3) Classified articles described in
                                     USML Category XI(c) specially
                                     designed for articles described in
                                     USML Category XIII(b); and
                                     classified, directly related
                                     technical data and defense
                                     services.
XIII(b) and (l)...................  Classified articles described in
                                     USML Category XIII(b); and
                                     classified, directly related
                                     technical data and defense
                                     services.
XIII(d)(2) and (l)................  Articles described in USML Category
                                     XIII(d)(2); and directly related
                                     technical data and defense
                                     services.
XIV(a), (b), (c)(5), (f)(1), (i),   Articles described in USML Category
 and (m).                            XIV(a), (b), (c)(5), (f)(1), or
                                     (i); and directly related technical
                                     data and defense services.
XV(a), (e), and (f)...............  Classified articles described in
                                     USML Category XV(a) or (e); and
                                     classified, directly related
                                     technical data and defense
                                     services.
XVI...............................  Articles described in USML Category
                                     XVI; and directly related technical
                                     data and defense services.
XVIII.............................  Classified articles described in
                                     USML Category XVIII specially
                                     designed for counter-space
                                     operations; and classified,
                                     directly related technical data and
                                     defense services.
XIX(e), (f)(1), (2), (7), and       (1) Classified articles described in
 (12), and (g).                      USML Category XIX(e), (f)(1), or
                                     (f)(2), not already integrated into
                                     a complete engine; and directly
                                     related technical data and defense
                                     services.
                                    (2) Classified articles described in
                                     USML Category XIX(f)(7) or (12) for
                                     excluded articles described in USML
                                     Category XIX(f)(1) or (2); and
                                     directly related technical data and
                                     defense services.
XX(b)(2), (c), and (d)............  Articles described in USML Category
                                     XX(b)(2); articles specially
                                     designed therefor; and directly
                                     related technical data and defense
                                     services.
XX(d).............................  Design methodology, engineering
                                     analysis, and manufacturing know-
                                     how (see Sec.   120.43 of this
                                     subchapter) directly related to:
                                    --crewed vessels described in USML
                                     Category XX(a); or
                                    --articles described in USML
                                     Category XX(b) or (c) that are used
                                     only in:
                                    [cir] crewed vessels,
                                    [cir] classified payloads, or
                                    [cir] classified Uncrewed Underwater
                                     Vehicle (UUV) signature reduction
                                     techniques.
XXI...............................  Commodities, software, technical
                                     data, and defense services, unless
                                     specifically designated as eligible
                                     for the exemption provided at Sec.
                                      126.7 in State's written Category
                                     XXI determination.
------------------------------------------------------------------------


Bonnie D. Jenkins,
Under Secretary, Arms Control and International Security, Department of 
State.
[FR Doc. 2024-18043 Filed 8-16-24; 11:15 am]
BILLING CODE 4710-25-P