[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13928-13931]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5821]
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DEPARTMENT OF STATE
22 CFR Parts 123 and 126
[Public Notice 7258]
RIN 1400-AC70
Amendment to the International Traffic in Arms Regulations:
Replacement Parts/Components and Incorporated Articles
AGENCY: Department of State.
ACTION: Proposed rule.
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SUMMARY: The Department of State is amending the International Traffic
in Arms Regulations (ITAR) to update policies regarding replacement
parts/components and incorporated articles.
DATES: The Department of State will accept comments on this proposed
rule until April 14, 2011.
ADDRESSES: Interested parties may submit comments within 30 days of the
[[Page 13929]]
date of publication by any of the following methods:
E-mail: DDTCResponseTeam@state.gov with an appropriate
subject line.
Mail: PM/DDTC, SA-1, 12th Floor, Directorate of Defense
Trade Controls, Office of Defense Trade Controls Policy, Attn:
Regulatory Changes--Replacement Parts/Components and Incorporated
Articles, Bureau of Political Military Affairs, U.S. Department of
State, Washington, DC 20522-0112.
Persons with access to the Internet may also view this
notice by searching for its RIN on the U.S. Government regulations Web
site at http://regulations.gov/index.cfm.
FOR FURTHER INFORMATION CONTACT: Nicholas Memos, Office of Defense
Trade Controls Policy, Department of State, by telephone: (202) 663-
2804; fax: (202) 261-8199; or e-mail: memosni@state.gov. Attn:
Regulatory Changes--Replacement Parts/Components and Incorporated
Articles.
SUPPLEMENTARY INFORMATION: As a part of the President's Export Control
Reform effort, the Department of State proposes to amend Parts 123 and
126 of the ITAR to reflect new policies regarding coverage of
replacement parts/components and incorporated articles.
The Department's review of current ITAR treatment of replacement
parts/components led to the proposed change to streamline the flow of
parts and components and to eliminate redundancy in licensing. The
current rule regarding parts and components imposes burdensome
requirements for additional licenses for licensed end-users and end-
uses for systems and components already vetted in earlier licenses. The
proposed rule adds a new section (Sec. 123.28) that facilitates the
expeditious repair of U.S. supplied end-items abroad, enabling more
timely response to coalition forces, as well as other allies and
friends, by eliminating the requirement for a license for parts and
components for systems approved in a previous license. This proposed
exemption applies only to exporters specifically identified in a
previously approved authorization to export the end-item in question.
It would not apply to upgrades of capabilities of the original end-
item. The type, amount, and frequency of parts and components could not
exceed the type, amount, and frequency consistent with normal
logistical repair/replacement operations. Nor can the value of the
purchase order exceed an amount that would require Congressional
notification. The exporter must have in its possession a copy of the
purchase order from the foreign government end-user and cite in its
Automated Export System (AES) filing the license number for the
original export. The exporter must use the U.S. Postal Service, freight
forwarders registered with the Directorate of Defense Trade Controls
(DDTC) and eligible, or licensed customs brokers that are subject to
background investigation and have passed a comprehensive examination
administered by U.S. Customs and Border Protection. Finally, this
exemption does not apply to exporters who are otherwise ineligible.
The Department's review of current ITAR treatment of incorporated
articles led to the proposed change with a view to limit ITAR coverage
to where diversion of the embedded defense article is a realistic and
practical concern. To this end, the proposed new Sec. 126.19 sets out
conditions under which a DDTC license is not required for the export or
re-export of defense articles incorporated into an end-item that is
``subject to the Export Administration Regulations (EAR).'' Those
conditions include where the end-item would be ``rendered inoperable''
by the removal of the defense article, where no technical data for
development or production are transferred with the defense article, and
where the incorporation of the defense article does not provide (or is
not related to) a military application. Additionally, no license is
required for the export or re-export of a defense article when that
article would be rendered inoperable by removal from the end-item. A
license would be required for the export of defense articles that are
spare or replacement parts when they are embedded into a larger
assembly such that they can be removed without destroying the defense
articles. The proposed new Sec. 126.19 would not go into effect until
the Department of Commerce amends its regulations such that the ITAR
and CCL provide complimentary coverage of the articles in question.
The proposed rules were presented to the Defense Trade Advisory
Group (DTAG), a Department of State advisory committee, for purposes of
comment and evaluation. The DTAG commented favorably on most aspects of
the proposed rules, but also recommended certain changes. Having
thoroughly reviewed and evaluated the comments and the recommended
changes, the Department has determined that it will proceed with the
proposed rules per the Department's evaluation of the written comments
and recommendations, as noted in the following paragraphs:
The DTAG commented favorably on the addition of a new Sec. 123.28
(replacement parts/components), with some recommended edits. We note
that in the interim we changed the title of the section by removing the
word ``special'' before exemption, removing the word ``spare'' before
``parts/components'' and replacing it with the word ``replacement,'' to
make clear that this exemption applies to the replacement of components
for systems already authorized for export. The DTAG recommended
elimination of the limitation that the exporter must be the
manufacturer of the end-item. We concurred with the change and
eliminated that condition.
The DTAG also recommended expanding the wording that defines who is
qualified to use the exemption from ``original exporter of the end-
item'' to ``applicant of a previously approved authorization.'' We
concurred with that change with minor edits.
The DTAG further suggested modifying the limitation regarding
upgrades in capabilities to ensure that it does not preclude
``replacement parts or components that would result in enhancements or
improvements only in the reliability or maintainability * * *'' We
concurred with that change in the form of a note.
The DTAG suggested adding a requirement that the exporter use the
U.S. Postal Service, registered freight forwarders, and licensed
brokers. We concurred with that change.
The DTAG recommended expanding the exemption to apply to a ``second
exporter'' if they met the conditions of (a) and (b). We did not accept
that change as the unclear terminology could potentially open up the
exemption for unlimited sources. We are willing to explore the
possibility of expansion of the exemption to include major
subcontractor component suppliers, but the proposed ``second exporter''
language is too broad.
The DTAG recommended adding a condition that the foreign government
end-user is not subject to restrictions under Sec. 126.1. We concurred
with that change.
The DTAG commented favorably on the addition of a new Sec. 126.19
(incorporated articles), with some recommended edits. The DTAG
recommended changing the proposed rule to cover defense articles
embedded into ``a higher level assembly that is not an end item. * *
*'' We did not accept that recommendation. The recommendation would
remove the assurance contained in the proposed rule that the ultimate
end-item would be an article subject to the EAR. It is our
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intent to avoid creating a means by which integrated defense articles
could find their way into higher level militarily relevant assemblies.
The DTAG proposed alternate models that added defense article
exports ``solely for integration into and inclusion as an integral part
of a higher level assembly * * *'' We did not accept that change
because it effectively would allow for the export of non-embedded
defense articles without a license and would pose too great a risk of
diversion. The proposed rule requires that defense articles be pre-
embedded or pre-incorporated, which provides a measure of security.
Regulatory Analysis and Notices
Administrative Procedure Act
These proposed amendments involve a foreign affairs function of the
United States and, therefore, are not subject to the procedures
contained in 5 U.S.C. 553 and 554. The Department of State has
nevertheless determined that the public interest would be served by
publishing this proposed rule and soliciting public comment.
Regulatory Flexibility Act
Since these proposed amendments are not subject to 5 U.S.C. 553,
they do not require analysis under the Regulatory Flexibility Act.
Unfunded Mandates Reform Act of 1995
These proposed amendments do not involve a mandate that will result
in the expenditure by State, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any
year and it will not significantly or uniquely affect small
governments. Therefore, no actions were deemed necessary under the
provisions of the Unfunded Mandates Reform Act of 1995.
Small Business Regulatory Enforcement Fairness Act of 1996
These proposed amendments have been found not to be a major rule
within the meaning of the Small Business Regulatory Enforcement
Fairness Act of 1996.
Executive Orders 12372 and 13132
These proposed amendments 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 these proposed amendments
do 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 these amendments.
Executive Order 12866
These proposed amendments are exempt from review under Executive
Order 12866, but has been reviewed internally by the Department of
State to ensure consistency with the purposes thereof.
Executive Order 12988
The Department of State has reviewed the proposed amendments in
light of sections 3(a) and 3(b)(2) of Executive Order 12988 to
eliminate ambiguity, minimize litigation, establish clear legal
standards, and reduce burden.
Executive Order 13175
The Department of State has determined that this rule will not have
tribal implications, will not impose substantial direct compliance
costs on Indian tribal governments, and will not pre-empt tribal law.
Accordingly, the requirement of Section 5 of Executive Order 13175 does
not apply to this rule.
Paperwork Reduction Act
This proposed rule does not impose any new reporting or
recordkeeping requirements subject to the Paperwork Reduction Act, 44
U.S.C. chapter 35.
List of Subjects in 22 CFR Parts 123 and 126
Arms and munitions, Exports.
Accordingly, for the reasons set forth above, Title 22, Chapter I,
Subchapter M, parts 123 and 126 are proposed to be amended as follows:
PART 123--LICENSES FOR THE EXPORT OF DEFENSE ARTICLES
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; E.O. 11958, 42 FR
4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; 22 U.S.C. 2776; Pub.
L. 105-261, 112 Stat. 1920; Sec 1205(a), Pub. L. 107-228.
2. Part 123 is amended by adding Sec. 123.28 to read as follows:
Sec. 123.28 Exemption for the export of replacement parts or
components in support of end-items previously exported from the U.S.
(a) Port Directors of U.S. Customs and Border Protection shall
permit the export without a license of parts or components of U.S.-
origin end-items, as defined in Sec. 121.8(a), held in the inventory
of a foreign government when all of the following conditions are met:
(1) The exporter is not subject to policy of denial (see Sec. Sec.
126.7 and 127.7 of this subchapter), is not otherwise ineligible (see
Sec. 120.1(c) of this subchapter), and the authority to claim the
exemption has not been revoked in accordance with paragraph (c) of this
section; and
(2) The exporter was the applicant of a previously approved
authorization to export the U.S.-origin end-item as defined in Sec.
121.8(a); and
(3) The replacement parts or components being exported do not
upgrade the capability of the end item as originally exported. (Note:
This does not preclude the export of replacement parts or components
that would result in enhancements or improvements only in the
reliability or maintainability of the U.S.-origin end-item, such as an
increased mean time between failure (MTBF) when a part identical to
that originally exported is not available); and
(4) The type, amount, and frequency of the exports are consistent
with repair and replacement in accordance with normal logistical
support requirements for the number of end-items in the end-user
inventory; and
(5) The value of the purchase order or contract for the export does
not exceed the requirements for congressional notification set forth in
Sec. 123.15; and
(6) The consignee of the shipment is the foreign government
approved under the original export authorization; and
(7) The foreign government end-user is not subject to restrictions
under Sec. 126.1 of this subchapter; and
(8) The replacement parts or components being exported meet all the
restrictions, limitations, and provisos (including those on the
handling or control of the replacement parts or components) in the
original export authorization for the end-item; and
(9) The replacement parts or components being exported are
consistent with the U.S. Government authorized maintenance activities.
(b) In order to claim the exemption, the exporter must:
(1) Be in possession of a purchase order from the foreign
government end-user; and
(2) Cite in its Automated Export System (AES) filing at the time of
export the license number authorizing the previously approved export of
the U.S.-origin defense article as required under paragraph (a)(2) of
this section; and
(3) Provide, upon request of the Port Director, a copy of the
license cited in paragraph (b)(2) of this section and a
[[Page 13931]]
copy of a purchase order required by paragraph (b)(1) of this section;
and
(4) If the replacement parts or components are shipped, the
exporter must use the U. S. Postal Service, or only those freight
forwarders registered with the Directorate of Defense Trade Controls
and eligible, or licensed customs brokers that are subject to
background investigation and have passed a comprehensive examination
administered by U.S. Customs and Border Protection. If export is by
hand carry, the exporter must ensure that the AES filing is completed
at the time of export; and
(5) Maintain records, to be provided on request to the Directorate
of Defense Trade Controls, U.S. Immigration and Customs Enforcement,
U.S. Customs and Border Protection, and other authorized U.S. law
enforcement agencies, that support the exporter's authority to use the
exemption in accordance with the requirements of paragraphs (a)(1)
through (9) and (b)(1) and (2) of this section.
(c) The authority to use this exemption may be revoked at any time
by the Managing Director, Directorate of Defense Trade Controls, if the
exporter is found to be not in compliance with the requirements listed
in this section.
PART 126--GENERAL POLICIES AND PROVISIONS
3. The authority citation for part 126 continues to read as
follows:
Authority: Secs. 2, 38, 40, 42 and 71, Pub. L. 90-629, 90 Stat.
744 (22 U.S.C. 2752, 2778, 2780, 2791 and 2797); E.O. 11958, 42 FR
4311; 3 CFR, 1977 Comp., p.79; 22 U.S.C. 2651a; 22 U.S.C. 287c; E.O.
12918, 59 FR 28205; 3 CFR, 1994 Comp., p.899; Sec. 1225, Pub. L.
108-375.
4. Part 126 is amended by adding and reserving Sec. Sec. 126.16-
126.18 to read as follows:
Sec. 126.16 [Reserved]
Sec. 126.17 [Reserved]
Sec. 126.18 [Reserved]
5. Add Sec. 126.19 to read as follows:
Sec. 126.19 Policy on the export and re-export of defense articles
incorporated into commodities ``subject to the EAR.''
(a) A license or other approval from the Department of State is not
required for the export or re-export of a defense article(s) that has/
have been incorporated into an end-item subject to the Export
Administration Regulations (EAR) (see 15 CFR 734.3), when all of the
following conditions are met:
(1) The end-item would be rendered inoperable, for purposes of
intended applications or enhanced capabilities for which the defense
article was incorporated into the end-item, by the removal of the
defense article(s); and
(2) ``Technology'' subject to the EAR for the ``production,''
``development,'' or ``use'' (as defined in 15 CFR 772.1) of the end-
item does not include any technical data (as defined by Sec. 120.10)
or ``technical assistance'' (as defined in 15 CFR 772.1) qualifying as
defense services (as defined by Sec. 120.9) about the defense
article(s) incorporated into the end-item; and
(3) Incorporation of the defense article(s) does/do not provide,
nor is it related to, a military application or ``military end-use''
(as defined in 15 CFR 744.21), or does not result in a ``military
commodity'' (as defined in 15 CFR Sec. 772.1); and
(4) The value of the defense articles is less than 1% of the value
of the end-item.
(b) A license or other approval from the Department of State is not
required for the export or re-export of a defense article(s) that has/
have been incorporated into a component (as defined in ITAR Sec.
121.8(b)) subject to the EAR or an end-item subject to the EAR, when
all the following conditions are met:
(1) The defense article would be destroyed (i.e., rendered useless
beyond the possibility of restoration) by its removal from the
component, major assembly or end-item;
(2) ``Technology'' subject to the EAR for the ``production,''
``development,'' or ``use'' (as defined in 15 CFR 772.1) of the
component, or major assembly does not include any technical data (as
defined by Sec. 120.10) or ``technical assistance'' (as defined in 15
CFR 772.1) qualifying as defense services (as defined by Sec. 120.9)
about the defense article incorporated into the component or major
assembly; and
(3) Incorporation of the defense article does not provide, nor is
it related to, a military application or ``military end-use'' (as
defined in 15 CFR 744.21), or does not result in a ``military
commodity'' (as defined in 15 CFR 772.1).
(c) A license or other approval from the Department of State is
required for the export or re-export of the defense article when
exported or re-exported as a replacement part or component for a
component, major assembly, or end-item subject to the EAR.
Dated: March 4, 2011.
Ellen O. Tauscher,
Under Secretary, Arms Control and International Security, Department of
State.
[FR Doc. 2011-5821 Filed 3-14-11; 8:45 am]
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