[Federal Register Volume 77, Number 120 (Thursday, June 21, 2012)]
[Proposed Rules]
[Pages 37346-37349]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15070]


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DEPARTMENT OF STATE

22 CFR Parts 120, 121, 123, 124, 125, 126, 127, 128, 129, and 130

[Public Notice: [7927]]


Export Control Reform Transition Plan

AGENCY: Department of State.

ACTION: Proposed policy statement, request for comments.

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SUMMARY: As part of the President's export control reform initiative, 
the Directorate of Defense Trade Controls (DDTC) seeks public comment 
on the proposed implementation plan for defense articles and defense 
services that will transition from the jurisdiction of the Department 
of State to the Department of Commerce. The intent of this plan is to 
provide a clear description of DDTC's proposed policies and procedures 
for the transition of items to the jurisdiction of the Department of 
Commerce. The revisions

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to this rule are part of the Department of State's retrospective plan 
under E.O. 13563 completed on August 17, 2011. The Department of 
State's full plan can be accessed at http://www.state.gov/documents/organization/181028.pdf.

DATES: The Department of State will accept comments on this proposed 
policy statement until August 6, 2012.

ADDRESSES: Interested parties may submit comments within 45 days of the 
date of publication by one of the following methods:
     Email: DDTCResponseTeam@state.gov with the subject line, 
``ECR Transition Guidance.''
     Internet: At www.regulations.gov, search for this notice 
by using this notice's docket number, DOS-2012-0020.
    Comments received after that date will be considered if feasible, 
but consideration cannot be assured. Those submitting comments should 
not include any personally identifying information they do not desire 
to be made public or information for which a claim of confidentiality 
is asserted because those comments and/or transmittal emails will be 
made available for public inspection and copying after the close of the 
comment period via the Directorate of Defense Trade Controls Web site 
at www.pmddtc.state.gov. Parties who wish to comment anonymously may do 
so by submitting their comments via www.regulations.gov, leaving the 
fields that would identify the commenter blank and including no 
identifying information in the comment itself. Comments submitted via 
www.regulations.gov are immediately available for public inspection.

FOR FURTHER INFORMATION CONTACT: Ms. Candace M. J. Goforth, Director, 
Office of Defense Trade Controls Policy, U.S. Department of State, 
telephone (202) 663-2792, or email DDTCResponseTeam@state.gov. ATTN: 
ECR Transition Guidance.

SUPPLEMENTARY INFORMATION: The Directorate of Defense Trade Controls 
(DDTC), U.S. Department of State, administers the International Traffic 
in Arms Regulations (ITAR) (22 CFR parts 120-130). The items subject to 
the jurisdiction of the ITAR, i.e., ``defense articles,'' are 
identified on the ITAR's U.S. Munitions List (USML) (22 CFR 121.1). 
With few exceptions, items not subject to the export control 
jurisdiction of the ITAR are subject to the jurisdiction of the Export 
Administration Regulations (``EAR,'' 15 CFR parts 730-774, which 
includes the Commerce Control List (CCL) in Supplement No. 1 to part 
774), administered by the Bureau of Industry and Security (BIS), U.S. 
Department of Commerce. Both the ITAR and the EAR impose license 
requirements on exports and reexports. Items not subject to the ITAR or 
to the exclusive licensing jurisdiction of any other set of regulations 
are subject to the EAR.

Transition Plan

    The Departments of State and Commerce described in their respective 
Advanced Notices of Proposed Rulemaking (ANPRM) in December 2010 the 
Administration's plan to make the USML and the CCL positive, tiered, 
and aligned so that eventually they can be combined into a single 
control list (see ``Commerce Control List: Revising Descriptions of 
Items and Foreign Availability,'' 75 FR 76664 (December 9, 2010) and 
``Revision to the United States Munitions List,'' 75 FR 76935 (December 
10, 2010)). Since that time, DDTC has published proposed revisions to 
several USML Categories, which, when implemented, will transition a 
significant number of items to the jurisdiction of the Department of 
Commerce.
    Because an immediate effective date would impose undue compliance 
burden on the defense industry, DDTC has developed the following phased 
implementation plan for items that will transition from the USML to the 
CCL, and will become effective for those items upon publication of each 
revised USML category. This phased implementation plan is designed to 
mitigate the impact on U.S. license holders, while assuring that all 
defense trade that should be licensed remains so. Under the plan U.S. 
license holders will continue to use their approved licenses at the 
time the transition takes place.

Licenses (DSP-5, DSP-61, and DSP-73)

    Licenses for items transitioning to the CCL that are issued in the 
period prior to the date of final rule publication for each revised 
USML category will remain valid until expired, returned by the license 
holder, a license amendment is required, or for a period of two years 
from the effective date, whichever occurs first. Any limitation, 
proviso or other requirement imposed on the DDTC authorization will 
remain in effect. The Department of Commerce may be consulted regarding 
the applicability of the EAR to the subject commodity.
    License applications for items transitioning to the CCL that are 
received by DDTC prior to final rule publication for each revised USML 
category will be adjudicated up until the effective date of the rule, 
unless the applicant requests that the application be Returned Without 
Action.
    License applications received by DDTC within the 45 days following 
the final rule's publication, but before the rule becomes effective, 
will be adjudicated only when the applicant provides a written 
statement certifying that the export or temporary import will be 
completed within 45 days after the effective date of the final rule. 
License applications that do not contain this certification will be 
Returned Without Action. The validity period for licenses issued in 
this timeframe will be limited to the date 45 days after the effective 
date of the final rule.
    License amendment requests (i.e., DSP-6, DSP-62, and DSP-74) 
received by DDTC within the 45 days following the final rule's 
publication, but before the rule becomes effective, will be adjudicated 
only when the applicant provides a written statement certifying that 
the export or temporary import will be completed within 45 days after 
the effective date of the final rule. Amendment requests that do not 
contain this statement will be Returned Without Action. The validity 
period for amended licenses issued in this timeframe will be limited to 
the date 45 days after the effective date of the final rule.
    All license requests, including amendments, received after the 
effective date for items that have transitioned to the CCL will be 
Returned Without Action with instructions to contact the Department of 
Commerce.

Technical Assistance Agreements, Manufacturing License Agreements, and 
Warehouse and Distribution Agreements

    Agreements approved prior to the date of relevant final rule 
publication will remain valid until expired, unless they require an 
amendment, or for a period of two years from the effective date of the 
transition, whichever occurs first. Any activity conducted under an 
agreement will remain subject to all limitations, provisos and other 
requirements stipulated in the agreement.
    Agreement amendments that incorporate items moving to the CCL prior 
to the date of publication of the final rule will remain valid until 
expired or for a period of two years from the effective date of the 
transition, whichever occurs first.
    Agreements and amendments received after the final rule is 
published, but before it becomes effective, will be Returned Without 
Action if the agreement contains both USML and CCL

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items. The agreement holder will be required to amend the agreement to 
remove all CCL items. Any agreement in which all items are 
transitioning to the CCL must be terminated and the applicant must seek 
a new authorization from the Department of Commerce, as applicable.
    Agreements and agreement amendments for items moving to the CCL 
which are received after the effective date will be Returned Without 
Action with instructions to contact the Department of Commerce.

Reporting Requirements

    All reporting requirements for Manufacturing License Agreements 
under ITAR Sec.  124.9(a)(6) and Warehouse and Distribution Agreements 
under ITAR Sec.  124.14(c)(6) must be complied with and such reports 
must be submitted to the Department of State while the agreement is 
relied upon as an export authorization by the exporter.

Commodity Jurisdiction Determinations

    Previously rendered commodity jurisdiction (CJ) determinations for 
items deemed to be USML, but that are subsequently transitioning to the 
CCL pursuant to a published final rule, will no longer be valid after 
the transition date. Exporters are encouraged to review each revised 
USML category along with its companion CCL category to determine 
whether their items have transitioned to the jurisdiction of the 
Department of Commerce. Consistent with the recordkeeping requirements 
of the ITAR and the EAR, licensees and foreign persons subject to 
licenses must maintain records reflecting their assessments of the 
proper regulatory jurisdiction over their items. Licensees who are 
unable to ascertain the proper jurisdiction of their items may request 
a CJ determination from DDTC through the current, established 
procedure.
    Licensees who are certain their items have transitioned to the CCL 
are encouraged to review the appropriate Export Control Classification 
Number (ECCN) to determine the classification of their item. Licensees 
who are unsure of the proper ECCN designation may request a Commodity 
Classification Automated Tracking System (CCATS) determination from the 
Department of Commerce through the current, established procedure. See 
15 CFR 748.3.

Reexport/Retransfer of USML items that have transitioned to the CCL

    Following the effective date of transition, foreign persons (i.e., 
end-users, foreign consignees, and foreign intermediate consignees) who 
receive, via a Department of State authorization, an item that they are 
certain has transitioned to the CCL (e.g., confirmed in writing by 
manufacturer or supplier), should treat the item as such and submit 
requests for post-transition reexports or retransfers to the Department 
of Commerce, as may be required by the EAR.
    Foreign persons or U.S. persons abroad that have USML items in 
their inventory at the effective date of transition should review both 
the USML and the CCL to determine the proper jurisdiction. If doubt 
exists on jurisdiction of the items, the foreign person should contact 
the original exporter. If the item is clearly controlled by the 
Department of Commerce, any reexport or retransfer must comply with the 
requirements of the EAR.

Regulatory Oversight Responsibilities

    For those items transitioning from the USML to the CCL, the 
Department of Commerce will exercise regulatory oversight, effective on 
the transition date, for the purposes of licensing and enforcement of 
exports from the United States where no Department of State 
authorization is being used. The Department of State will continue to 
exercise regulatory oversight concerning all Department of State 
licenses, agreements, and other authorizations, including those where 
exporters, temporary importers, manufacturers, and brokers continue to 
use previously issued Department of State licenses and agreements after 
the effective date of the final rule.
    License holders may decide to apply for and use Department of 
Commerce authorizations for export of the newly transitioned CCL items 
rather than continue to use previously issued Department of State 
authorizations. In such cases, license holders must return the 
Department of State licenses in accordance with ITAR Sec.  123.22, and 
obtain the required Department of Commerce authorizations.

Violations and Voluntary Disclosures of Possible Violations

    Exporters, temporary importers, manufacturers, and brokers are 
cautioned to closely monitor ITAR and EAR compliance concerning 
Department of State licenses and agreements for items transitioning 
from the USML to the CCL.
    On the effective date of each rule that adds an item to the CCL 
that was previously subject to the ITAR, that item will be subject to 
the EAR. Authorizations issued by DDTC before the transition date may 
continue to be used as described above by exporters, temporary 
importers, manufacturers, and brokers. The violation of a previously 
issued DDTC authorization (including any condition of a DDTC 
authorization) that is continued in use under the ITAR as described 
above is a violation of the ITAR.
    With respect to a transitioned item, should a possible violation of 
the ITAR, the EAR, or any license or authorization issued thereunder be 
discovered, the person or persons involved are strongly encouraged to 
consult with DDTC or BIS as appropriate, to avail themselves of the 
current, established procedures for submitting voluntary disclosures 
and for requesting specific authorization to take any further actions 
in connection with that item.
    License holders and foreign persons must obtain Department of State 
authorization before disposing, reselling, transshipping, or otherwise 
transferring any item in their possession that remains on the USML.

Registration

    Manufacturers, exporters, and brokers are required to register with 
the Department of State if their activities involve USML defense 
articles or defense services.
    Registered manufacturers, exporters, temporary importers, defense 
service providers and brokers (``registrants'') are reminded of the 
requirement to notify DDTC in writing when they are no longer in the 
business of manufacturing, exporting, or brokering USML defense 
articles or defense services. Registrants who determine that all of 
their activities involve articles or services that will transition from 
the USML to the CCL and therefore are no longer required to register 
with the Department of State must provide such written notification. 
Instructions for providing such notification are accessible on the DDTC 
Web site (www.pmddtc.state.gov). Note that DDTC will not cancel or 
revoke those registrations, but will allow the registration to expire. 
Registrants who determine that all of their activities will be subject 
to Department of Commerce jurisdiction as a result of the transition 
from the USML to the CCL must nevertheless maintain registration with 
the Department of State until the effective date of the transition.
    Registrants who determine they will no longer be required to 
register with the Department of State after the effective date of 
transition, and who have registration renewal dates that occur after 
publication of the final rule but before its effective date, may 
request to have their registration expiration date extended to the 
effective date of transition and not be charged a

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registration fee. In those cases, registrants must insert the following 
statement as the first paragraph in the written notification previously 
mentioned: ``(insert company name) requests DDTC extend our 
registration expiration date to the effective date of transition to CCL 
for USML Category (insert Category number) items and waive the 
registration fee. (insert company name) certifies that no changes in 
our eligibility from what is represented in our previously submitted 
DS-2032 Statement of Registration has occurred (otherwise specify 
change in eligibility status). Registrants that avail themselves of the 
opportunity to continue using previously issued Department of State 
authorizations (licenses and agreements) for items that have 
transitioned to the CCL must maintain current registration with the 
Department of State, which includes payment of registration fees.

Request for Comments

    DDTC requests public consideration and comment on the preceding 
transition plan, taking into account the following specific questions:
    1. Is the transition plan clear and understandable? Is it logical?
    2. Does the plan adequately address all regulated scenarios?
    3. Will industry compliance with existing export control law be 
negatively affected by this plan?
    4. Recognizing that this regulatory transition will unavoidably 
create challenges for industry, does the plan as presented effectively 
minimize these challenges?
    5. Does the plan impose undue burden on industry, and if so, are 
there any suggestions that will help mitigate them?

    Dated: June 14, 2012.
Rose E. Gottemoeller,
Acting Under Secretary, Arms Control and International Security, 
Department of State.
[FR Doc. 2012-15070 Filed 6-20-12; 8:45 am]
BILLING CODE 4710-25-P