Rule Title: Amendment to the International Traffic in Arms Regulations: Registration Fee Change

AGENCY:

Department of State.

ACTION:

Final rule.

SUMMARY:

This rule makes final the interim rule that amended the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 122 and 129) by increasing the registration fees, changing the registration renewal period, and making other minor administrative changes. Comments received on the interim rule are analyzed in the SUPPLEMENTARY INFORMATION section. No changes were made to the interim rule.

DATES:

Effective Date: The interim rule is adopted as final February 23, 2006.

FOR FURTHER INFORMATION CONTACT:

David Trimble, Office of Defense Trade Controls Compliance, Bureau of Political-Military Affairs, Department of State, Washington, DC 20522-0112, 202-663-2807 or FAX 202-261-8199. ATTN: ITAR Regulatory Change, 22 CFR part 122 and part 129.

SUPPLEMENTARY INFORMATION:

Background

On December 8, 2004, the Department of State published an interim rule (Public Notice 4920; 69 FR 70888), with a request for comments, amending the ITAR (22 CFR parts 122 and 129) by increasing the registration fees, changing the registration renewal period, and making other minor administrative changes. The administration of the Arms Export Control Act (22 U.S.C. 2751 et seq.), regulations for which are set forth in the ITAR, is a foreign affairs function. The Department received 43 comments from ITAR registrants and defense-related associations.

Comment Analysis

Impact on Small Business and Fee Relief

The majority of comments received concerned the fee increase's impact on small businesses. The comments provided noted the burden the fee increase would place on small businesses, and some sought relief from the increase. Prior to the publication of the interim rule, the Department fully considered the financial burden the fee increase would place on industry and small businesses when it decided upon the new fee structure, and concluded that the impact would be minimal for the majority of the registrants. In addition, as noted in the Regulatory Findings and Notice section, the Department has found that this fee increase will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

Rational for Increasing Registration Fees

Ten comments were received regarding the rationale for increasing the registration fee. The Department has increased the ITAR registration fee to help fund the activities of its Directorate of Defense Trade Controls (DDTC), as set forth in 22 U.S.C. 2717. In particular, the additional revenue will assist DDTC in achieving its goals of expanded automation, compliance, training, and quality assurance. The additional resources will enable DDTC to serve the export community with greater efficiency. This increase in registration fees is the first increase since 1997.

Registration Requirements

Three comments were received regarding whether particular entities must register with DDTC. The interim rule and this final rule address an increase in the registration fee, the registration renewal period, and other minor administrative changes. The regulations pertaining to who must register with DDTC remain unchanged. Pursuant to 22 CFR 122.1, any person who engages in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services is required to register with the Office (now Directorate) of Defense Trade Controls. Manufacturers who do not engage in exporting must nevertheless register. In addition, 22 CFR 129.1 states that section 38(b)(1)(A)(ii) of the Arms Export Control Act (22 U.S.C. 2778) provides that persons engaged in the business of brokering activities shall register and pay a registration fee. Furthermore, 22 CFR 129.2 states that, inter alia, brokering activities include activities by U.S. persons who are located inside or outside of the United States or foreign persons subject to U.S. jurisdiction involving defense articles or defense services of U.S. or foreign origin, which are located inside or outside of the United States.

Rationale for Two-Year Registration

Two comments were received requesting the retention of the option to register up to a maximum period of four years. DDTC has reduced the maximum registration period to two years because the increased volume of mergers and acquisitions by regulated companies has made it more difficult to maintain accurate information on registrants. Also, DDTC encountered problems with companies not updating their registration, except at the time of their renewal, as required by 22 CFR 129.4(c). The change from a four-year to a two-year maximum registration period will improve the currency and accuracy of the registrants' information, which is critical to all licensing decisions.

List of Subjects

22 CFR Part 122

• Arms and munitions
• Exports

22 CFR Part 129

• Arms and munitions
• Exports
• Technical assistance

Accordingly, for the reasons set forth above, the interim rule published at 69 FR 70888 is adopted as final.