International Traffic in Arms Regulations: Registration Fees

DEPARTMENT OF STATE <CFR>22 CFR Parts 122 and 129</CFR> <DEPDOC>[Public Notice: 12236]</DEPDOC> <RIN>RIN 1400-AF78</RIN> <SUBJECT>International Traffic in Arms Regulations: Registration Fees</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Department of State. <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of State proposes to amend the International Traffic in Arms Regulations (ITAR) by increasing and specifying the fees required for registration with the Directorate of Defense Trade Controls (DDTC). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Send comments on or before June 10, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Interested parties may submit comments by one of the following methods: • <E T="03">Email: DDTCPublicComments@state.gov</E> . Include the subject line: “Registration Fees—RIN 1400-AF78” • <E T="03">Federal eRulemaking Portal: http://www.regulations.gov</E> . Identify by the Department docket number DOS-2023-0034 or RIN 1400-AF78. Follow the instructions for sending comments. Comments received after that date may 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 any such claim will be deemed waived and comments and/or transmittal emails may be made publicly available. Parties who wish to comment anonymously may do so by submitting their comments via <E T="03">www.regulations.gov,</E> leaving the fields that would identify the commenter blank and including no identifying information in the comment itself. Per 5 U.S.C. 553(b)(4), a concise summary of this proposed rule may be found at <E T="03">https://www.regulations.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Allison Smith, PM/DDTC Director of Management, Bureau of Political-Military Affairs, U.S. Department of State, telephone 202-647-1282; email: <E T="03">DDTCCustomerService@state.gov.</E> Subject: Registration Fee Change. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Overview</HD> For the first time in fifteen years, the State Department proposes to revise and increase the registration fees (also referred to as “fees”) charged to those required to register with DDTC. In accordance with section 38(b) of the Arms Export Control Act (AECA) (22 U.S.C. 2778(b)), every person who engages in the business of manufacturing, exporting, temporarily importing, or brokering any defense articles or defense services is required to register with DDTC, the agency charged with administering the relevant sections of the AECA. Section 38(b) of the AECA also requires that every person required to register pay a registration fee. As the ITAR implements section 38 of the AECA, and as its parts 122 and 129 (22 CFR parts 122 and 129) address registration, the Department proposes to revise those provisions to restate registration requirements without substantive change, to revise the Department's methodology for determining the fees paid by certain registrants, to increase registration fees, and to reinsert the actual amount of fees within the ITAR itself. <HD SOURCE="HD1">Uses of Registration Fees</HD> Registration fees required under section 38 of the AECA are, by a separate statute (22 U.S.C. 2717), used to fund a large share of DDTC and the many functions it provides to exporters, importers, brokers, manufacturers, and the general public. The Department briefly outlines some of these functions here so that registrants can have more context for how their fees help DDTC's mission. Services like the DDTC Response Team, Help Desk, commodity jurisdiction determinations, advisory opinions, guidance on brokering, and support for registration all offer assistance for the approximately 14,500 current DDTC registrants and the general public. Moreover, DDTC often conducts outreach, visits, webinars, speaking engagements and other educational services to help people understand the ITAR and its requirements and exemptions. For fiscal year 2022, for example, DDTC experts attended over 60 outreach events and engaged with over 6,000 industry attendees in online webinars. Issuing licenses or other authorizations under the ITAR is also a core and large part of DDTC's work. In fiscal year 2022, DDTC received approximately 22,500 license applications and issued authorizations that were valued at just over $153.7 billion. Although licensing officials currently are some of the only DDTC officials paid through congressional appropriations, contractor support and other technologies impacting the processing, adjudication. and monitoring of licenses are funded by fees. DDTC also provides crucial public services in investigating possible ITAR violations to maintain U.S. foreign policy and national security imperatives. Again, using the last fiscal year as an illustrative example, DDTC received over 600 disclosures, either voluntary or directed, and conducted over 300 end-use monitoring checks. Because investigations and compliance actions can be complex and span several months or years, the monetary value that DDTC's Compliance office secured is best viewed as a three-year rolling average for FY 2020-2023, where an average of over $7.6M per year in settlement funds were obtained for alleged ITAR violations, all of which was deposited into the Treasury Department's General Fund and does not go to DDTC. DDTC also assists Department of Justice (DOJ) officials in certain criminal proceedings related to the ITAR, including by providing testimony. These services provide broad protection to industry and the public alike, ensuring that a uniform set of rules are enforced for all, that one business or exporter does not have an unfair advantage over the other, and that exports, temporary imports, or brokering of defense articles and defense services are consistent with the national security and foreign policy of the United States. Apart from these ongoing crucial services, DDTC has also recently made significant advancements in processes for registration statements and license applications, and for those members of the public seeking advisory opinions or commodity jurisdiction determinations. One of those is the creation, maintenance, and enhancement of the Defense Export Control and Compliance System (DECCS). Launched in February 2020, DECCS simplifies the submission processes for applicants and allows applicants to track electronic forms submitted to DDTC. DDTC's Information Technology Modernization Team also supports enhanced security and operations features and regularly connects with DECCS users through the DECCS Users Group where industry users can provide direct feedback and suggest enhancements to DECCS. In the area of improved customer service and response, since February 2020, DDTC has used DECCS to implement a fully electronic case-management system, receiving and resolving 81,604 Help Desk tickets and 29,653 Response Team tickets. DECCS users can engage directly with DDTC Help Desk and Response Team customer service experts to resolve their issue. DDTC also implemented a customer satisfaction survey to engage with industry, and DDTC's average survey rating is 4.6 out of 5. Other enhancements and improvements have also been made specifically to the registration processes. Since 2022, registration processing times have dropped from an average of around 45 days to 30 days. DDTC implemented automated email reminders and status updates for industry to track registration applications. The DECCS application also automatically calculates the registration fee for all registrants, and now registrants can download their renewal fees calculation letter. Additionally, there is enhanced communication between industry and DDTC through DECCS. DDTC has instituted additional improvements, including providing a list of approved licenses and other authorizations and registration guides for DECCS and FAQs. <HD SOURCE="HD1">How DDTC Calculated the New Proposed Registration Fees</HD> The Department assessed that after fifteen years of inflation, increasing technological improvements, and improved services (which are described in further detail below), that an increase in the amount of registration fees is necessary for the continued and modernized operations of DDTC. DDTC has engaged in some public engagement on this issue, previewing that it was considering increasing its registration fees in multiple industry engagement events over the last twelve months. No questions or comments on the topic were raised by the public at those events. Separately, different industry representatives have suggested to DDTC that increased fees would be worthwhile to continue receiving improved services. To compute the new fees proposed here, the Department looked at DDTC's past and projected fee collections projected against future operating costs. It found that although DDTC's operating budget has remained mostly the same over the past few years, apart from inflation, increasing expenses are resulting in operating costs that currently exceed the amount of revenue generated by fees. While DDTC has been able to draw from its collections over the past few years to meet its costs, these funds and the current registration fee amounts will not cover DDTC's increased operational expenses. The need to increase fees to keep up with inflation and increased costs related to enhanced services has therefore become particularly pressing and DDTC would have to cut back on certain services if registration fees are not adjusted in the near future. Similarly, obtaining more funds from other sources may not be feasible. DDTC operates with only limited congressionally appropriated funds, comprising under 17% of its total ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 41k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━