The U.S. Department of State's Directorate of Defense Trade Controls (DDTC) has unveiled its first regulatory agenda under President Donald Trump's second administration. This regulatory agenda includes 10 planned actions to revise the International Traffic in Arms Regulations (ITAR) and U.S. Munitions List (USML). This agenda follows a landmark year for regulatory developments that saw in 2024 the most substantial number of regulatory revisions and proposals in nearly a decade. Released as part of the semiannual Unified Agenda of Regulatory and Deregulatory Actions, these planned rules chart DDTC's regulatory course for the next 12 months.
This Holland & Knight alert analyzes the key rulemaking developments ahead.
Planned Developments
DDTC's planned rulemaking list includes 10 intended actions.
USML Revisions
DDTC expects to issue three rulemakings seeking to revise the USML. A greater focus on the USML is expected, as the list has seen few changes since 2016 and Congress now requires DDTC to review the USML every three years. The three planned rulemaking include:
- Space-Related Controls. An interim final rule revises Categories IV and XV regarding the ITAR's space-related controls. In October 2024, DDTC published the proposed rule for these revisions, and it received more than 800 public comments. The proposed rule was in response to public comments the agency received from the advanced notice of proposed rulemaking from March 2019. This rulemaking action item has been on DDTC's regulatory agenda since spring 2020.
- Omnibus USML Changes. A proposed rule seeks to revise the USML by adding and removing items, as well as clarify certain entries. This is the first time this action is on DDTC's regulatory agenda, though it appears to be consolidating several planned rulemakings into one, as previous regulatory agendas included:
- a proposed rule concerning circuit boards and semiconductors "to revise paragraphs (c)(1) through (4) of Category XI of the [USML] to describe more precisely the articles warranting control on the USML;" notably, this planned rule has the same rulemaking identification number as the proposed omnibus rule
- a proposed rule to modernize the USML and Supplement No. 1 to Part 126 by standardizing the "language and structure across Categories and entries for purposes of consistency, clarity and improved ease of use"
- a final rule to address the public comments the agency received for the USML revisions to Categories IV, V, VIII, XI and XV from the interim final rule in 2018
- a final rule concerning Category XVI "to better harmonize [the USML] with the Department of Energy part 810 regulations and ensure that all items that provide the United States with a critical military or intelligence advantages are listed on the [USML] and remain subject to U.S. Government export controls at all times"
- an interim final rule will "clarify and correct recent revisions to the [USML]"
- Defense Services. A final rule revises the ITAR's definition of "defense services" and amends the USML by enumerating certain military and intelligence services on the USML under Category IX. In June 2024, DDTC published the proposed rule, and it received at least 27 public comments. This rulemaking action item has been planned since at least 2011 when DDTC issued the first proposed rule, followed by a second proposed rule in 2013 and a third proposed rule in 2015.
Final Rule Regarding Australia and United Kingdom Exemptions
DDTC expects to issue a final rule regarding the new licensing exemption in ITAR Section 126.7 for Australia and the U.K. and the expedited review policy in ITAR Section 126.15 for Australia, the U.K. and Canada. Though those regulatory changes are in furtherance of the trilateral security partnership between Australia, the U.K. and U.S. (AUKUS), the exemptions and expedited review policies are not limited to AUKUS-related activities. The interim final rule took effect on Sept. 1, 2024, and DDTC received at least 12 public comments. This rulemaking action item has been on DDTC's regulatory agenda since fall 2024.
Interim Final Rule Concerning Technical Data Releases to Foreign Persons
DDTC plans to issue an interim final rule to change how the ITAR handles "deemed exports" and "deemed reexports" of technical data to foreign persons so there is "a release only to any countries in which that foreign person currently holds citizenship or permanent residency." The ITAR currently controls such releases "to all countries in which the foreign person has held or holds citizenship or holds permanent residency." DDTC issued a proposed rule regarding this rulemaking in February 2022. This rulemaking action item has been on DDTC's regulatory agenda since fall 2022.
Proposed Rule Concerning Regular Employees
DDTC intends to issue another proposed rule to revise the meaning of a regular employee within ITAR Section 120.64. Specifically, the proposed revisions would update the definition by allowing "subject persons to work remotely" and clarifying "the contractual relationships that meet the definition of regular employee." The first proposed rule, published in May 2021, received several public comments critical of the proposed approach to distinguish between contract employees based on the duration of employment. This rulemaking action item has been on DDTC's regulatory agenda since fall 2021.
Proposed Rule Revising Part 130 Requirements
DDTC will propose changes to the ITAR's Part 130 requirements by increasing "the threshold value for transactions requiring reporting of information and revise reporting requirements from transactional to annual." The Defense Trade Advisory Group (DTAG) reviewed the Part 130 requirements in November 2022 and made some recommendations. This is the first time this rulemaking action item is on DDTC's regulatory agenda.
Interim Final Rule Concerning the Personal Protective Equipment Exemption
DDTC is preparing an interim final rule "to expand the list of personal protective equipment covered by the exemption in ITAR section 123.17." DTAG reviewed this exemption in May 2021 and submitted proposed revisions based on its recommendations. This rulemaking action item has been on DDTC's regulatory agenda since spring 2021.
Final Rule Clarifying Certain Noncontrolled Events
DDTC plans to finalize the 2019 interim final rule for ITAR Section 120.54, which includes the cloud computing rule. These changes are apparently unrelated to the recent revisions to this section that added two noncontrolled events and became effective in September 2024. This rulemaking action item has been on DDTC's regulatory agenda since spring 2020.
Final Rule for Corrections and Clarifications
DDTC expects to issue a final rule that will make "better standardize language, form, style, and structure throughout the regulations, as well as to make certain clarifications and corrections." This rulemaking action item has been on DDTC's regulatory agenda since spring 2017.
Next Steps
Regulated parties affected by or interested in these rulemaking developments should monitor their progress and consider submitting public comments to help shape the rule when the applicable notice appears in the Federal Register. When the new regulatory revisions are published, regulated parties should also update their compliance programs accordingly.
