A Look at Anticipated ITAR Rulemaking Developments for 2025

The U.S. Department of State's Directorate of Defense Trade Controls (DDTC) has unveiled an ambitious regulatory agenda for 2025, with 14 planned actions that will significantly revise the International Traffic in Arms Regulations (ITAR) and U.S. Munitions List (USML). This agenda follows a landmark 2024 that saw 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 and beyond. This Holland & Knight alert analyzes the key developments ahead.

Anticipated Developments

DDTC's anticipated rulemaking list includes 14 intended actions:

USML Revisions. DDTC expects to issue eight 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 eight anticipated rulemaking include:

• 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 anticipated 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.
• Emerging Technologies. An interim final rule revises and excludes "entries in the [USML] that do not warrant inclusion, and to add entries for critical and emerging technologies that warrant inclusion." This update will also revise Category XXI "to limit the items categorized in" that category. This interim final rule should be published soon, as it completed final interagency review on Dec. 23, 2024. This rulemaking action item has been on DDTC's regulatory agenda since fall 2021.
• Space-Related Controls. A final rule revises Categories IV and XV regarding the ITAR's space-related controls. On Oct. 23, 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.
• Semiconductor Controls. A proposed rule concerns 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." This rulemaking action item has been on DDTC's regulatory agenda since fall 2019.
• Nuclear Controls. A final rule addresses 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." This rulemaking action item has been on DDTC's regulatory agenda since fall 2019.
• USML Modernization. A proposed rule will 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." DDTC recently explained its approach to "modernizing the USML," which also includes placing USML specific definitions in ITAR Section 121.0. This rulemaking action item has been on DDTC's regulatory agenda since fall 2021.
• Minor USML Updates. A final rule will 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. This rulemaking action item has been on DDTC's regulatory agenda since fall 2020.
• Clarifications and Corrections. An interim final rule will "clarify and correct recent revisions to the [USML]." This rulemaking action item has been on DDTC's regulatory agenda since spring 2021.

Final Rule Regarding the 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 United Kingdom 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.

Final Rule Concerning Technical Data Releases to Foreign Persons. DDTC plans to issue a 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 distinguishing between contract employees based on the duration of employment. This rulemaking action item has been on DDTC's regulatory agenda since fall 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 computer 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.

Proscribed Country List Revisions. DDTC plans to issue a final rule to amend the ITAR's proscribed country list "to reflect recently adopted United Nations Security Council Resolutions concerning the Democratic Republic of the Congo." This rulemaking action item has been on DDTC's regulatory agenda since spring 2024.

Final Rule for Corrections and Clarifications. DDTC expects to issue a final rule that will make unspecified "technical clarifications and corrections." This rulemaking action item has been on DDTC's regulatory agenda since spring 2017.

Long-Term Developments

In addition to the above list, DDTC identified two long-term regulatory actions that the agency is planning but does not expect to take action on within the next 12 months:

Proposed Rule Consolidating Licensing Provisions and Exemptions. DDTC plans to issue a proposed rule involving the consolidation of ITAR Parts 123, 124 and 125. The consolidation will place most licensing exemptions in Part 125, while Part 123 will focus on the licensing requirements and Part 124 on the licensing process. The Defense Trade Advisory Group (DTAG) reviewed this consolidation process in October 2023. This rulemaking action item has been on DDTC's regulatory agenda since spring 2017.

Final Rule Concerning the Personal Protective Equipment (PPE) Exemption. DDTC is preparing a 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.

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 finalized, regulated parties should also update their compliance programs accordingly.

If you have any questions, please feel free to reach out to the authors.

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