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Defense Export Regulations on Brokers, Brokering Activities Revised

Monday, August 26, 2013
Sandler, Travis & Rosenberg Trade Report

The State Department has issued an interim final rule amending part 129 of the International Traffic in Arms Regulations relating to brokers and brokering activities. These revisions clarify registration requirements, the scope of brokering activities, prior approval requirements and exemptions, procedures for obtaining prior approval and guidance, and reporting and recordkeeping of such activities. This rule will be effective as of Oct. 25 and interested parties may submit comments on it by Oct. 10.

The department estimates that approximately 1,300 currently registered brokers will not need to maintain registration following implementation of this rule and that approximately 300 will be eligible to consolidate into their manufacturer/exporter registration and no longer be required to pay a broker registration fee.

Among the changes from the proposed rule are the following.

- clarifies that foreign persons required to register as brokers are those that are in the U.S. and those foreign persons outside the U.S. that are owned/controlled by a U.S. person

- exempts from the broker registration requirement persons whose business is exclusively financing, insuring, transporting or freight forwarding, as distinct from those who engage in such activities as part of their direct involvement in arranging transactions for defense articles or services or hold title to defense articles, even when no physical custody of defense articles is involved

- clarifies that activities by an attorney that do not extend beyond the provision of legal advice to clients is not within the definition of brokering activities and notes that legal advice includes the provision of export compliance advice by an attorney to a client

- removes from the definition of “brokering activities” the activities of any foreign person located outside the U.S. acting on behalf of a U.S. person

- rather than requiring prior approval for brokering activities related to all U.S. Munitions List items, specifies which of these items requires prior approval for brokering generally consistent with U.S. international commitments or obligations

- eliminates a proposed requirement to identify brokers and brokering activities in all authorization requests

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