Department of State Issues Interim Final Rule Amending ITAR Brokering Provisions

On August 26, 2013, the Department of State posted an interim final rule in the Federal Register amending the International Traffic in Arms Regulations (ITAR) provisions relating to brokers and brokering activities.

The amendments clarify registration requirements, scope of brokering activities, prior approval requirements and exemptions, and recordkeeping of such activities. Specifically, the changes include: 

The Department has clarified the scope of “broker” and “brokering activities” definitions: “foreign persons that are required to register as brokers are those that are in the United States and those foreign persons outside the United States that are owned/controlled by a U.S. person.” The Department has also removed from the definition of “brokering activities” the activities of any foreign person located outside the United States acting on behalf of a U.S. person;

The Department confirmed that any person charged with a violation of the U.S. criminal statutes enumerated in ITAR § 120.27 is generally ineligible to be involved in ITAR-regulated activities;

The new ITAR § 129.3(d) allows U.S. and foreign subsidiaries and affiliates owned or otherwise controlled by a registrant to be listed as brokers on the registrant's manufacturer/exporter registration. The Department notes that while these entities, under these circumstances, are not required to submit a separate broker registration or pay a separate broker registration fee, all other requirements of ITAR part 129 apply to such brokers and their brokering activities;

The new ITAR § 129.4 specifies which items require prior approval for brokering generally consistent with U.S. international commitments or obligations (rather than requiring prior approval for brokering activities related to all U.S. Munitions List (USML) items);

The Department has removed the proposed requirement in ITAR § 126.13 to identify brokers and brokering activities in all authorization requests from the revised regulation;

Section 129.2 clarifies that brokering activity does not include activities performed by an affiliate on behalf of another affiliate.

With respect to legal advice or any export compliance services provided by an attorney, the Department has clarified 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.” “Legal advice” includes the provision of export compliance advice by an attorney to a client.

Interested parties may submit comments on this rule by October 10, 2013. The Department will publish a final rule notifying of any changes to the rule pursuant to public comment assessment.