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Export, ITARs, Uncategorized

New Brokering Rule for ITAR-Controlled Exports

The Department of State has published a proposed rule that seeks to to amend the International Traffic in Arms Regulations (ITARs) as they apply to brokers and brokering activities.

Brokering is distinguished under the regulations from exporting.  Thus, those who might negotiate a deal as an agent, or finance a deal, but who never get involved in the actual exporting of ITAR-controlled articles and services, are  nonetheless subject to the State Department’s regulations.

Under the current rules, persons who broker exports of ITAR-controlled articles and services are required to register, and also in many cases to obtain licenses before they engage in brokering.  This is meant to curb arms-dealing, but in practice it affects export of many aircraft parts that are controlled under the ITARs.

The recently-proposed changes to the ITARs would help by removing many dual-use parts as well as defense-related parts that do not serve a unique defense purpose from the scope of the ITARs.

The proposed rule would change (“clarify”) the definitions of the terms “broker” and “brokering activities.”  It would also provide additional exemptions from the regulations for certain brokering activities.  Hee are the proposed new definitions:

§ 129.2 Definitions.
(a) Broker means any person (as defined by § 120.14 of this subchapter) who engages in brokering activities.
(b) Brokering activities means any action to facilitate the manufacture, export, reexport, import, transfer, or retransfer of a defense article or defense service. Such action includes, but is not limited to:
(1) Financing, insuring, transporting, or freight forwarding defense articles and defense services, or
(2) Soliciting, promoting, negotiating, contracting for, arranging, or otherwise assisting in the purchase, sale, transfer, loan, or lease of a defense article or defense service.
(c) For the purposes of this subchapter, engaging in the business of brokering activities requires only one action as described above.
(d) The activities subject to part 129 include brokering activities:
(1) by any U.S. person wherever located;
(2) by any foreign person located in the United States;
(3) by any foreign person located outside the United States involving a U.S.-origin defense article or defense service;
(4) by any foreign person located outside the United States involving the import into the United States of any defense article or defense service; or
(5) by any foreign person located outside the United States acting on behalf of a U.S. person.
(e) Brokering activities do not include:
(1) Activities by a U.S. person in the United States that are limited exclusively to U.S. domestic sales or transfers (e.g., not for export, which includes transfer in the United States to a foreign person);
(2) Activities by employees of the U.S. Government acting in an official capacity; or
(3) Activities that do not extend beyond administrative services, such as providing or arranging office space and equipment, hospitality, advertising, or clerical, visa, or translation services, or activities by an attorney that do not extend beyond providing legal advice to a broker.


About Jason Dickstein

Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Air Carrier Purchasing Conference, and the Modification and Replacement Parts Association. He also represents private clients drawn from the spectrum of the aviation industry.


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