May 07, 2018

5 Things You Should Know About ... Brokering

1. Registration requirement.

Per Section 129.3 of the International Traffic in Arms Regulations ("ITAR"), persons engaging in “brokering activities” are required to register as brokers with the Directorate of Defense Trade Controls (“DDTC”).

2. “Brokering activities” are defined broadly.

“Brokering activities” are defined under Section 129.2(b) of the ITAR as “any action on behalf of another to facilitate the manufacture, export, permanent import, transfer, reexport, or retransfer of a U.S. or foreign origin defense article or defense service, regardless of its origin[,]” and it includes, without limitation, “financing, insuring, transporting, or freight forwarding [of] defense articles and defense services” and “soliciting, promoting, negotiating, contracting for, arranging, or otherwise assisting in the purchase, sale, transfer, loan, or lease of a defense article or defense service.”

If this definition strikes you as exceptionally broad, then you are absolutely right, and the list of of activities in Section 129.2(b)(2) that do not constitute brokering activities does little to limit its scope.

3. Licenses are not always required.

Not all brokering activities require a brokering license - only the brokering of foreign defense articles or defense services and the articles and services specified in Section 129.4(a)(2) of the ITAR require prior approval.

4. File your brokering reports.

Even if your brokering activities do not require a license, DDTC still wants to be aware of them, understand them, and potentially hold you accountable for them.

Accordingly, ALL brokering activities must be described in your annual registration renewal application and must include the information required under Section 129.10(b) of the ITAR.

5. Be careful of 126.1 countries.

Pursuant to Section 129.7(b) of the ITAR, the foregoing licensing requirement limitations do NOT apply to brokering activities involving countries referenced in Section 126.1 and, as such, ANY brokering of defense articles and defense services that has a nexus to those countries requires a license.


About the Authors

Downrange authors Jennifer S. Huber and Adam Munitz are Partners in FH+H's International Trade & Transactions Practice.  Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam help businesses translate their domestic successes into overseas growth and assist foreign entities with sensitive investments in, and acquisitions of, U.S. businesses.  

Additional information regarding their capabilities and previous representations can be found here.

 

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"Brokering Activities" are defined very broadly in the International Traffic in Arms Regulations (ITAR).
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