On Monday, the State Department published an interim final rule which revises significant portions of the brokering activities controlled by Part 129 of the ITAR. One of the most meaningful changes in this rule is a definition of what “brokering activities” actually means. The rule also revises and clarifies related sections of the ITAR related to brokers and brokering.
Some of the highlights include:
- A helpful addition in §129.2(b)(2) which describes certain activities which do not constitute “brokering activities” under the regulations. This includes, for example, foreign subsidiaries of U.S. parent companies who promote or advertise their parent companies’ defense articles/services in foreign countries.
- A revised §129.4 which more clearly states that types of defense articles and defense services on the USML that require prior approval from DDTC before brokering activities can begin. This list is more clearly stated and delineated than the previous version.
- A new rule in §129.3(d) that will eliminate the need for companies to submit two registration forms (and pay two registration fees) when they are engaged in the business of both brokering and manufacturing/exporting. Going forward, only one form (and one fee) will be needed for companies who meet the criteria in (d).
- Removing the requirement for a Foreign Person to register as a broker, unless they are “owned/controlled” by a U.S. Person. (This change is affected by removing the previous requirement that any Foreign Person who acts on behalf of a U.S. Person must register.)
You can read the full text of the new rule here. Public comments will be accepted until October 10, 2013. Assuming there are no further changes, the new rule will become final on October 25, 2013 – approximately 17 years after the idea of regulating “brokering activities” was first introduced in the ITAR.
Tom Reynolds is the Vice President of Operations for Export Solutions, a consultancy firm which specializes in ITAR and EAR compliance.