State Department Publishes Interim Final Rule on Brokers and Brokering Activities
The State Department on Aug. 26 issued an interim final rule to amend International Traffic in Arms Regulations (ITAR) provisions related to brokers and brokering activities. The action finalizes a December 2011 proposed rule, with some changes (see 11121910). The amendments make alterations to the definition of “broker”, the scope of “brokering activities”, “broker” eligibility and other requirements. The interim final rule is set to take effect Oct. 25. Interested parties may submit additional comments by Oct. 10.
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New Definition of “Broker”
The interim final rule now says foreign persons that are required to register as brokers are those that (1) are in the U.S., along with (2) those foreign persons outside the U.S. that are owned or controlled by a U.S. person. The proposed definition qualified any individual that engages in “brokering activities” as a “broker”. Comments expressed concern over the potential to greatly increase the number of individuals required to register as brokers as a result of the broad definition of “broker." The change was in response to that concern.
Changes Definition of “Brokering Activities”
State also made several changes to its definition of "brokering activities." These include:
- Removed the activities of any foreign person located outside the United States acting on behalf of a U.S. person from “brokering activities”.
- Said “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 noted that “legal advice” includes the provision of export compliance advice by an attorney to a client.
- Exempted from “brokering activities” persons that are exclusively involved in financing, insuring, transporting or freight forwarding, as long as the activities aren't part of arranging transactions.
State Elaborates on Ineligible “Broker” Qualification
In response to uncertainty from commenters, the agency said any person charged with a violation of the U.S. criminal statutes enumerated in 22 CFR 120.27 is generally ineligible to be involved in ITAR-regulated activities. Among other statutes, 22 CFR 120.27 includes Section 38 of the Arms Export Control Act and Section 11 of the Export Administration Act of 1979. The interim final rule does not elaborate on the use of the term “generally”. The confirmation is not a regulatory change.
Agency Limits Scope of Prior Approval, Authorization Requests
Revisions to 22 CFR 120.4 also specify which of the U.S. Munitions List (USML) items require prior approval for brokering activities, instead of generally requiring prior approval for all USML items. Additionally, the State Department removed a provision from the revised regulation that would have, in 22 CFR 126.13, required the identification of brokers and brokering activities in all authorization requests due to excessive burden.
(Federal Register 08/26/13)