Pillsbury Winthrop Shaw Pittman

State department publishes interim final rule to clarify defence-broker requirements

By Christopher R Wall, Stephan E Becker, Nancy A Fischer and Aaron R Hutman

Section 38(f) of the Arms Export Control Act requires the registration of brokers of defense articles and defense services, pursuant to regulations currently published in Part 129 of the International Traffic in Arms Regulations (ITAR). Although these regulations have been in place for decades, their scope and reach have not been clearly defined. New regulations published on 26 August, 2013, are the culmination of a multi-year effort on the part of the US Department of State, Directorate of Defense Trade Controls (DDTC) to clarify the brokering rules.

DDTC published a proposed revision of ITAR Part 129 on 19 December, 2011 (76 Fed. Reg. 78578) (Proposed Rule). The Proposed Rule would have greatly expanded the broker registration requirements, particularly with respect to foreign companies engaged in activities outside the United States. Also in 2011, DDTC settled a major enforcement case involving a large number of Part 129 violations in which DDTC appeared to adopt new interpretations of Part 129 requirements.

Many in the business community commented on the Proposed Rule, noting that the expansion of the brokering requirements was at cross purposes with the direction of the Obama Administration’s export control reform initiative…

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