Brokering Requirements for the Firearms Industry July Export Control Services

PwC Brokering 101: Section 129 of the International Traffic in Arms Regulations addresses the registration and licensing of brokers: Section “Purpose” references Section 39b()(1)(A)(ii) of the Arms Export Control Act Section 129.2(a) defines “broker” Section 129.2(b) defines “brokering activities” Section 129.2(c) defines “foreign defense article or defense service” Section describes registration requirements Section describes Department of State Form DS-2032 (Statement of Registration) and fees Section gives policy on embargoes (see 126.1) and other proscriptions Section provides requirements for license/approval Section describes activities requiring prior written approval (license) of the Directorate of Defense Trade Controls (“DDTC”) (see (a)(1)(i) re firearms) Section describes activities requiring prior notification to DDTC Section outlines annual reporting requirements Section gives where to go for additional guidance  DDTC July

PwC Who is a “broker”? July “Section 129.2(a) Broker means any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee, commission or other consideration.”

PwC What is “brokering”? July “Section 129.2(b) Brokering activities means acting as a broker as defined in Section 129.2(a), and includes the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import, or [sic] a defense article or defense service, irrespective of its origin.”

PwC Section 129.2(b) definition of “brokering” continued: July “For example, this includes, but is not limited to, activities by U.S. persons who are located inside or outside of the United States or foreign persons subject to U.S. jurisdiction involving defense articles or defense services of U.S. or foreign origin inside or outside of the United States.” Section 129.2(c) defines “foreign defense article or defense service” “as “includes any non-United States defense article or defense service of a nature described on the United States Munitions List regardless of whether such article or service contains United States origin components.”

PwC Who is NOT a “broker”? July Section 129.2(b): “But, this does not include activities by U.S. persons that are limited exclusively to U.S. domestic sales or transfers (e.g., no for export or re-transfer in the United States or to a foreign person). For the purposes of this subchapter, engaging in the business of brokering activities requires only one action as described above.”

PwC Who is NOT a “broker” continued July Section 129.3(b) provides the following exemptions from registration: (1)“Employees of the United States Government acting in official capacity.” (2)“Employees of foreign governments or international organizations acting in official capacity.” (3)“Persons exclusively in the business of financing, transporting, or freight forwarding, whose business activities do not also include brokering defense articles or defense services. For example, air carriers and freight forwarders who merely transport or arrange transportation for licensed United States Munitions List items are not required to register, nor are banks or credit companies who merely provide commercially available lines or letters of credit to persons registered in accordance with part 122 of this subchapter required to register….”

PwC Prior approval (licenses) are required July Section 129.7(a)(1)(i) requires prior written approval from DDTC for “brokering activities relating to defense articles and services covered by or of a nature described by part 121” (U.S. Munitions List), to or from any country – “ automatic firearms and components and parts therefore.”

PwC Proposed new brokering requirements July On December 19, 2011, the Department of State published a proposed rule on brokering. The public comment period closed on February 17, 2012.

PwC Export Control Services Contacts and Resources July 2012 Jeannette L. Chu Director Telephone: (703) Philip D. Treccagnoli Partner Telephone: (646) Philip A. Charnas Director Telephone: (408) Samar Aziz Manager Telephone: (646) Ray T. Hirata Manager Telephone: (408)

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