1. Brokering Requirements for the Firearms Industry July 2012 www.pwc.com/us/forensics Export Control Services

2. PwC Brokering 101: Section 129 of the International Traffic in Arms Regulations addresses the registration and licensing of brokers: Section 129.1 “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 129.3 describes registration requirements Section 129.4 describes Department of State Form DS-2032 (Statement of Registration) and fees Section 129.5 gives policy on embargoes (see 126.1) and other proscriptions Section 129.6 provides requirements for license/approval Section 129.7 describes activities requiring prior written approval (license) of the Directorate of Defense Trade Controls (“DDTC”) (see (a)(1)(i) re firearms) Section 129.8 describes activities requiring prior notification to DDTC Section 129.9 outlines annual reporting requirements Section 129.10 gives where to go for additional guidance  DDTC July 2012 2

3. PwC Who is a “broker”? July 2012 3 “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.”

4. PwC What is “brokering”? July 2012 4 “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.”

5. PwC Section 129.2(b) definition of “brokering” continued: July 2012 5 “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.”

6. PwC Who is NOT a “broker”? July2012 6 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.”

7. PwC Who is NOT a “broker” continued July 2012 7 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….”

8. PwC Prior approval (licenses) are required July 2012 8 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.”

9. PwC Proposed new brokering requirements July 2012 9 On December 19, 2011, the Department of State published a proposed rule on brokering. The public comment period closed on February 17, 2012.

10. PwC Export Control Services Contacts and Resources July 2012 Jeannette L. Chu Director Telephone: (703) 762-7250 Jeannette.L.Chu@us.pwc.com 10 Philip D. Treccagnoli Partner Telephone: (646) 471-8191 Philip.D.Treccagnoli@us.pwc.com Philip A. Charnas Director Telephone: (408) 817-8183 Philip.Charnas@us.pwc.com Samar Aziz Manager Telephone: (646) 471-1265 Samar.Aziz@us.pwc.com Ray T. Hirata Manager Telephone: (408) 534-2391 Ray.T.Hirata@us.pwc.com

11. © 2012 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This proposal is protected under the copyright laws of the United States and other countries. This proposal contains information that is proprietary and confidential to PricewaterhouseCoopers LLP, and shall not be disclosed outside the recipient's company or duplicated, used or disclosed, in whole or in part, by the recipient for any purpose other than to evaluate this proposal. Any other use or disclosure, in whole or in part, of this information without the express written permission of PricewaterhouseCoopers LLP is prohibited.