Obligations of Brokers under the ITAR

    October 07, 2011, 06:52 PM

    A broker is defined under the International Traffic in Arms Regulations (ITAR) as 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. 22 CFR 129.2(a) Brokering activities include acting as a broker, as previously defined, and includes the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import of a defense article or defense service, irrespective of its origin. 22 CFR 129.2(b). If your company performs these activities, then ITAR applies and it must comply with the ITAR obligations for brokers. If your company acts as an agent for others in negotiating or arranging contracts, purchases, sales, or transfers of products, then the first step is to determine whether the products in which your company deals are defense articles. To do this, you must review the United States Munitions List (USML), which is located at 22 CFR 121.1. If the product is located on the USML, then the product is considered a defense article. Assuming your company acts as a broker in exchange for a fee, commission, or other consideration, it must register with the Directorate of Defense Trade Controls (DDTC) pursuant to ITAR. Exemptions from registration are narrow and include only the following persons:

    1. Employees of the United States Government acting in official capacity,
    2. Employees of foreign governments or international organizations acting in official capacity, and
    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 USML items).

    22 CFR 129.3 To register as a broker, your company must submit (1) a statement of registration, (2) a transmittal letter, (3) documentation that demonstrates it is incorporated or otherwise authorized to do business in the Unites States, and (4) a registration fee of $2,250.00. 22 CFR 129.4. In addition to registration with the DDTC, a broker may be required to obtain a license before engaging in certain enumerated brokering activities, depending on the particular product and country involved in the transaction. See 22 CFR 129.6-.7. Even if a license is not required, the registered broker must provide an annual report to DDTC specifying its brokering activities by quantity, type, U.S. dollar value, and purchasers and recipients license numbers, as well as any applicable ITAR exemptions.