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What Constitutes a “Broker” under ITAR

December 2012

The International Traffic in Arms Regulations (ITAR) require that any U.S. person, wherever located, and any foreign person located in the U.S. or otherwise subject to the jurisdiction of the U.S., who engages in the business of brokering activities with respect to the manufacture, export, import, or transfer of any defense article or defense service register with the Directorate of Defense Trade Controls (DDTC) of the U.S. Department of State (DOS). 

Questions often arise about whether a particular activity requires a person to register as an ITAR Broker.  The existing regulation is challenging to interpret.  On December 19, 2011, the DDTC attempted to make things a bit easier by publishing a proposed clarifying regulation (Proposed Rule). 

The Proposed Rule would amend the definitions of broker and brokering activities to track the definitions in the Arms Export Control Act.   Through these and other changes, the Proposed Regulation helps professionals involved in the defense and export control communities understand whether they are required to register with the DDTC as ITAR brokers.  

The Proposed Rule revises the definitions of brokering and brokering activities.

Broker means any person who engages in brokering activities. 

Brokering activities means any action to facilitate the manufacture, export, reexport, import, transfer, or retransfer of a defense article or defense service. Such action includes, but is not limited to:

  1. Financing, insuring, transporting, or freight forwarding defense articles and defense services, or
  2. Soliciting, promoting, negotiating, contracting for, arranging, or otherwise assisting in the purchase, sale, transfer, loan, or lease of a defense article or defense service.  

Engaging in the activities described in either (1) or (2) is enough to meet the definition of brokering activities.

The Proposed Rule includes brokering activities by any

The Proposed Rule excludes

Further, the Proposed Rule specifically exempts the following persons from the broker registration requirements under ITAR

Under the Proposed Rule, if further guidance about the scope of the registration requirement is needed, a person could request guidance in writing from the DDTC including

Comments on the Proposed Rule were due February 17, 2012.  The DDTC has not announced the status of any changes to the Proposed Rule in response to comments that it has received.  The DDTC may release a final rule in the coming months incorporating language changes made in response to the comments on the Proposed Rule.