[Federal Register Volume 76, Number 243 (Monday, December 19, 2011)]
[Proposed Rules]
[Pages 78578-78591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32432]
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DEPARTMENT OF STATE
22 CFR Parts 120, 122, 126, 127, and 129
RIN 1400-AC37
[Public Notice 7732]
Amendment to the International Traffic in Arms Regulations:
Registration and Licensing of Brokers, Brokering Activities, and
Related Provisions
AGENCY: Department of State.
ACTION: Proposed rule.
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SUMMARY: The Department of State proposes to amend part 129 of the
International Traffic in Arms Regulations (ITAR) relating to brokers
and brokering activities. Amendments are also to be made to related
provisions of the ITAR. The proposed revisions are intended to clarify
registration requirements, the scope of brokering activities, prior
approval requirements and exemptions, procedures for obtaining prior
approval and guidance, and reporting and recordkeeping of such
activities. Conforming and technical changes would be made to other
parts of the ITAR that affect export as well as brokering activities.
DATES: The Department will accept comments on this proposed rule until
February 17, 2012.
ADDRESSES: Interested parties may submit comments within 60 days of the
date of publication by one of the following methods:
Email: [email protected] with the subject line,
``Brokering Rule Comments.''
Internet: At www.regulations.gov, search for this notice
by using this rule's RIN (1400-AC37).
Comments received after that date will be considered if feasible, but
consideration cannot be assured. Those submitting comments should not
include any personally identifying information they do not desire to be
made public or information for which a claim of confidentiality is
asserted because those comments and/or transmittal emails will be made
available for public inspection and copying after the close of the
comment period via the Directorate of Defense Trade Controls Web site
at www.pmddtc.state.gov. Parties who wish to comment anonymously may do
so by submitting their comments via www.regulations.gov, leaving the
fields that would identify the commenter blank and including no
identifying information in the comment itself. Comments submitted via
www.regulations.gov are immediately available for public inspection.
FOR FURTHER INFORMATION CONTACT: Daniel L. Cook, Chief, Compliance and
Registration Division, Office of Defense Trade Controls Compliance,
Department of State, 12th Floor, SA-1, 2401 E Street NW., Washington,
DC 20037; or email: [email protected], with the subject line
``Brokering Rule Comments.''
SUPPLEMENTARY INFORMATION: This proposed rule would make changes to
part 129 and other related sections of the ITAR that regulate brokers
and brokering activities and implement the brokering amendment to the
Arms Export Control Act (AECA) (Sec. 38(b)(1)(A)(ii) of the AECA, 22
U.S.C. 2778(b)(1)(A)(ii)).
Background
The Arms Export Control Act was amended in 1996 (Pub. L. 104-164)
to provide for the regulation of brokering activities. The following
year, implementing regulations were added to the ITAR in part 129.
These regulations have remained unchanged except for two minor
technical changes.
In 2003, in a report to Congress, the Department of State noted
that it was beginning a review of the brokering regulations. The
purpose of the review was to assess the need to modify the regulations
in light of the experience gained in administering them. The changes
proposed in this notice stem from this experience. They were also
shaped by comments received from other agencies and industry, including
the Defense Trade Advisory Group, a Department of State advisory
committee.
Revisions Relevant to Industry Concerns
Changes are proposed to key provisions involving definitions,
registration, licensing, exemptions, and reporting procedures. Some of
these changes will result in a reduction of burden to the affected
public. New exemptions are proposed, requirements for prior
notification would be eliminated, and detailed guidance on obtaining a
brokering authorization would be provided. The proposed changes also
provide additional specificity regarding the applicability of these
regulations to foreign brokers operating overseas.
Summary of Major Changes
Definitions of Broker and Brokering Activities
The definitions in current Sec. 129.2(a) and (b) would be amended
to clarify the terms ``broker'' and ``brokering activities.'' The
revision also would more closely track the statutory definition of
brokering activities in the Arms Export Control Act, which provides
that brokering activities shall include 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.
The proposal would delete the phrase ``who acts as an agent for
others'' that is in the current regulatory definition of ``broker,''
but is not in the definition of ``brokering activities'' in the Arms
Export Control Act. Under current definitions, part 129 applies to U.S.
persons who conduct brokering activities in the U.S. or abroad. It also
applies to foreign persons who conduct brokering activities in the
U.S., or abroad if subject to U.S. jurisdiction. Proposed Sec.
129.2(d)(3)-(5) clearly indicate when a foreign person's brokering
activities are subject to the ITAR.
New Sec. 129.2(e)(3) would clarify that brokering does not include
activities that do not extend beyond administrative services such as
providing or arranging office space and equipment, hospitality,
advertising, or clerical, visa, or translation services, or does not
include activities beyond the provision of legal advice by an attorney
to his client.
Brokering and U.S. Government Employees
New Sec. 129.2(e)(1) would continue to exclude from the definition
of ``brokering activities'' actions by U.S. persons in the United
States that are limited to facilitating U.S. domestic sales or
transfers. New Sec. 129.2 (e)(2) would add a new exclusion from the
definition of ``brokering activities'' for such activities by employees
of the U.S. Government acting in an official capacity. The proposed
exclusion would clarify that the U.S. Government and its officers or
employees acting in an official capacity are not merely exempt from the
requirements to register and obtain licenses, but rather are not
covered by part 129 at all.
[[Page 78579]]
Registration Requirements and Exemptions
Editorial and technical revisions would be made to certain
registration and related registration exemption provisions in Sec.
129.3.
Persons exclusively in the business of insuring would be added to
those persons exempt from registration in Sec. 129.3(b)(2), as their
insuring activity is similar to that of banks and financing. Such
persons would also be exempt from the requirements in Sec. 129.6 for
prior approval for brokering activities, as well as reporting and
recordkeeping requirements in Sec. Sec. 129.10 and 129.11.
New Sec. 129.3(b)(3) concerns persons registered pursuant to part
122 of this subchapter, including their U.S. subsidiaries, joint
ventures, and other affiliates listed in their Statement of
Registration, their bona fide and full-time regular employees, and
their eligible foreign person brokers listed and identified as their
exclusive brokers in their Statement of Registration, whose brokering
activities: (a) Involve only the defense articles or services that are
currently subject to export licenses obtained by the part 122
registrant or will require a license prior to their export by the
registrant; or, (b) are on behalf of the part 122 registrant and
involve only defense articles and defense services that are located and
obtained from a manufacturer or source in the United States for export
outside the United States under an export approval. Such persons are
not required to obtain a separate part 129 registration, and would be
exempt from the requirements in Sec. 129.6 for prior approval for
brokering activities as well as reporting requirements in Sec. 129.10,
but would still have recordkeeping requirements as specified in Sec.
129.11.
New Sec. 129.3(b)(4) would exempt from registration persons whose
activities do not extend beyond acting as an end-user of a defense
article or defense service exported pursuant to a license or approval
under parts 123, 124, or 125, or subsequently acting as a reexporter or
retransferor of such article or service under such license or approval
or under an approval under Sec. 123.9. Such persons would also be
exempt from the requirements in Sec. 129.6 for prior approval for
brokering activities, as well as reporting and recordkeeping
requirements in Sec. Sec. 129.10 and 129.11.
New Sec. 129.3(c) would specify that persons exempt from
registration are subject to the policy of embargoes and other
proscriptions in Sec. 129.5.
New Sec. 129.3(d) would specify that if new Sec. 129.3(b)(3) is
not applicable, U.S. persons who are registered as a manufacturer or
exporter in accordance with part 122, including their U.S. or foreign
subsidiaries, joint ventures, and other affiliates listed and covered
on their Statement of Registration, and who are required to register
under part 129, are not required to submit a separate broker
registration or pay a separate broker registration fee as long as they
have listed and identified themselves as brokers within their
manufacturer or exporter Statement of Registration. All other
requirements of part 129 would apply to such brokers and their
brokering activities.
Registration Statement and Fees
The revisions would consolidate most broker registration
requirements in Sec. 129.4 rather than referring to certain
requirements in part 122 (e.g., notification of changes in information
in registration submissions, notice of transfer of ownership or control
to foreign persons and special provisions for mergers and
acquisitions). In addition, the requirements for submissions by foreign
person brokers are clarified. A broker not otherwise exempt from
registration or not listed under a part 129 registration submission in
accordance with Sec. 129.4(c) would continue to be required to
register and pay a registration fee of $2,250 per year (see Sec.
129.4(a)). The Statement of Registration would be required to be signed
by a senior officer who has been empowered by the intended registrant
to sign such documents (see Sec. 129.4(a)). The registrant must also
submit documentation that it is incorporated or otherwise authorized to
do business in the United States or, in the case of a foreign person
registrant, in the relevant foreign jurisdiction (see Sec. 129.4(a)).
Section 129.4(b) would be revised to reflect that a person who is
required to register as a broker must do so annually and pay a
registration fee of $2,250. This revision was made so readers would no
longer need to refer to Sec. 122.3. In addition, nearly half of the
brokers registered with the Directorate of Defense Trade Controls
(DDTC) are foreign persons whose first language is not English and who
are not accustomed to U.S. regulations. We therefore want to
consolidate most broker-related requirements in one section and make
the navigation of the ITAR simpler.
Section 129.4(c) would be revised to reflect that there is no
longer a requirement for a separate transmittal letter. The new
requirements for intended broker registrants are certain certifications
to be made on the Statement of Registration that previously were
provided via the transmittal letter.
In Sec. 129.4(c)(1), specific references to certain senior
officers or officials would be added. In order for DDTC to obtain a
certification of eligibility status as to all parties listed in a
registration, this paragraph would also expressly require
certifications to cover the registrant's parent or any subsidiary,
joint venture, other affiliate, or other persons required to be listed
in the Statement of Registration. In addition, this paragraph would
clarify that disclosure is required of any form of charge of listed
U.S. criminal statutes as well as indictment in order to eliminate
uncertainty or misinterpretation of whether someone who has waived
indictment and is criminally charged by ``information'' must notify
DDTC. Certification requirements would be supplemented with a provision
for part 129 registrants to disclose any convictions or indictments or
other charges for violating foreign criminal statutes dealing with
subject matter similar to the listed U.S. statutes or ineligibility
under the laws of a foreign country to participate in export, import,
or brokering activities. (A similar requirement is added to a broker's
application for prior approval of brokering activities (see Sec.
129.8(a)).
Section 129.4(c)(2) would contain the certification on whether the
registrant is subject to foreign ownership or control and would add
clarifications on when this requirement applies and would specifically
require a foreign owned or controlled registrant to explain such
ownership or control, including the identities of all ultimate owners
or control persons.
New Sec. 129.4(d) would recognize expressly the discretion of DDTC
to permit a broker that is a parent of a U.S. or foreign person
registered as a broker under part 129 to be covered by the registrant's
Statement of Registration, provided that such broker parent is listed
in the registrant's Statement of Registration and meets the same
certification and other requirements set forth in this section.
New Sec. 129.4(e) would specify that notifications of changes in
registration information be signed by a senior officer, and provide
that certain changes be communicated within five days of the event and
other material changes at the time of annual registration renewal.
New Sec. 129.4(f) would require notice 60 days in advance of any
transfer to foreign ownership or control of a broker, any parent,
subsidiary, or other affiliate listed and in the Statement of
Registration.
New Sec. 129.4(g) would provide procedures that must be followed
in the
[[Page 78580]]
case of an acquisition or merger involving a registered broker.
Policy on Embargoes and Other Proscriptions
Section 129.5 would be amended to provide explicitly that
exemptions from prior approval in Sec. 129.7 do not apply to brokering
activities involving countries or other persons subject to embargoes
and other proscriptions cited in Sec. 129.5 (e.g., those involving
countries or other persons referred to in Sec. 126.1 or subject to a
restriction published in the Federal Register). A provision in current
paragraph (d) would be removed because it is redundant of paragraph
(b); paragraphs would be re-designated, accordingly.
Exemptions From Prior Approval Requirement
The exemption for brokering activities undertaken for an agency of
the U.S. Government would be amended to make clear that the exemption
applies only to persons under direct contract with a U.S. Government
agency for the sole use by the U.S. Government agency or for carrying
out a foreign assistance or sales program authorized by law and subject
to the control of the President by other means. In the latter case, use
of this exemption requires either prior concurrence from DDTC or the
contract at issue must contain an explicit clause stating the contract
supports a foreign assistance or sales program authorized by law and
the contracting agency has established control of the activity covered
by the contract by other means equivalent to that established under the
ITAR.
The exemption for brokering activities arranged within the North
Atlantic Treaty Organization (NATO), NATO member countries, Australia,
Japan, New Zealand, or the Republic of Korea would be amended to make
it clear that the brokering activities must be undertaken wholly within
these countries, and the defense articles and services must be located
within and destined for NATO or such countries (see Sec. 129.7(c)).
A new exemption would be added for brokering activities outside of
NATO member countries, Australia, Japan, New Zealand, or the Republic
of Korea that involve U.S.-origin defense articles that are not
significant military equipment (SME) and where the end-use is limited
to foreign government and international organization end-users (see
Sec. 129.7(d)).
The list of excluded items in Sec. 129.7(e) would be expanded to
cover certain sensitive defense articles and services (e.g., man-
portable air defense systems or ``MANPADS,'' night vision equipment,
spacecraft items that are SME, submersible vessels, directed energy
weapons, and miscellaneous articles in U.S. Munitions List Category
XXI). Additional technical and clarifying changes would also be made to
various exclusions.
Prior Notification
The proposed revision would delete the requirement for prior
notification in its entirety in the current Sec. 129.8. While
nominally a notice provision, this section had the effect of being a
prior approval requirement and proved to be confusing and difficult to
administer. The revisions would re-title Sec. 129.8 and modify
procedures for obtaining prior approval.
Procedures for Obtaining Prior Approval
The information required in a request for prior approval submitted
by a broker is revised and clarified in proposed new Sec. 129.8. A
provision adding a certification would be added in Sec. 129.8(a) so
that a request must include a statement on whether the broker applicant
or its senior officers or officials have been indicted or otherwise
charged (e.g., by information) or convicted by foreign governments for
violating any national statutes similar to those listed in Sec. 120.27
or are ineligible to contract with, or to receive a license or other
form of authorization or otherwise participate in defense trade under
the laws of a foreign country. (See similar requirement in Sec. 129.4
for a broker's Statement of Registration certification.)
The proposal would provide more specific guidance on the
information required in a request (e.g., identities of all entities and
individuals who would participate in the brokering activities,
information regarding the defense articles and services and any fee,
commission, or other consideration). In this connection, the
requirement for brokers to disclose fees, commissions, or other
consideration is separate from and additional to the disclosure
requirements imposed on exporters, suppliers, and vendors under part
130.
Proposed Sec. 129.8 recognizes that some of the information to be
required by that section may not be available at the time a request for
prior approval is submitted (e.g., the quantity and value of defense
articles or services to be brokered). The broker would be required to
identify what information is omitted and provide an explanation. DDTC
has the discretion to take such circumstances into account in deciding
whether to approve the request with or without conditions or to deny
the request.
A provision would be added specifying that the validity period of a
prior approval may not exceed four years.
Guidance
Section 129.9 would be re-titled and would revise the provision
that enables persons to seek guidance from DDTC regarding the
applicability of part 129 to their activities. It would provide the
procedures for obtaining guidance and specify that such guidance shall
not substitute for prior approval when required under Sec. 129.8. As
revised, this provision would be self-contained and would no longer
reference the provision for advisory opinions in ITAR Sec. 126.9.
Reports
Section 129.10 would be re-titled and revised to require that
reports be submitted annually with the registration renewal submission,
or within 30 days after expiration of registration if not renewing, for
brokering activities the preceding year and to clarify the information
required in the reports. Currently, the regulations do not provide a
specific time period for submission of these reports, but via the DDTC
Web site we have requested submissions in January. We are proposing
this new reporting schedule in order to consolidate registration
renewal with report submission, which we believe will improve reporting
accountability and lessen the burden on industry.
Records
New Sec. 129.11 would provide that records on brokering activities
must be maintained in accordance with Sec. 122.5.
Examples of Brokering Activities and License Application or Other
Approval Requirements
Described below are several examples of conduct that constitute
brokering activities and how the ITAR applies to such activities. These
examples are illustrative only and are not exhaustive.
Example 1: A U.S. person learns of an upcoming U.S. Government
solicitation for procurement of foreign defense articles that are
significant military equipment (SME) and located abroad for delivery
to a foreign government in South America. The solicitation will not
be in support of a U.S. Government foreign assistance or sales
program otherwise authorized by law. In advance of the solicitation,
the U.S. person contacts several foreign manufacturers, personally
visits their facilities to assess their capabilities to meet product
specifications, and obtains guidance on the export procedures of the
governments of the
[[Page 78581]]
countries where the defense articles are manufactured. Upon being
awarded the contract by the U.S. Government, the U.S. person
arranges for delivery from the manufacturers in the foreign
countries to the South American government identified in the U.S.
Government contract. The U.S. person is engaged in brokering
activities and would be required to register under part 129 prior to
initiating such activities. If the U.S. person is already registered
as a manufacturer or exporter under part 122, it could meet part 129
registration requirements simply by amending its form DS-2032
Statement of Registration to add broker as a registration type and
other required information (e.g., U.S. and foreign subsidiaries and
affiliates also engaged in brokering activities); there would be no
requirement for a separate broker registration submission or fee.
Example 2: A foreign person signs an agreement with a U.S.
manufacturer/exporter registered with DDTC under part 122 to act as
a broker exclusively for the registrant and is listed on the
registrant's statement of registration as an exclusive broker. The
agreement obligates the foreign person to purchase and distribute
(or resell) to specified foreign governments in the Middle East the
SME defense articles of the part 122 registrant. The part 122
registrant has obtained a DSP-5 license for technical data and a
Warehouse & Distribution Agreement authorizing the foreign person to
receive and present technical data to promote sales and to warehouse
and distribute the defense articles. The foreign person is engaged
in brokering activities, but assuming the foreign person meets
eligibility and other criteria, he would be exempt under Sec.
129.3(b)(3) from separate registration, prior approval, and
reporting under part 129 with respect to the foregoing activities on
behalf of the part 122 registrant. However, the foreign person would
be subject to the policies and proscriptions of Sec. 129.5 as well
as recordkeeping requirement of proposed Sec. 129.11.
Example 3: A foreign person seeks buyers for certain U.S.-origin
SME defense articles previously exported through commercial channels
to a foreign government of a NATO-member country. The foreign person
enters into a representational arrangement with the foreign
government to find a buyer. The foreign person contacts potential
buyers in the U.S. and overseas and ultimately identifies a foreign
government in Southeast Asia that wishes to procure the defense
articles. The foreign person arranges for an in-country
demonstration of the defense articles and negotiates the terms of
the sale. The foreign person has engaged in brokering activities and
would be required to register under part 129 and to obtain DDTC
approval prior to initiating such activities. In addition, the
foreign government seller would be required to obtain a reexport
authorization under ITAR Sec. 123.9(d) before reselling or
reexporting such defense articles.
Example 4: A U.S. manufacturer/exporter, registered with DDTC
under part 122, provided U.S. SME defense articles for export by the
U.S. Department of Defense through the Foreign Military Sales
Program to a foreign government in the Middle East. Several years
later, the foreign government asks the U.S. manufacturer/exporter to
find buyers for the defense articles. The foreign government will
use proceeds from the sale to upgrade its inventory with more modern
defense articles from the same U.S. manufacturer. The U.S. company
solicits and identifies a foreign government buyer in a sub-Saharan
African country and negotiates the terms of sale on behalf of the
Middle Eastern government. The U.S. manufacturer/exporter company is
engaged in brokering activities and would be required to register
under part 129 and obtain approval from DDTC under part 129 prior to
engaging in such activities. As provided in proposed Sec. 129.3(d),
the manufacturer/exporter, having already registered under part 122,
would not be required to file a separate broker registration or pay
a separate fee, provided that it discloses that it engages in
brokering activities in its registration. The Middle Eastern
government owner would also be required to obtain reexport
authorization for the FMS-origin defense articles from the
Department of State's Office of Regional Security and Arms Transfers
prior to reselling or reexporting such defense articles.
Example 5: A U.S. manufacturer of a defense article enters into
a sales contract with a government end-user in a South American
country and then obtains an export license from DDTC to export the
defense article. The manufacturer engages a freight forwarder to
arrange pick-up, containerization, transportation, and delivery to
the end-user. The freight forwarder is engaged in brokering
activities. However, so long as activities do not extend beyond
freight forwarding, the freight forwarder will not be required to
register, as provided by proposed Sec. 129.3(b)(2). The freight
forwarder, as well as any other person exempt from registration,
must still comply with Sec. 129.5 (policy on embargoes and other
proscriptions).
Example 6: A bank in a Caribbean island country approaches a
U.S. manufacturer of a defense article. The bank proposes to provide
financing, through letters of credit that the bank issues, for the
sale of the manufacturer's defense articles to a government end-user
in Asia. As an inducement to perform the financing, the bank
arranges introductions with a procurement official of the Asian
government. The bank is performing activities beyond financing and
is engaged in brokering activities (i.e., arranging introductions).
The bank would be required to register with DDTC under part 129 and
would be required to obtain prior approval unless its activities
qualify for an exemption under Sec. 129.7.
Example 7: A European manufacturer of a defense article
incorporates U.S. origin defense articles (i.e., parts and
components on the U.S. Munitions List). The European manufacturer
negotiates a sales contract with a government end-user in a Middle
Eastern country. In doing so, the European manufacturer employs a
foreign person from that country to perform translation services
during the negotiation. The foreign person is not engaged in
brokering so long as that person's activity does not extend beyond
administrative services such as translation pursuant to proposed
Sec. 129.2(e)(3). Release to the foreign person of technical data
on the U.S.-origin defense articles would require a license from
DDTC. In addition, the European manufacturer would be exempt from
registration, prior approval, reporting, and recordkeeping
requirements under part 129, assuming all of the conditions of Sec.
129.3(b)(4) are met. However, the policies and proscriptions of
Sec. 129.5 would apply.
Other Revisions
Conforming and other changes would be made to a number of other
parts of the ITAR related to brokering activities.
Section 120.1(a) would be amended to add reference to ``other
relevant authorities in the Arms Export Control Act (22 U.S.C. 2751 et
seq.)'' that are implemented by the ITAR. Sections 120.1(a)-(c) would
be amended to update the title of the Deputy Assistant Secretary.
Section 120.1(c)'s heading would be changed to ``Receipt of
Licenses and Eligibility'' and the text would be restructured into two
subparagraphs. Subparagraph (1) would identify the kinds of licenses
and other approvals that U.S. and/or foreign persons are qualified to
receive and would add a clarification that foreign as well as U.S.
persons may receive prior approvals for brokering activities.
Subparagraph (2) would list the circumstances that would make a person
generally ineligible to be involved in activities regulated under the
ITAR. The latter provision would include clarification that it applies
to foreign as well as U.S. persons and that ineligibility also attaches
to a criminal charge (e.g., by information) as well as indictment, an
interim suspension under Sec. 127.8, or policy of denial under Sec.
126.7(a).
Section 120.1(d) would be amended to clarify that exemptions
provided by the ITAR do not apply to transactions in which the source
or manufacturer, broker, or other participant in brokering activities
(in addition to the exporter or party to the export) is generally
ineligible, unless prior authorization granted by the DDTC. Also, an
obsolete reference to Sec. 126.7(c) would be deleted.
Section 120.20 would be amended to add ``or other approval'' to the
title and provide a definition for ``other approval.''
Section 120.25(a)(4)(i), the definition of ``Empowered Official,''
would be amended to add a reference to brokering activities. Paragraph
(b) would be added to clarify that the empowered official of a foreign
person broker may be a foreign person who otherwise meets the criteria
for such an official in paragraph (a). Paragraph (c) would be added to
specify that a person may not serve as an empowered official if such
person is
[[Page 78582]]
ineligible under Sec. 120.1(c)(2); has been convicted of violating any
foreign criminal statutes similar to that referred to in that section;
is ineligible to contract with, or to receive an import or export
license from any foreign government agency; or is a citizen or national
of any country or is a person referred to in Sec. 126.1.
New Sec. 120.40 would add a definition of ``affiliate.''
Section 122.2(b)(1) would be amended to add specific references to
certain senior officers or officials, including secretary, partner, or
member. This paragraph would also expressly require certifications to
cover the registrant's parent or any subsidiary, joint venture, other
affiliate, or other persons required to be listed in the Statement of
Registration. This paragraph would also be clarified to require
disclosure of any criminal charge (e.g., an information), as well as
indictment of a listed crime. Paragraph (b)(2) of this section would be
amended by adding a provision that would specifically require a foreign
owned or controlled registrant to explain such ownership or control,
including the identities of all ultimate owners or control persons.
Also, a redundant provision concerning U.S. incorporation documentation
would be deleted from this paragraph.
Section 122.4(a) would be amended to specify that notifications of
changes in registration information be signed by a senior officer, and
to provide that certain changes be notified within five days of the
event and other material changes at the time of annual registration
renewal.
The authority citation for part 126 would be amended to add a
reference to Sec. 40A of the Arms Export Control Act (22 U.S.C. 2781).
Section 126.1(a) would be amended to clarify that the reference to the
exception to the prohibition on use of exemption is found in paragraphs
(c) through (e) of Sec. 123.17. It would also add a reference to Sec.
129.5 that contains restrictions imposed on brokering activities
involving countries, areas, and persons referred to in Sec. 126.1.
Section 126.1(b) would be amended to add after ``[a] defense
article licensed'' the words ``or otherwise authorized for export,
temporary import, reexport, or retransfer.''
Section 126.13 would be amended by re-designating paragraph (c) as
(d) and adding a new paragraph (c) that would require all applications
for license or approval to identify all brokers and described their
activities with respect to the transaction subject to the application.
Section 127.1(b) would be amended to specify that responsibilities
imposed on a person granted a license also apply to a person who ``acts
pursuant to an exemption,'' and that such responsibilities include acts
of brokers.
Section 127.1(c) would be amended to change the reference from
Sec. 120.1(c) to Sec. 120.1(c)(2) and to clarify that this provision
applies to ineligible persons themselves. Section 127.1(c)(1) would be
amended to delete the words ``debarred, suspended, or'' before
``ineligible person,'' as an ineligible person includes one who has
been debarred or suspended. Also, Sec. 127.1(c)(2) would be amended to
add a reference to ``or brokering activities'' after ``defense article,
defense service''; delete the words ``the furnishing of any'' before
``defense service''; replace reference to ``for which a license or
approval is required'' with ``subject to this subchapter''; and delete
the words ``debarred, suspended, or'' before ``ineligible person.''
Section 127.2(b)(13) would be amended to add a reference to
``brokering activities'' to the definition of documents to which the
prohibition against misrepresentation and omission of facts in Sec.
127.1(a) applies.
Section 127.7(a) would be amended to add a specific reference to
brokering activities to the scope of debarment and to replace the words
``for which a license or approval is required by this subchapter'' with
``subject to this subchapter.''
Section 127.8 would be amended to add a reference to brokering
activities to the scope of an interim suspension order and to delete
obsolete references to notice and other provisions relating to Sec.
127.7(c). Also, the words ``for which a license or approval is required
by this subchapter'' would be replaced with ``subject to this
subchapter.''
Regulatory Analysis and Notices
Administrative Procedure Act
The Department of State is of the opinion that controlling the
import and export of defense articles and services is a foreign affairs
function of the United States Government and that rules implementing
this function are exempt from Sec. 553 (Rulemaking) and Sec. 554
(Adjudications) of the Administrative Procedure Act. Although the
Department is of the opinion that this rule is exempt from the
rulemaking provisions of the APA, the Department is publishing this
rule with a 60-day provision for public comment and without prejudice
to its determination that controlling the import and export of defense
services is a foreign affairs function.
Regulatory Flexibility Act
Since this proposed rule is not subject to the notice-and-comment
procedures of 5 U.S.C. 553, it does not require analysis under the
Regulatory Flexibility Act.
Unfunded Mandates Act of 1995
This proposed rule does not involve a mandate that will result in
the expenditure by State, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any
year and it will not affect significantly or uniquely small
governments. Therefore, no actions were deemed necessary under the
provisions of the Unfunded Mandates Act of 1995.
Executive Order 13175
The Department has determined that this proposed rule will not have
tribal implications, will not impose substantial direct compliance
costs on Indian tribal governments, and will not pre-empt tribal law.
Accordingly, the requirements of Executive Order 13175 do not apply to
this rule.
Small Business Regulatory Enforcement Fairness Act of 1996
This proposed rule has been found not to be a major rule within the
meaning of the Small Business Regulatory Enforcement Fairness Act of
1996.
Executive Orders 12372 and 13132
This proposed rule will not have substantial, direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with Executive
Order 13132, this proposed rule does not have sufficient federalism
implications to require consultation or warrant the preparation of a
federalism summary impact statement. The regulations implementing
Executive Order 12372 regarding inter-governmental consultation on
Federal programs and activities do not apply to this proposed rule.
Executive Order 12866
The Department is of the opinion that controlling the import and
export of defense articles and services is a foreign affairs function
of the United States Government and that rules governing the conduct of
this function are exempt from the requirements of Executive Order
12866. However, the Department
[[Page 78583]]
has reviewed the proposed rule to ensure its consistency with the
regulatory philosophy and principles set forth in the Executive Order.
Executive Order 13563
The Department of State has considered this rule in light of
Executive Order 13563, dated January 18, 2011, and affirms that this
regulation is consistent with the guidance therein.
Executive Order 12988
The Department of State has reviewed the proposed rule in light of
sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate
ambiguity, minimize litigation, establish clear legal standards, and
reduce burden.
Paperwork Reduction Act
The Paperwork Reduction Act (``PRA,'' 44 U.S.C. 3501 et seq.)
requires all Federal agencies to analyze proposed regulations for
potential burdens on the regulated community created by provisions in
the proposed regulations that require the submission or retention of
information. The information collection requirements must be submitted
to the Office of Management and Budget (OMB) for approval. Persons are
not required to respond to a collection of information unless it
displays a currently valid OMB control number.
As part of its continuing effort to reduce paperwork and respondent
burden, and to conform with the requirements as set forth in this
proposed rule, the Department of State proposes to change the reporting
requirements on the following collections: DS-2032, Statement of
Registration (approved by the Office of Management and Budget [OMB]
under control number 1405-0002); the Annual Brokering Report (OMB
control number 1405-0141); and Brokering Prior Approval (OMB control
number 1405-0142). This notice serves to inform the general public and
Federal agencies of the opportunity to comment on these information
collections in accordance with the PRA.
Summary of Proposed Collections: The Department of State is seeking
OMB approval for the information collections described below.
Title of Information Collection: DS-2032 Statement of
Registration.
OMB Control Number: 1405-0002.
Type of Request: Revision of Currently Approved
Collection.
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC.
Form Number: DS-2032.
Respondents: Business and Nonprofit Organizations.
Estimated Number of Respondents: 12,000.
Estimated Number of Responses: 12,000.
Average Hours per Response: 1 hour.
Total Estimated Burden: 12,000 hours.
Frequency: Annually and on occasion.
Obligation to Respond: Mandatory.
Title of Information Collection: Annual Brokering Report.
OMB Control Number: 1405-0141.
Type of Request: Extension of Currently Approved
Collection.
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC.
Form Number: None.
Respondents: Business and Nonprofit Organizations.
Estimated Number of Respondents: 1,515.
Estimated Number of Responses: 1,515.
Average Hours per Response: 2 hours.
Total Estimated Burden: 3,030 hours.
Frequency: On Occasion.
Obligation to Respond: Mandatory.
Title of Information Collection: Brokering Prior Approval
(License).
OMB Control Number: 1405-0142.
Type of Request: Extension of Currently Approved
Collection.
Originating Office: Bureau of Political-Military Affairs,
Directorate of Defense Trade Controls, PM/DDTC.
Form Number: None.
Respondents: Business and Nonprofit Organizations.
Estimated Number of Respondents: 1,515.
Estimated Number of Responses: 150.
Average Hours per Response: 2 hours.
Total Estimated Burden: 300 hours.
Frequency: On Occasion.
Obligation To Respond: Required to Obtain Benefits.
DATES: The Department will accept comments from the public on these
information collections up to 60 days from date of publication in the
Federal Register.
FOR FURTHER INFORMATION CONTACT: Comments and questions regarding the
collections listed in this notice should be directed to Daniel L. Cook,
Chief, Compliance and Registration Division, Office of Defense Trade
Controls Compliance, Directorate of Defense Trade Controls, Department
of State, 12th Floor, SA-1, 2401 E Street NW., Washington, DC 20037; or
email [email protected], with the subject line ``Brokering
Rule Information Collections.''
Abstract of Proposed Collections: The export, temporary import,
temporary export and brokering of defense articles, defense services
and related technical data are licensed by the Directorate of Defense
Trade Controls in accordance with the International Traffic in Arms
Regulations (22 CFR parts 120-130) and Section 38 of the Arms Export
Control Act. Those of the public who manufacture or export defense
articles, defense services, and related technical data, or the
brokering thereof, must register with the Department of State. Persons
desiring to engage in brokering activities must submit an application
or written request to conduct the transaction to the Department to
obtain a decision whether it is in the interests of U.S. foreign policy
and national security to approve the transaction. Also, registered
brokers must submit annual reports regarding all brokering activity
that was transacted, and registered manufacturers and exporter must
maintain records of defense trade activities for five years. We are
soliciting public comments to permit the Department to:
Evaluate whether the proposed information collection is
necessary for the proper performance of our functions.
Evaluate the accuracy of our estimate of the burden of the
proposed collection, including the validity of the methodology and
assumptions used.
Enhance the quality, utility, and clarity of the
information to be collected.
Minimize the reporting burden on those who are to respond,
including the use of automated collection techniques or other forms of
technology.
Methodology: These forms/information collections may be sent to the
Directorate of Defense Trade Controls via mail, personal delivery, or
fax.
Summary of Proposed Changes to the Information Collections: The
proposed changes to the DS-2032, Statement of Registration, follow the
proposed changes to ITAR part 129 that would allow manufacturers/
exporters to register as brokers on the same form, with one
registration fee. In addition, the form will ask for more information
regarding company structure, specifically for information on
intermediary parents, if applicable. Finally, the form will have a
separate statement of certification for those registering as brokers.
[[Page 78584]]
The revised regulations provide that the Annual Brokering Report
collection would be submitted with the DS-2032, as an attachment. New
information that is to be required on the report includes the
following: brokering registration code; signature and certification of
the report by an empowered official; identification of all parties
involved in the brokering transaction (currently, the regulations
require only the identification of purchasers and recipients); and
identification of the source of any consideration paid for the
brokering transaction.
Clarification of the requirements for obtaining Brokering Prior
Approval will result in the applicant providing additional information,
to include the following: Categorization of the types of defense
articles and services to be brokered, including whether the items are
significant military equipment; identification of the type of sale that
is to be brokered (commercial or under the Foreign Military Sales
program); listing of any consideration expected to be received; and
signature of an empowered official certifying the information provided
is complete and accurate.
List of Subjects
22 CFR Part 120
Arms and munitions, Classified information, Exports.
22 CFR Part 122
Arms and munitions, Exports, Reporting and record-keeping
requirements.
22 CFR Part 126
Arms and munitions, Exports.
22 CFR Part 127
Arms and munitions, Crime, Exports, Penalties, Seizures and
forfeitures.
22 CFR Part 129
Arms and munitions, Exports, Technical assistance.
Accordingly, for the reasons set forth above, Title 22, Chapter I,
Subchapter M, parts 120, 122, 126, 127, and 129 are proposed to be
amended as follows:
PART 120--PURPOSE AND DEFINITIONS
1. The authority citation for part 120 continues to read as
follows:
Authority: Sections 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744
(22 U.S.C. 2752, 2778, 2797); 22 U.S.C. 2794; E.O. 11958, 42 FR
4311; E.O. 13284, 68 FR 4075; 3 CFR, 1977 Comp. p.79; 22 U.S.C.
2651a; Pub. L. 105-261, 112 Stat. 1920.
2. Section 120.1 is amended by revising the section heading and
paragraphs (a), (b)(1), (b)(2), (c), and (d), and adding paragraphs
(c)(1), (c)(1)(i), (c)(1)(ii), (c)(1)(iii), and (c)(2), to read as
follows:
Sec. 120.1 General authorities, receipt of licenses, and
ineligibility.
(a) Section 38 of the Arms Export Control Act (22 U.S.C. 2778)
authorizes the President to control the export and import of defense
articles and defense services. The statutory authority of the President
to promulgate regulations with respect to exports of defense articles
and defense services was delegated to the Secretary of State by
Executive Order 11958, as amended. This subchapter implements that
authority, as well as other relevant authorities in the Arms Export
Control Act (22 U.S.C. 2751 et seq.). By virtue of delegations of
authority by the Secretary of State, these regulations are primarily
administered by the Deputy Assistant Secretary for Defense Trade and
Regional Security and the Managing Director, Directorate of Defense
Trade Controls, Bureau of Political-Military Affairs.
(b)(1) Authorized officials. All authorities conferred upon the
Deputy Assistant Secretary for Defense Trade and Regional Security or
the Managing Director of Defense Trade Controls by this subchapter may
be exercised at any time by the Under Secretary of State for Arms
Control and International Security or the Assistant Secretary of State
for Political-Military Affairs unless the Legal Adviser or the
Assistant Legal Adviser for Political-Military Affairs of the
Department of State determines that any specific exercise of this
authority under this paragraph may be inappropriate. (2) In the Bureau
of Political-Military Affairs, there is a Deputy Assistant Secretary
for Defense Trade and Regional Security (DAS--Defense Trade and
Regional Security) and a Managing Director of Defense Trade Controls
(MD--Defense Trade Controls). The DAS--Defense Trade and Regional
Security and the MD--Defense Trade Controls are responsible for
exercising the authorities conferred under this subchapter. The DAS--
Defense Trade and Regional Security is responsible for oversight of the
defense trade controls function. The MD--Defense Trade Controls is
responsible for the Directorate of Defense Trade Controls, which
oversees the subordinate offices described in paragraphs (b)(2)(i)
through (b)(2)(iv) of this section.
* * * * *
(c) Receipt of Licenses and Eligibility.
(1) A U.S. person may receive a license or other approval pursuant
to this subchapter. A foreign person may not receive such a license or
other approval, except as follows:
(i) A foreign governmental entity in the United States may receive
an export license or other export approval;
(ii) A foreign person may receive a reexport or retransfer
approval; and
(iii) A foreign person may receive a prior approval for brokering
activities.
Requests for a license or other approval other than by a person
referred to in paragraphs (c)(1)(i) and (c)(1)(ii) of this section will
be considered only if the applicant has registered with the Directorate
of Defense Trade Controls pursuant to part 122 or 129 of this
subchapter, as appropriate.
(2) Persons who have been convicted of violating the criminal
statutes enumerated in Sec. 120.27 of this subchapter, who have been
debarred pursuant to part 127 or 128 of this subchapter, who are
subject to indictment or are otherwise charged (e.g., by information)
for violating the criminal statutes enumerated in Sec. 120.27 of this
subchapter, who are ineligible to contract with or to receive a license
or other form of authorization to import defense articles or defense
services from any agency of the U.S. Government, who are ineligible to
receive an export license or other approval from any other agency of
the U.S. Government, or who are subject to a Department of State policy
of denial, suspension, or revocation under Sec. 126.7(a) of this
subchapter, or to interim suspension under Sec. 127.8 of this
subchapter, are generally ineligible to be involved in activities
regulated under the subchapter.
(d) The exemptions provided in this subchapter do not apply to
transactions in which the exporter, any party to the export (as defined
in Sec. 126.7(e) of this subchapter), any source or manufacturer,
broker or other participant in the brokering activities, is generally
ineligible as set forth in paragraph (c)(2) of this section, unless
prior written authorization has been granted by the Directorate of
Defense Trade Controls.
3. Section 120.20 is amended by revising the title and text to read
as follows:
Sec. 120.20 License or other approval.
License means a document bearing the word ``license'' issued by the
Managing Director, Directorate of Defense Trade Controls, or his
authorized designee that permits the export, temporary import, or
brokering
[[Page 78585]]
of a specific defense article or defense service controlled by this
subchapter.
Other approval means a document issued by the Managing Director,
Directorate of Defense Trade Controls, or his authorized designee, that
approves an activity regulated by this subchapter (e.g., approvals for
brokering activities or retransfer authorizations), or the use of an
exemption to the license requirements as described in this subchapter.
4. Section 120.25 is amended by revising paragraph (a)(4)(i),
removing paragraph (b) from reserved status, and adding paragraph (b)
and (c), to read as follows:
Sec. 120.25 Empowered Official.
(a) * * *
* * * * *
(4) * * *
(i) Enquire into any aspect of a proposed export, temporary import,
or brokering activity by the applicant, and
* * * * *
(b) For the purposes of a broker who is a foreign person, the
empowered official may be a foreign person who otherwise meets the
criteria for an empowered official in paragraph (a) of this section.
(c) A person who is ineligible within the meaning of Sec.
120.1(c)(2) of this subchapter, or who is the subject of an indictment
or has otherwise been charged (e.g., by information) for or has been
convicted of violating any foreign criminal statutes dealing with
subject matter similar to that in the U.S. criminal statutes enumerated
in Sec. 120.27 of this subchapter, or who is ineligible to contract
with any foreign government agency, or to receive a license or other
form of authorization or otherwise participate in export or brokering
activities under the laws of a foreign country, or who is a citizen or
national of a country or other person referred to in Sec. 126.1 of
this subchapter, may not be an empowered official.
5. Section 120.40 is added to read as follows:
Sec. 120.40 Affiliate.
An affiliate of a registrant is a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such registrant.
PART 122--REGISTRATION OF MANUFACTURERS AND EXPORTERS
6. The authority citation for part 122 continues to read as
follows:
Authority: Sections 2 and 38, Pub. L. 90-629, 90 Stat. 744 (22
U.S.C. 2752, 2778); E.O. 11958, 42 FR 4311; 1977 Comp., p. 79; 22
U.S.C. 2651a.
7. Section 122.1 is amended by revising paragraphs (a), (b),
(b)(1), (b)(2), and (b)(3) to read as follows:
Sec. 122.1 Registration requirements.
(a) Any person who engages in the United States in the business of
manufacturing or exporting defense articles or furnishing defense
services is required to register with the Directorate of Defense Trade
Controls under Sec. 122.2 of this subchapter. For the purpose of this
subchapter, engaging in such a business requires only one occasion of
manufacturing or exporting a defense article or furnishing a defense
service. A manufacturer who does not engage in exporting must
nevertheless register. (See part 129 of this subchapter for
requirements for registration of persons who engage in brokering
activities.)
(b) Exemptions. The registration requirements of paragraph (a) of
this section do not apply to:
(1) Officers and employees of the U.S. Government acting in an
official capacity;
(2) Persons whose pertinent business activity is confined to the
production of unclassified technical data only;
(3) Persons all of whose manufacturing and export activities are
licensed under the Atomic Energy Act of 1954, as amended; or
(4) * * *
Note: Persons who qualify for the exemptions in paragraphs
(b)(2) or (b)(4) of this section remain subject to the requirements
for licenses or other approvals for exports of defense articles
(including technical data) and defense services and may not receive
an export license or approval unless registered under Sec. 122.2 of
this subchapter.
* * * * *
8. Section 122.2 is amended by revising paragraphs (b)(1),
(b)(1)(i), and (b)(2) to read as follows:
Sec. 122.2 Submission of registration statement.
* * * * *
(b) * * *
(1) Whether the intended registrant, chief executive officer,
president, vice-presidents, secretary, partner, member, other senior
officers or officials (e.g., comptroller, treasurer, general counsel),
or any member of the board of directors of the registrant or of its
parent, subsidiary, joint venture, or other affiliate or other persons
required to be listed in the Statement of Registration:
(i) Has ever been indicted or otherwise charged (e.g., by
information) for or convicted of violating any of the U.S. criminal
statutes enumerated in Sec. 120.27 of this subchapter; or
(ii) * * *
(2) Whether the intended registrant is foreign owned or foreign
controlled (as defined in Sec. 120.37 of this subchapter). If the
intended registrant is foreign owned or foreign controlled, the
certification shall include an explanation of such ownership or
control, including the identities of all foreign persons who ultimately
own or control the registrant.
9. Section 122.4 is amended by revising paragraphs (a) and (a)(2)
to read as follows:
Sec. 122.4 Notification of changes in information furnished by
registrants.
(a) A registrant must, within five days of the event, provide the
Directorate of Defense Trade Controls a written notification, signed by
a senior officer (e.g., chief executive officer, president, secretary,
partner, member, treasurer, general counsel), if:
(1) * * *
(2) There is a change in the following information contained in the
Statement of Registration: (i) Registrant's name, (ii) registrant's
address, (iii) registrant's legal organization structure, (iv)
ownership or control, (v) the establishment, acquisition, or divestment
of a U.S. or foreign subsidiary, joint venture, or other affiliate who
is engaged in manufacturing defense articles, exporting defense
articles or defense services, or otherwise required to be listed on
registrant's Statement of Registration.
Note: All other changes in the Statement of Registration must
be provided as part of annual registration renewal.
* * * * *
PART 126--GENERAL POLICIES AND PROVISIONS
10. The authority citation for part 126 is revised to read as
follows:
Authority: Sections. 2, 38, 40, 40A, 42, and 71, Pub. L. 90-
629, 90 Stat. 744 (22 U.S.C. 2752, 2778, 2780, 2781, 2791, and
2797); E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp., p.79; 22 U.S.C.
2651a; 22 U.S.C. 287c; E.O. 12918, 59 FR 28205; 3 CFR, 1994 Comp.,
p. 899; Sec. 1225, Pub. L. 108-375; Sec. 7089, Pub. L. 111-117.
11. Section 126.1 is amended by revising paragraphs (a) and (b) to
read as follows:
Sec. 126.1 Prohibited exports, imports, and sales to or from certain
countries.
(a) General. It is the policy of the United States to deny licenses
and other approvals for exports and imports of defense articles and
defense services, destined for or originating in certain countries.
This policy applies to
[[Page 78586]]
Belarus, Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela. This
policy also applies to countries with respect to which the United
States maintains an arms embargo (e.g., Burma, China, and the Republic
of the Sudan) or whenever an export would not otherwise be in
furtherance of world peace and the security and foreign policy of the
United States. Information regarding certain other embargoes appears
elsewhere in this section. Comprehensive arms embargoes are normally
the subject of a State Department notice published in the Federal
Register. The exemptions provided in the regulations in this
subchapter, except Sec. 123.17(c) through Sec. 123.17(e) of this
subchapter, do not apply with respect to articles originating in or for
export to any proscribed countries, areas, or other persons referred to
in this Sec. 126.1 or to brokering activities involving such
countries, areas or persons. (See Sec. 129.5 of this subchapter, which
imposes restrictions on brokering activities similar to those in this
section.)
(b) Shipments. A defense article licensed or otherwise authorized
for export, temporary import, reexport, or retransfer under this
subchapter may not be shipped on a vessel, aircraft, spacecraft, or
other means of conveyance that is owned by, operated by, leased to, or
leased from any of the proscribed countries, areas, or other persons
referred to in this section.
* * * * *
12. Section 126.13 is amended by re-designating paragraph (c) as
paragraph (d) and adding a new paragraph (c) to read as follows:
Sec. 126.13 Required information.
* * * * *
(c) All applications for licenses or other approvals under this
subchapter and amendments thereto shall identify all brokers and
describe the brokering activities involved in the transaction subject
to such application or prior notification.
(d) In cases when foreign nationals are employed at or assigned to
security-cleared facilities, provision by the applicant of a Technology
Control Plan will facilitate processing.
PART 127--VIOLATIONS AND PENALTIES
13. The authority citation for part 127 continues to read as
follows:
Authority: Sections 2, 38, and 42, Pub. L. 90-629, 90 Stat. 744
(22 U.S.C. 2752, 2778, 2791); E.O. 11958, 42 FR 4311; 3 CFR, 1977
Comp., p. 79; 22 U.S.C. 401; 22 U.S.C. 2651a; 22 U.S.C. 2779a; 22
U.S.C. 2780.
14. Section 127.1 is amended by revising paragraphs (b), (c),
(c)(1), and (c)(2) to read as follows:
Sec. 127.1 Violations.
* * * * *
(b) Any person who is granted a license or other approval or acts
pursuant to an exemption under this subchapter is responsible for the
acts of employees, agents, brokers, and all authorized persons to whom
possession of the defense article or technical data has been entrusted
regarding the operation, use, possession, transportation, and handling
of such defense article or technical data abroad. All persons abroad
subject to U.S. jurisdiction who obtain custody of a defense article
exported from the United States or produced under an agreement
described in part 124 of this subchapter, and irrespective of the
number of intermediate transfers, are bound by the regulations of this
subchapter in the same manner and to the same extent as the original
owner or transferor.
(c) A person who is ineligible pursuant to Sec. 120.1(c)(2) of
this subchapter, or a person with knowledge that another person is
ineligible pursuant to Sec. 120.1(c)(2), may not, directly or
indirectly, in any manner or capacity, without prior disclosure of the
facts to and written authorization from the Directorate of Defense
Trade Controls:
(1) Apply for, obtain, or use any export control document as
defined in Sec. 127.2(b) of this subchapter for such ineligible
person; or
(2) Order, buy, receive, use, sell, deliver, store, dispose of,
forward, transport, finance, or otherwise service or participate in any
manner in any transaction that may involve any defense article,
including technical data, defense service, or brokering activities
subject to this subchapter where such ineligible person may obtain any
benefit there from or have any direct or indirect interest therein.
* * * * *
15. Section 127.2 is amended by revising paragraph (b)(13) to read
as follows:
Sec. 127.2 Misrepresentation and omission of facts.
* * * * *
(b) * * *
(13) Any other document used in the regulation or control of a
defense article, including technical data, defense service, or
brokering activities regulated by this subchapter.
16. Section 127.7 is amended by revising paragraph (a) to read as
follows:
Sec. 127.7 Debarment.
(a) Debarment. In implementing Sec. 38 of the Arms Export Control
Act, the Assistant Secretary of State for Political-Military Affairs
may prohibit any person from participating directly or indirectly in
the export of defense articles, including technical data, in the
furnishing of defense services, or in brokering activities that are
subject to this subchapter for any of the reasons listed below. Any
such prohibition is referred to as a debarment for purposes of this
subchapter. The Assistant Secretary of State for Political-Military
Affairs shall determine the appropriate period of time for debarment,
which shall generally be for a period of three years. Reinstatement is
not automatic, however, and in all cases the debarred persons must
submit a request for reinstatement and be approved for reinstatement
before engaging in any export or brokering activities subject to the
Arms Export Control Act or this subchapter.
* * * * *
17. Section 127.8 is amended by revising paragraph (a) to read as
follows:
Sec. 127.8 Interim suspension.
(a) The Managing Director of the Directorate of Defense Trade
Controls or the Director of the Office of Defense Trade Controls
Compliance is authorized to order the interim suspension of any person
when the Managing Director or Director of Compliance believes that
grounds for debarment (as defined in Sec. 127.7 of this subchapter)
exist and where and to the extent the Managing Director or Director of
Compliance, as applicable, finds that interim suspension is reasonably
necessary to protect world peace or the security or foreign policy of
the United States. The interim suspension order prohibits that person
from participating directly or indirectly in the export of any defense
article or defense service or in brokering activities subject to this
subchapter. A copy of the interim suspension order will be served upon
the suspended person in the same manner as provided in Sec. 128.3(b)
of this subchapter. The interim suspension order may be made
immediately effective, without prior notice. The order will state the
relevant facts, the grounds for issuance of the order, and describe the
nature and duration of the interim suspension. No person may be
suspended for a period exceeding 60 days, absent extraordinary
circumstances, (e.g., unless proceedings under part 128 of this
subchapter, or criminal proceedings, are initiated).
* * * * *
[[Page 78587]]
PART 129--REGISTRATION AND LICENSING OF BROKERS
18. Section Contents for part 129 is revised to read as follows:
Contents
Sec.
129.1 Purpose.
129.2 Definitions.
129.3 Requirement to register.
129.4 Submission of Statement of Registration, registration fees,
and notification of changes in information furnished by registrants.
129.5 Policy on embargoes and other proscriptions.
129.6 Requirement for prior approval.
129.7 Exemptions from prior approval.
129.8 Procedures for obtaining prior approval.
129.9 Guidance.
129.10 Reports.
129.11 Maintenance of brokering records by registrants.
19. The authority citation for part 129 continues to read as
follows:
Authority: Section 38, Pub. L. 104-164, 110 Stat. 1437, (22
U.S.C. 2778).
20. Section 129.2 is amended by revising paragraphs (a), (b), and
(c) and adding paragraphs (b)(1), (b)(2), (d), (e), and (f) to read as
follows:
Sec. 129.2 Definitions.
(a) Broker means any person (as defined by Sec. 120.14 of this
subchapter) who engages in brokering activities.
(b) 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.
(c) For the purposes of this subchapter, engaging in the business
of brokering activities requires only one action as described above.
(d) The activities subject to part 129 include brokering
activities:
(1) by any U.S. person wherever located;
(2) by any foreign person located in the United States;
(3) by any foreign person located outside the United States
involving a U.S.-origin defense article or defense service;
(4) by any foreign person located outside the United States
involving the import into the United States of any defense article or
defense service; or
(5) by any foreign person located outside the United States acting
on behalf of a U.S. person.
(e) Brokering activities do not include:
(1) Activities by a U.S. person in the United States that are
limited exclusively to U.S. domestic sales or transfers (e.g., not for
export, which includes transfer in the United States to a foreign
person);
(2) Activities by employees of the U.S. Government acting in an
official capacity; or
(3) Activities that do not extend beyond administrative services,
such as providing or arranging office space and equipment, hospitality,
advertising, or clerical, visa, or translation services, or activities
by an attorney that do not extend beyond providing legal advice to a
broker.
(f) The term ``foreign defense article or defense service'' means
any non-U.S.-origin article or service described on the U.S. Munitions
List. Unless otherwise provided in this part, the terms ``defense
article'' and ``defense service'' refer to both U.S. and foreign origin
defense articles and defense services described on the U.S. Munitions
List. A ``defense article'' and ``defense service'' are determined
exclusively in accordance with the ITAR, irrespective of any
designation (either affirming or contrary) that may be attributed to
same article by any foreign government or international organization.
21. Section 129.3 is amended by revising paragraphs (a), (b),
(b)(1), (b)(2), (b)(3), and by adding paragraphs (b)(4), (c), (d), and
(e) to read as follows:
Sec. 129.3 Requirement to register.
(a) Except as provided in Sec. 129.3(b) of this subchapter, any
person who engages in brokering activities, as defined by Sec. 129.2
of this subchapter, is required to register with the Directorate of
Defense Trade Controls. Registration under this section is generally a
precondition for the issuance of prior approval for brokering
activities required under part 129 of this subchapter or the use of
exemptions from prior approval.
(b) Exemptions. Registration, prior approval, or reporting under
this section is not required as provided in paragraphs (b)(1) through
(b)(4):
(1) Employees of foreign governments or international organizations
acting in an official capacity are exempt from registration. Such
employees are also exempt from the requirements in Sec. 129.6 of this
subchapter for prior approval for brokering activities, as well as
reporting and recordkeeping requirements.
(2) Persons exclusively in the business of financing, insuring,
transporting, or freight forwarding, whose activities do not extend
beyond financing, insuring, transporting, or freight forwarding, are
exempt from registration. Examples include air carriers or other
freight forwarders who merely transport or arrange transportation for
licensed U.S. Munitions List items, and banks or credit companies who
merely provide commercially available lines or letters of credit to
persons registered or required to register in accordance with parts 122
or 129 of this subchapter. Such persons exempt from registration are
also exempt from the requirements in Sec. 129.6 of this subchapter for
prior approval for brokering activities, as well as reporting and
record-keeping requirements. However, banks, firms, or other persons
providing financing for defense articles or defense services are
required to register under certain circumstances, such as when the bank
or its employees are directly involved in arranging transactions
involving defense articles or defense services or hold title to defense
articles, even when no physical custody of defense articles is
involved.
(3) Persons registered pursuant to part 122 of this subchapter,
their U.S. person subsidiaries, joint ventures, and other affiliates
listed and covered in their Statement of Registration, their bona fide
and full-time regular employees, and their eligible (see Sec. 120.1 of
this subchapter) foreign person brokers listed and identified as their
exclusive brokers in their Statements of Registration, whose brokering
activities (A) involve only such registered persons' defense articles
or defense services that are currently subject to an export approval
under this subchapter obtained by the part 122 registrant or will
require such an approval prior to their export, or (B) are on behalf of
the part 122 registrant and involve only defense articles and defense
services that are located and obtained from a manufacturer or source in
the United States for export outside the United States under an export
approval under this subchapter. Such persons are registered under part
129 but are not required to submit a separate broker registration or
pay a separate broker registration fee and are exempt from prior
approval and reporting, but are still required to perform the record-
keeping requirements of part 129 (see Sec. 129.11 of this subchapter).
(4) Persons (including their bona fide regular employees) whose
activities do not extend beyond acting as an end-user of a defense
article or defense service exported pursuant to a license or approval
under parts 123, 124, or 125 of this subchapter, or subsequently acting
[[Page 78588]]
as a reexporter or retransferor of such article or service under such
license or approval or under an approval under Sec. 123.9 of this
subchapter are exempt from registration. Such persons exempt from
registration are also as to these activities generally exempt from the
requirements in Sec. 129.6 of this subchapter for prior approval for
brokering activities, as well as reporting and record-keeping
requirements.
(c) Persons exempt from registration, prior approval, or reporting
as provided in paragraphs (a) and (b) of this section are subject to
the policy on embargoes and other proscriptions as outlined in Sec.
129.5 of this subchapter.
(d) If Sec. 129.3(b)(3) of this subchapter is not applicable, U.S.
persons who are registered as a manufacturer or exporter in accordance
with part 122 of this subchapter, including their U.S. or foreign
subsidiaries, joint ventures, and other affiliates listed on their
Statement of Registration who are required to register under part 129,
are not required to submit a separate broker registration or pay a
separate broker registration fee as long as they have listed and
identified themselves as brokers within their manufacturer or exporter
Statement of Registration. All other requirements of part 129 apply to
such brokers and their brokering activities.
(e) Registration under this section is generally a precondition for
the issuance of prior approval for brokering activities required under
this section or the use of exemptions from prior approval.
22. Section 129.4 is amended by revising the section heading,
paragraphs (a), (b), and (c), and adding paragraphs (c)(1), (c)(1)(i),
(c)(1)(ii), (c)(2), and (d) through (h) to read as follows:
Sec. 129.4 Submission of registration statement, registration fees,
and notification of changes in information furnished by registrants.
(a) An intended registrant must submit a Department of State form
DS-2032 (Statement of Registration) by registered or overnight mail
delivery to the Office of Defense Trade Controls Compliance, and must
submit an electronic payment via Automated Clearing House (ACH) or
Society for Worldwide Interbank Financial Telecommunications (SWIFT),
payable to the Department of State of a registration fee as set forth
in paragraph (b) of this section. ACH is an electronic network used to
process financial transactions in the United States and SWIFT is the
messaging service used by financial institutions worldwide to issue
international transfers for foreign accounts. Payment methods (i.e.,
ACH and SWIFT) are dependent on the source of the funds (U.S. or
foreign bank) drawn from the applicant's account and not a third
party's account. Intended registrants should access the Directorate of
Defense Trade Controls Web site at www.pmddtc.state.gov for detailed
guidelines on submitting an ACH and SWIFT electronic payment. Payments,
including from foreign brokers, must be in U.S. currency and must be
payable through a U.S. financial institution. Cash, checks, foreign
currency, or money orders will not be accepted. The Statement of
Registration must be signed by a senior officer (e.g., chief executive
officer, president, secretary, partner, member, treasurer, general
counsel) who has been empowered by the intended registrant to sign such
documents. The intended registrant, whether a U.S. or foreign person,
shall submit documentation that demonstrates it is incorporated or
otherwise authorized to do business in its respective country. Foreign
persons who are required to register shall provide information that is
substantially similar in content to that which a U.S. person would
provide under this provision (e.g., foreign business license or similar
authorization to do business). The Directorate of Defense Trade
Controls will notify the registrant if the Statement of Registration is
incomplete either by notifying the registrant of what information is
required or through the return of the entire registration package.
Registrants may not establish new entities for the purpose of reducing
registration fees.
(b) A person who is required to register must do so on an annual
basis upon submission of a completed Form DS-2032 and a fee of $2,250.
Registrants are not required to submit a separate statement of
registration and pay an additional fee when provisions in Sec. Sec.
129.3(b)(3) or 129.4(c) of this subchapter are met.
(c) Statement of Registration Certification. The Statement of
Registration of the intended registrant shall include a certification
by an authorized senior officer of the following:
(1) Whether the intended registrant, chief executive officer,
president, vice presidents, secretary, partner, member, other senior
officers or officials (e.g., comptroller, treasurer, general counsel),
or any member of the board of directors of the intended registrant, or
of any parent, subsidiary, or other affiliate or other person required
to be listed in the Statement of Registration:
(i) Is the subject of an indictment or has otherwise been charged
(e.g., by information) for or has been convicted of violating any U.S.
criminal statutes enumerated in Sec. 120.27 of this subchapter or
foreign criminal statutes dealing with subject matter similar to that
in the U.S. criminal statutes enumerated in Sec. 120.27 of this
subchapter; or
(ii) Is ineligible to contract with, or to receive a license or
other approval to import defense articles or defense services from, or
to receive an export license or other approval from, any agency of the
U.S. Government, or is ineligible to contract with, or to receive a
license or other form of authorization or otherwise participate in
export or brokering activities under the laws of a foreign country; or
(2) Whether the intended registrant is foreign owned or foreign
controlled (see Sec. 120.37 of this subchapter). If the intended
registrant is foreign owned or foreign controlled, the certification
shall include an explanation of such ownership or control, including
the identities of the foreign person or persons who ultimately own or
control the registrant. This requirement applies to a registrant who is
a U.S. person and is owned or controlled by a foreign person. It also
applies to a registrant who is a foreign person and is owned or
controlled by a foreign person from the same country or a foreign
person from another country.
(d) A broker that is the parent of a person registered in
accordance with part 129 may upon request to the Directorate of Defense
Trade Controls be covered by the registrant's Statement of
Registration, provided that the broker is listed in the registrant's
Statement of Registration and meets the same certification requirements
in Sec. 129.4(b) of this section as the registrant. If the broker is a
foreign person, it must provide the registrant with a written
certification signed by a senior officer acknowledging that it will be
subject to the requirements of this subchapter, to include part 129.
The registrant must maintain the letter as part of its record-keeping
requirements in Sec. 129.11 of this subchapter. The foreign person
broker is subject to the same eligibility and certification criteria as
the registrant.
(e) A registrant must, within five days of the event, provide the
Directorate of Defense Trade Controls a written notification, signed by
a senior officer (e.g., chief executive officer, president, secretary,
partner, member, treasurer, general counsel) if:
(1) Any of the persons referred to in Sec. 129.4(b)(1) of this
subchapter are indicted or otherwise charged (e.g., by information) for
or convicted of violating any of the U.S. criminal statutes enumerated
in Sec. 120.27 of this
[[Page 78589]]
subchapter or foreign criminal statutes dealing with subject matter
similar to that in the U.S. criminal statutes enumerated in Sec.
120.27; or become ineligible to contract with, or to receive a license
or other approval to export or import defense articles or defense
services from any agency of the U.S. government; or are ineligible to
contract with, or to receive a license or other form of authorization
or otherwise participate in export or brokering activities under the
laws of a foreign country; or
(2) There is a change in the following information contained in the
Statement of Registration: (i) Registrant's name, (ii) registrant's
address, (iii) registrant's legal organization structure, (iv)
ownership or control, or (v) the establishment, acquisition or
divestment of a U.S. or foreign subsidiary or other affiliate who is
engaged in brokering activities or otherwise required to be listed
registrant's Statement of Registration.
All other changes in the Statement of Registration must be provided
as part of annual registration renewal.
(f) A U.S. or foreign registrant must provide written notification
to the Directorate of Defense Trade Controls at least sixty (60) days
in advance of any intended sale or transfer to a foreign person of
ownership or control of the registrant or any parent, subsidiary, joint
venture, or other affiliate listed and covered in their Statement of
Registration. This requirement applies to a foreign person required to
register pursuant to this part who intends to sell or transfer
ownership or control to a foreign person from the same country or to a
foreign person from another country. Such notice does not relieve the
registrant from obtaining any prior approval required under this
subchapter.
(g) The new entity formed when a registrant merges with another
company or acquires, or is acquired by, another company or a subsidiary
or division of another company, shall advise the Directorate of Defense
Trade Controls of the following:
(1) The new firm name and all previous firm names being disclosed;
(2) The registration number that will survive and those that are to
be discontinued (if any); and
(3) The numbers of all approvals for brokering activities under the
surviving registration number, since any approval not the subject of
notification will be considered invalid.
(h) A registrant whose registration lapses because of failure to
renew and, after an intervening period, seeks to register again must
pay registration fees for any part of such intervening period during
which the registrant engaged in the business of brokering activities.
23. Section 129.5 is amended by revising paragraphs (a), (b), (c)
and (d) and removing paragraph (e) to read as follows:
Sec. 129.5 Policy on embargoes and other proscriptions.
(a) This section applies to brokering activities defined in Sec.
129.2 of this subchapter, regardless of whether the person involved in
such activities has registered or is exempt from registration under
Sec. 129.3 of this subchapter. The exemptions in Sec. 129.7 of this
subchapter from the requirement for prior approval are not applicable
to brokering activities subject to this section.
(b) No person may engage in or make a proposal to engage in
brokering activities that involve any country, area, or other person
referred to in Sec. 126.1 of this subchapter without first obtaining
the approval of the Directorate of Defense Trade Controls.
(c) No person may engage in or make a proposal to engage in
brokering activities without the prior approval of the Directorate of
Defense Trade Controls if such activities involve other countries or
persons identified from time to time by the Department of State through
notice in the Federal Register, with respect to which certain
limitations on defense articles or defense services are imposed for
reasons of U.S. national security, foreign policy, or law enforcement
interests (e.g., an individual subject to debarment pursuant to Sec.
127.7 of this subchapter). (See Sec. 127.1(c) of this subchapter for
additional disclosure and approval requirements applicable to brokering
activities.)
(d) It is the policy of the Department of State to deny requests
for approval of brokering activities or proposals to engage in
brokering activities involving the countries or other persons referred
to in paragraph (b) or (c) of this section. Any person who knows or has
reason to know of brokering activities involving such countries or
other persons must immediately inform the Directorate of Defense Trade
Controls.
24. Section 129.6 is amended by revising the section heading,
removing paragraphing, and revising the text to read as follows:
Sec. 129.6 Requirement for prior approval.
Except as provided in Sec. 129.7 of this subchapter, no person who
is required to register as a broker pursuant to Sec. 129.3 of this
subchapter may engage in the business of brokering activities without
the prior approval of the Directorate of Defense Trade Controls.
25. Section 129.7 is amended by revising the section heading and
paragraphs (a), (a)(1), (a)(2), (b), (b)(1), (b)(2), (c), and (d),
removing paragraphs (a)(1)(i) through (a)(1)(vii), (a)(2)(i) through
(a)(2)(iv), and adding paragraphs (a)(3), (b)(2)(i), (b)(2)(ii),
(c)(1), (c)(2), (d)(1), (d)(2), (e), (e)(1) through (e)(14), and (f),
to read as follows:
Sec. 129.7 Exemptions from prior approval.
(a) The exemptions in this section from prior approval requirements
for certain brokering activities may not be used if:
(1) The broker is not registered as required by Sec. 129.3 of this
subchapter;
(2) The broker or any person who has a direct or indirect interest
in or may benefit from the brokering activities, including any related
defense article or defense service transaction, is ineligible as
defined in Sec. 120.1(c)(2) of this subchapter; or
(3) A country or other person referred to in Sec. 126.1 of this
subchapter is involved in the brokering activities or such activities
are otherwise subject to Sec. 129.5 of this subchapter.
(b) Brokering activities are exempt from the requirement for prior
approval if undertaken for an agency of the U.S. Government pursuant to
a contract between the broker and that agency provided that:
(1) The brokering activities concern defense articles or defense
services solely for the use of the agency; or
(2) The brokering activities are undertaken for carrying out a
foreign assistance or sales program authorized by law and subject to
control by the President by other means, as demonstrated by one of the
following conditions being met:
(i) The U.S. Government agency contract with the broker contains an
explicit provision stating the contract supports a foreign assistance
or sales program authorized by law and the contracting agency has
established control of the activity covered by the contract by other
means equivalent to that established under the International Traffic in
Arms Regulations; or
(ii) The Directorate of Defense Trade Controls provides written
concurrence in advance that the condition is met.
(c) Brokering activities are exempt from the requirement for prior
approval if:
(1) The brokering activities are undertaken wholly within and
involve defense articles or defense services located within and
destined exclusively for the North Atlantic Treaty
[[Page 78590]]
Organization (NATO), any member country of that organization,
Australia, Japan, New Zealand, or the Republic of South Korea; and
(2) The brokering activities do not pertain to the defense articles
or defense services that are excluded from this exemption by paragraph
(e) of this section.
(d) Brokering activities are exempt from the requirement of prior
approval if they involve U.S. defense articles or defense services that
are not designated as significant military equipment as defined by
Sec. 120.7 of this subchapter and are for end-use by an international
organization or foreign government. This exemption does not apply to
brokering activities pertaining to:
(1) Defense articles or defense services excluded from this
exemption by paragraph (e) of this section; or
(2) Defense articles or defense services valued at or greater than
$25 million.
(e) The exemptions in paragraphs (c) and (d) of this section do not
apply to brokering activities pertaining to the following defense
articles or associated defense services:
(1) Firearms and other weapons of a nature described by Category
I(a) through (d), Category II(a) and (d), and Category III(a) of part
121 of this subchapter;
(2) Rockets, bombs and grenades as well as launchers for such
defense articles of a nature described by Category IV(a), and launch
vehicles and missile and anti-missile systems of a nature described by
Category IV(b) of part 121 of this subchapter;
(3) Nuclear weapons strategic delivery systems and all components,
parts, accessories, or attachments specifically designed for such
weapons and associated equipment;
(4) Naval nuclear propulsion equipment of a nature described by
Category VI(e) of part 121 of this subchapter;
(5) Night vision-related defense articles and inertial platform,
sensor, and guidance-related systems of a nature described by Category
XII(c) and (d) of part 121 of this subchapter;
(6) Chemical agents and precursors described by Category XIV(a),
(c), and (e) of part 121 of this subchapter, biological agents and
biologically derived substances described by Category XIV(b), and
equipment described by Category XIV(f) for dissemination of the
chemical agents and biological agents described by Category XIV(a),
(b), and (e) of part 121 of this subchapter;
(7) Spacecraft of a nature described by Category XV of part 121 of
this subchapter that is significant military equipment;
(8) Nuclear weapons design and test equipment of a nature described
by Category XVI of part 121 of this subchapter;
(9) Directed energy weapons of a nature described by Category XVIII
of part 121 of this subchapter;
(10) Submersible vessels, oceanographic and associated equipment of
a nature described by Category XX of part 121 of this subchapter;
(11) Miscellaneous articles of a nature described by Category XXI
of part 121 of this subchapter;
(12) Classified defense articles, related technical data, and
defense services;
(13) Missile Technology Control Regime Annex items in Sec. 121.16
of this subchapter; or
(14) Foreign defense articles and defense services of a nature that
are described in various categories of Sec. 121.1 of this subchapter
other than those that are involved in brokering activities meeting the
criteria of paragraphs (c)(1) and (c)(2) of this section.
(f) Brokers who use the exemptions in this section must comply with
all other provisions of part 129 of this subchapter.
26. Section 129.8 is amended by revising the section heading and
paragraphs (a) and (b), and adding paragraphs (a)(1), (a)(2), (a)(2)(i)
through (a)(2)(iii), (b)(1) through (b)(5)(iii), (c), (d), and (e), to
read as follows:
Sec. 129.8 Procedures for obtaining prior approval.
(a) All requests for prior approval of brokering activities must be
made to the Directorate of Defense Trade Controls, be signed by an
empowered official, and include the following information:
(1) The applicant's name, address and registration code;
(2) A certification on whether:
(i) The applicant, chief executive officer, president, vice
president, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel), or any
member of the board of directors of the registrant or of its parent,
subsidiary, joint venture, or other affiliate required to be listed in
the Statement of Registration is the subject of an indictment or has
been otherwise charged (e.g., by information) for, or has been
convicted of, violating any of the U.S. criminal statutes enumerated in
Sec. 120.27 of this subchapter, or is the subject of an indictment or
has otherwise been charged (e.g., by information) for or has been
convicted of violating any foreign criminal statutes dealing with
subject matter similar to that in the U.S. criminal statutes enumerated
in Sec. 120.27 of this subchapter;
(ii) The applicant, chief executive officer, president, vice
president, secretary, partner, member, other senior officers or
officials (e.g., comptroller, treasurer, general counsel), or any
member of the board of directors of the registrant or of its parent,
subsidiary, joint venture, or other affiliate required to be listed in
the Statement of Registration is ineligible to contract with, or to
receive a license or other approval to import defense articles or
defense services from, or to receive an export license or other
approval from, any agency of the U.S. Government, or is ineligible to
contract with any foreign government agency, or to receive an export
license or other form of authorization or otherwise participate in
export or brokering activities under the laws of a foreign country; and
(iii) To the best of the applicant's knowledge, any other person
involved in the brokering activities that are the subject of the
request for prior approval as defined in Sec. 129.2 of this subchapter
is the subject of an indictment or has been otherwise charged (e.g., by
information) for or has been convicted of violating any of the U.S.
criminal statutes enumerated in Sec. 120.27 of this subchapter, or is
the subject of an indictment or has otherwise been charged (e.g., by
information) for or has been convicted of violating any foreign
criminal statutes dealing with subject matter similar to that in the
U.S. criminal statutes enumerated in Sec. 120.27 of this subchapter,
or is ineligible to contract with, or to receive a license or other
approval to import defense articles or defense services from, or to
receive an export license or other approval from any agency of the U.S.
Government, or is ineligible to contract with any foreign government
agency, or to receive an export license or other form of authorization
or otherwise participate in defense trade under the laws of a foreign
country.
(b) The request for prior approval shall describe fully the
brokering activities that will be undertaken, including:
(1) The action to be taken by the applicant to facilitate the
manufacture, export, import, or transfer of a defense article or
defense service (which may be referred to as a ``defense article or
defense service transaction'');
(2) The name, nationality and country where located of all persons
who may participate in the brokering activities;
[[Page 78591]]
(3) A description of each defense article or defense service that
may be involved, including:
(i) The U.S. Munitions List category and sub-category;
(ii) Name or military nomenclature of the defense article;
(iii) Whether the article or service is significant military
equipment;
(iv) Estimated quantity of defense articles;
(v) Estimated U.S. dollar value of defense articles and defense
services;
(vi) Security classification; and
(vii) End-user and end-use;
(4) A statement whether the brokering activities are related to a
sale through commercial channels or under the U.S. Foreign Military
Sales Program or other activity in support of the U.S. Government; and
(5) The type of consideration received or expected to be received,
directly or indirectly (consideration includes, for example, any fee,
commission, loan, gift, donation, political contribution, or other
payment made, or offered or agreed to be made, directly or indirectly,
in cash or in kind):
(i) by the applicant;
(ii) by other persons who may participate in such brokering
activities from or at the direction of the applicant, and the identity
of such other persons; and
(iii) the U.S. dollar value amount and source thereof.
(c) The empowered official signing the request for prior approval
shall include a certification that the request is complete and
accurate.
(d) If at the time of submission certain information required by
paragraph (b) of this section is not yet available, this fact must be
stated and explained in the certification required by paragraph (c) of
this section. The Directorate of Defense Trade Controls will take any
such explanation into account in deciding whether or not to approve the
request.
(e) The period of validity for a prior approval may not exceed four
years.
27. Section 129.9 is amended by revising the section heading and
text, to include new paragraphs (a), (b), and (c), to read as follows:
Sec. 129.9 Guidance.
(a) Any person desiring guidance on whether an activity constitutes
a brokering activity within the scope of part 129 of this subchapter
may request in writing guidance from the Directorate of Defense Trade
Controls. The request for guidance shall identify the applicant and
registrant code (if applicable) and describe fully the activities that
will be undertaken, including:
(1) The specific activities to be undertaken by the applicant and
any other U.S. or foreign person;
(2) The name, nationality, and country where located of all U.S.
and foreign persons who may participate in the activities;
(3) A description of the item, including name or military
nomenclature, or the service and a complete copy of the data that may
be involved in potential transactions;
(4) End-user and end-use;
(5) The type of consideration offered, expected to be made, paid or
received, directly or indirectly, to or by the applicant in connection
with such activity, and the amount and source thereof (consideration
includes, for example, any fee, commission, loan, gift, donation,
political contribution, or other payment, in cash or in kind); and
(6) A copy of any agreement or documentation between or among the
requester and other persons who will be involved in the activity or
related transactions that describes the activity to be taken by such
persons.
(b) If at the time of submission certain information is not yet
available, this circumstance must be stated and explained. The
Directorate of Defense Trade Controls will take the completeness of the
information into account in providing guidance on whether or not the
activities constitute brokering activities. The guidance will
constitute an official determination by the Department of State. The
guidance shall not substitute for prior approval when required under
Sec. 129.8 of this subchapter.
(c) Persons desiring guidance on other aspects of part 129 may also
request guidance from the Directorate of Defense Trade Controls in a
similar manner by submitting a description of the relevant facts or
copies of relevant documentation.
28. Section 129.10 is amended by revising the section heading and
text, to include new paragraphs (a), (b), and (c), to read as follows:
Sec. 129.10 Reports.
(a) Any person required to register under this part (including
those registered in accordance with Sec. 129.3(d) of this subchapter)
shall provide to the Directorate of Defense Trade Controls on an annual
basis a report of its brokering activities in the previous calendar
year. Such report shall be submitted along with the registrant's annual
renewal submission or, if not renewing, within 30 days after expiration
of registration.
(b) The report shall include brokering activities that received or
were exempt from prior approval as follows:
(1) The report shall identify the broker's name, address, and
registration code and be signed by an empowered official who shall
certify that the report is complete and accurate. The report shall
describe each of the brokering activities, including the number of the
prior approval or the exemption claimed; and
(2) For each of the brokering activities, the report shall identify
all persons who participated in the activities, including each person's
name, address, nationality, and country where located and role or
function; the quantity, description, and U.S. dollar value of the
defense articles or defense services; the type and U.S. dollar value of
any consideration received or expected to be received, directly or
indirectly, by any person who participated in the brokering activities,
and the source thereof.
(c) If there were no brokering activities, the report shall certify
that there were no such activities.
29. Section 129.11 is added to read as follows:
Sec. 129.11 Maintenance of Brokering Records by Registrants.
A person who is required to register pursuant to this part
(including those registered in accordance with Sec. 129.3(d) of this
subchapter) must maintain records concerning brokering activities in
accordance with Sec. 122.5 of this subchapter.
Dated: December 12, 2011.
Ellen O. Tauscher,
Under Secretary, Arms Control and International Security, Department of
State.
[FR Doc. 2011-32432 Filed 12-16-11; 8:45 am]
BILLING CODE 4710-25-P