78578 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

Issued in Seattle, Washington, on 

December 12, 2011. 

John Warner, 

Manager, Operations Support Group, Western 

Service Center. 

[FR Doc. 2011–32450 Filed 12–16–11; 8:45 am] 

BILLING CODE 4910–13–P 

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. 

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: 

DDTCResponseTeam@state.gov 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: 

DDTCResponseTeam@state.gov, 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 § 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 § 129.2(d)(3)–(5) clearly 

indicate when a foreign person’s 

brokering activities are subject to the 

ITAR. 

New § 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 § 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 § 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. 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 78579 

Registration Requirements and 

Exemptions 

Editorial and technical revisions 

would be made to certain registration 

and related registration exemption 

provisions in § 129.3. 

Persons exclusively in the business of 

insuring would be added to those 

persons exempt from registration in 

§ 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 § 129.6 for 

prior approval for brokering activities, 

as well as reporting and recordkeeping 

requirements in §§ 129.10 and 129.11. 

New § 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 fulltime 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 § 129.6 for prior 

approval for brokering activities as well 

as reporting requirements in § 129.10, 

but would still have recordkeeping 

requirements as specified in § 129.11. 

New § 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 § 123.9. Such persons 

would also be exempt from the 

requirements in § 129.6 for prior 

approval for brokering activities, as well 

as reporting and recordkeeping 

requirements in §§ 129.10 and 129.11. 

New § 129.3(c) would specify that 

persons exempt from registration are 

subject to the policy of embargoes and 

other proscriptions in § 129.5. 

New § 129.3(d) would specify that if 

new § 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 

§ 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 § 129.4(c) would 

continue to be required to register and 

pay a registration fee of $2,250 per year 

(see § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 129.4(g) would provide 

procedures that must be followed in the 


emcdonald on DSK5VPTVN1PROD with PROPOSALS
78580 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

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 § 129.7 do not apply 

to brokering activities involving 

countries or other persons subject to 

embargoes and other proscriptions cited 

in § 129.5 (e.g., those involving 

countries or other persons referred to in 

§ 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 § 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 enduse is limited to foreign government and 

international organization end-users 

(see § 129.7(d)). 

The list of excluded items in 

§ 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 § 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 § 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 

§ 129.8. A provision adding a 

certification would be added in 

§ 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 § 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 § 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 § 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 § 129.8. As revised, this 

provision would be self-contained and 

would no longer reference the provision 

for advisory opinions in ITAR § 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 § 129.11 would provide that 

records on brokering activities must be 

maintained in accordance with § 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 


emcdonald on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 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 § 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 § 129.5 as well as 

recordkeeping requirement of proposed 

§ 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 NATOmember 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 § 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 

§ 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 § 129.3(b)(2). The freight forwarder, 

as well as any other person exempt from 

registration, must still comply with § 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 § 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 § 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 

§ 129.3(b)(4) are met. However, the policies 

and proscriptions of § 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 § 127.8, or policy of denial under 

§ 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 § 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 


emcdonald on DSK5VPTVN1PROD with PROPOSALS
78582 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

ineligible under § 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 § 126.1. 

New § 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 

§ 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 § 123.17. It would also 

add a reference to § 129.5 that contains 

restrictions imposed on brokering 

activities involving countries, areas, and 

persons referred to in § 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 § 120.1(c) to 

§ 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, 

§ 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 § 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 § 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 § 553 (Rulemaking) and § 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 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 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 

DDTCResponseTeam@state.gov, 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. 


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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: 

§ 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 § 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 § 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 § 126.7(a) of this 

subchapter, or to interim suspension 

under § 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 § 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: 

§ 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 


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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: 

§ 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 § 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 § 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 § 126.1 of this subchapter, may not be 

an empowered official. 

5. Section 120.40 is added to read as 

follows: 

§ 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: 

§ 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 § 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 § 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: 

§ 122.2 Submission of registration 

statement. 

* * * * * 

(b) * * * 

(1) Whether the intended registrant, 

chief executive officer, president, vicepresidents, 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 

§ 120.27 of this subchapter; or 

(ii) * * * 

(2) Whether the intended registrant is 

foreign owned or foreign controlled (as 

defined in § 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: 

§ 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: 

§ 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 


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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 § 123.17(c) through 

§ 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 § 126.1 or to brokering 

activities involving such countries, 

areas or persons. (See § 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 redesignating paragraph (c) as paragraph 

(d) and adding a new paragraph (c) to 

read as follows: 

§ 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 securitycleared 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: 

§ 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 § 120.1(c)(2) of this 

subchapter, or a person with knowledge 

that another person is ineligible 

pursuant to § 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 

§ 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: 

§ 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: 

§ 127.7 Debarment. 

(a) Debarment. In implementing § 38 

of the Arms Export Control Act, the 

Assistant Secretary of State for PoliticalMilitary 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: 

§ 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 § 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 § 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). 

* * * * * 


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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: 

§ 129.2 Definitions. 

(a) Broker means any person (as 

defined by § 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: 

§ 129.3 Requirement to register. 

(a) Except as provided in § 129.3(b) of 

this subchapter, any person who 

engages in brokering activities, as 

defined by § 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 § 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 § 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 § 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 recordkeeping requirements of part 129 (see 

§ 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 


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as a reexporter or retransferor of such 

article or service under such license or 

approval or under an approval under 

§ 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 § 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 

§ 129.5 of this subchapter. 

(d) If § 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: 

§ 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 

§§ 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 § 120.27 of this 

subchapter or foreign criminal statutes 

dealing with subject matter similar to 

that in the U.S. criminal statutes 

enumerated in § 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 

§ 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 § 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 recordkeeping requirements in § 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 

§ 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 § 120.27 of this 


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subchapter or foreign criminal statutes 

dealing with subject matter similar to 

that in the U.S. criminal statutes 

enumerated in § 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: 

§ 129.5 Policy on embargoes and other 

proscriptions. 

(a) This section applies to brokering 

activities defined in § 129.2 of this 

subchapter, regardless of whether the 

person involved in such activities has 

registered or is exempt from registration 

under § 129.3 of this subchapter. The 

exemptions in § 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 § 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 § 127.7 of this subchapter). 

(See § 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: 

§ 129.6 Requirement for prior approval. 

Except as provided in § 129.7 of this 

subchapter, no person who is required 

to register as a broker pursuant to 

§ 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: 

§ 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 § 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 § 120.1(c)(2) of this 

subchapter; or 

(3) A country or other person referred 

to in § 126.1 of this subchapter is 

involved in the brokering activities or 

such activities are otherwise subject to 

§ 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 


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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 § 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 § 121.16 of this 

subchapter; or 

(14) Foreign defense articles and 

defense services of a nature that are 

described in various categories of 

§ 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: 

§ 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 

§ 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 § 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 § 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 § 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 § 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; 


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Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 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: 

§ 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 § 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: 

§ 129.10 Reports. 

(a) Any person required to register 

under this part (including those 

registered in accordance with § 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: 

§ 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 § 129.3(d) 

of this subchapter) must maintain 

records concerning brokering activities 

in accordance with § 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 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–124627–11] 

RIN 1545–BK43 

Corporate Reorganizations; Guidance 

on the Measurement of Continuity of 

Interest 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations concerning the 

continuity of interest requirement for 

corporate reorganizations. The guidance 

is necessary to clarify the manner in 

which the continuity of interest 


emcdonald on DSK5VPTVN1PROD with PROPOSALS