www.pwc.com/us/forensics
Brokering Requirements
for the Firearms Industry
July 2012
Export Control Services
Brokering 101:
Section 129 of the International Traffic in Arms Regulations addresses the registration and
licensing of brokers:
• Section 129.1 “Purpose” references Section 39b()(1)(A)(ii) of the Arms Export Control Act
• Section 129.2(a) defines “broker”
• Section 129.2(b) defines “brokering activities”
• Section 129.2(c) defines “foreign defense article or defense service”
• Section 129.3 describes registration requirements
• Section 129.4 describes Department of State Form DS-2032 (Statement of Registration)
and fees
• Section 129.5 gives policy on embargoes (see 126.1) and other proscriptions
• Section 129.6 provides requirements for license/approval
• Section 129.7 describes activities requiring prior written approval (license) of the
Directorate of Defense Trade Controls (“DDTC”) (see (a)(1)(i) re firearms)
• Section 129.8 describes activities requiring prior notification to DDTC
• Section 129.9 outlines annual reporting requirements
• Section 129.10 gives where to go for additional guidance  DDTC
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Who is a “broker”?
“Section 129.2(a) Broker means any person who acts as an agent for
others in negotiating or arranging contracts, purchases, sales or
transfers of defense articles or defense services in return for a fee,
commission or other consideration.”
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What is “brokering”?
“Section 129.2(b) Brokering activities means acting as a broker as defined
in Section 129.2(a), and includes the financing, transportation, freight
forwarding, or taking of any other action that facilitates the manufacture,
export, or import, or [sic] a defense article or defense service, irrespective
of its origin.”
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Section 129.2(b) definition of “brokering” continued:
“For example, this includes, but is not limited to, activities by U.S.
persons who are located inside or outside of the United States or
foreign persons subject to U.S. jurisdiction involving defense articles
or defense services of U.S. or foreign origin inside or outside of the
United States.”
Section 129.2(c) defines “foreign defense article or defense
service” “as “includes any non-United States defense article or
defense service of a nature described on the United States Munitions
List regardless of whether such article or service contains United
States origin components.”
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Who is NOT a “broker”?
Section 129.2(b): “But, this does not include activities by U.S. persons
that are limited exclusively to U.S. domestic sales or transfers (e.g., no
for export or re-transfer in the United States or to a foreign person).
For the purposes of this subchapter, engaging in the business of
brokering activities requires only one action as described above.”
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Who is NOT a “broker” continued
Section 129.3(b) provides the following exemptions from registration:
(1) “Employees of the United States Government acting in official
capacity.”
(2) “Employees of foreign governments or international organizations
acting in official capacity.”
(3) “Persons exclusively in the business of financing, transporting, or
freight forwarding, whose business activities do not also include
brokering defense articles or defense services.
For example, air carriers and freight forwarders who merely
transport or arrange transportation for licensed United States
Munitions List items are not required to register, nor are banks or
credit companies who merely provide commercially available lines
or letters of credit to persons registered in accordance with part
122 of this subchapter required to register….”
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Prior approval (licenses) are required
Section 129.7(a)(1)(i) requires prior written approval from DDTC for
“brokering activities relating to defense articles and services covered
by or of a nature described by part 121” (U.S. Munitions List), to or
from any country –
“ automatic firearms and components and parts therefore.”
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Proposed new brokering requirements
On December 19, 2011, the Department of State published a proposed rule
on brokering. The public comment period closed on February 17, 2012.
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Export Control Services Contacts and Resources
Philip D. Treccagnoli
Jeannette L. Chu
Partner
Telephone: (646) 471-8191
Philip.D.Treccagnoli@us.pwc.com
Director
Telephone: (703) 762-7250
Jeannette.L.Chu@us.pwc.com
Philip A. Charnas
Director
Telephone: (408) 817-8183
Philip.Charnas@us.pwc.com
Samar Aziz
Manager
Telephone: (646) 471-1265
Samar.Aziz@us.pwc.com
Ray T. Hirata
Manager
Telephone: (408) 534-2391
Ray.T.Hirata@us.pwc.com
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