ITAR Amendment to benefit Israelis Dealing in U.S. Military Products

By Gil Remeny, Adv.


On August 26, the U.S. Government finally brought some much needed clarity to an area of its International Traffic in Arms Regulations (ITAR) that was until then the cause of much confusion and uncertainty. 

While much of the ITAR is concerned with controlling the movement of U.S. military equipment and technology from the U.S. and the subsequent movement and use of the products and technology outside the U.S., Section 129 of the ITAR is concerned with the control of certain "brokering activities" related to ITAR controlled military equipment and technology.

Essentially, prior to the amendment, anyone regardless of nationality and location engaged in brokering activities, had to register with the Department of State's Directorate of Defense Trade Controls (DDTC) as brokers. Conducting those activities without DDTC registration and without the required licenses is a criminal offence that may have severe penalties.  Furthermore, it is forbidden for any party, U.S. or otherwise to conduct a business transaction involving ITAR controlled products or technology with the involvement of a party acting in breach of the ITAR brokering regulations. A major problem was that DDTC seemed to interpret the definitions of “broker” and “brokering activity” in the ITAR far wider than the language of the ITAR seemed to suggest, while providing no clear guidance on the matter. DDTC seemed to consider a wide range of activities undertaken in connection with facilitating the manufacture, import or export of ITAR controlled products as brokering activities meaning that many business, including Israeli business involved in the sale and distribution of U.S. origin military products or foreign made products containing ITAR controlled parts and technology could have been unknowingly acting in a manner that the U.S. Government viewed as breaking U.S. law. 

The August 26th amendment provides that non-U.S. parties will no longer be considered as performing "brokering activities" caught by the ITAR and will no longer need to register with the U.S. Government unless they are owned by a U.S. party and their brokering activities are conducted in connection with transactions that are unrelated to their affiliates. This means that a large number of non-U.S. companies that had to register with DDTC as brokers in the past, pay brokering registration fees (a couple of thousand dollars a year) and file reports to the U.S. Government detailing their brokering activities will now be released from these obligations as they will no longer be brokers as far as the ITAR is concerned. So at least for non-U.S. businesses, this is a very positive development.


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