Getting approval for a brokering transaction

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1. Registration is not permission

Registering as a broker, described in what counts as brokering, puts a person on the Directorate of Defense Trade Controls’ books. It does not authorize any particular deal. For certain categories of defense article, each brokering activity needs its own prior approval, unless an exemption applies (22 CFR 129.4(a)).

2. Which transactions need approval

A registered broker must obtain the Directorate’s approval before brokering two kinds of item. The first is any foreign defense article or defense service on the Munitions List, together with foreign-origin items on the Munitions Import List (22 CFR 129.4(a)(1)).

The second is a defined set of American-origin articles and services (22 CFR 129.4(a)(2)). The list covers firearms and other weapons in the early paragraphs of Categories I to III, and rockets, bombs, grenades and their launchers. It also covers launch vehicles and missile and anti-missile systems, including man-portable air defense systems, and vessels of war. Tanks and military vehicles, military aircraft and unmanned aerial vehicles are included. So are night vision and inertial guidance items, specified chemical and biological agents and their dissemination equipment, submersible vessels, and Category XXI items.

Brokering of American-origin articles outside that list still requires registration, but not transaction-by-transaction approval under this section.

3. Two exemptions from approval

The first covers work for the United States government. Brokering undertaken under a contract with a government agency is exempt from approval where the articles or services are solely for that agency’s use (22 CFR 129.5(a)(1)). It is also exempt where the work carries out a foreign assistance or sales program authorized by law and controlled by the President by other means. That must be shown in one of two ways. Either the contract explicitly says it supports such a program and the agency has established equivalent control, or the Directorate agrees in writing in advance (22 CFR 129.5(a)(2)).

The second covers foreign articles among close allies. Brokering of a foreign defense article or service is exempt when it is arranged wholly within, and destined only for, NATO, its member countries or five other named allies (22 CFR 129.5(b)). The exemption does not extend to the American-origin categories listed above.

4. When the exemptions fall away

Neither exemption applies in three cases (22 CFR 129.5(c)). The first is where the broker has not registered. The second is where the broker, or anyone with a direct or indirect interest in or benefit from the activity or the related transaction, is ineligible under the regulations. The third is where a proscribed country or person is involved, or the activity is otherwise subject to the policy on embargoes.

Using an exemption also leaves the rest of the part in force. "Brokers who use the exemptions in this section must comply with all other provisions of this part 129" (22 CFR 129.5(d)). Registration, record keeping and annual reporting continue.

5. Proscribed countries and persons

A separate policy section applies to all brokering, whether or not the person is registered or exempt from registration, and the approval exemptions do not apply to it (22 CFR 129.7(a)). "No person may engage in or make a proposal to engage in brokering activities that involve any country, area, or person referred to in § 126.1 of this subchapter without first obtaining the approval of the Directorate of Defense Trade Controls" (22 CFR 129.7(b)).

The same prior approval is needed where the activity involves countries or persons the Department of State has identified by notice in the Federal Register as subject to limits for national security, foreign policy or law enforcement reasons. A debarred individual is the regulation’s example (22 CFR 129.7(c)). The stated policy is to deny such requests, and anyone who knows or has reason to know of brokering involving those countries or persons must inform the Directorate immediately (22 CFR 129.7(d)). Even a proposal is covered, not only a completed deal.

6. What a request must contain

A request goes to the Directorate, signed by an empowered official, with the applicant’s name, address and registration code (22 CFR 129.6(a)). It must carry a certification on three matters. The first is whether the applicant or any senior officer or director has been indicted, charged or convicted under the criminal statutes listed in the regulations. The second is whether any of them is ineligible to contract with, or receive licenses from, any government agency. The third is whether, to the applicant’s knowledge, any other person involved is in either position (22 CFR 129.6(a)(2)).

The request must then describe the brokering fully (22 CFR 129.6(b)). It states the action the applicant will take and names every person who may take part, with nationality, address and place of business. For each defense article it gives the list category, nomenclature and whether the article is significant military equipment. It also gives the estimated quantity and dollar value, the security classification, and the end-user and end-use. Finally, it says whether the activity relates to a direct commercial sale, a Foreign Military Sales case or other support to the government.

7. Certification, gaps and validity

The signer vouches for the whole request. "The empowered official signing the request for approval shall include a certification that the request is complete and accurate" (22 CFR 129.6(c)).

Early-stage deals are recognized. If some required information is not yet available when the request is submitted, that must be stated and explained in the certification, and the Directorate takes the explanation into account in deciding whether to approve (22 CFR 129.6(d)).

Approvals are time-limited. "The period of validity for an approval may not exceed four years" (22 CFR 129.6(e)).

8. What this means for a broker

Brokering the listed American-origin categories, or any foreign defense article, needs an approval for each activity unless a narrow exemption applies. Government contract work can qualify, but only where the contract language or a written concurrence establishes it. The integrity certifications reach every participant the broker knows about. Registration filings and annual reports are covered in broker filings, guidance and annual reports.

Key terms

Brokering approval	The Directorate’s prior approval for a specific brokering activity in the listed categories.
Empowered official	The company officer who signs the request and certifies it complete and accurate.
Government contract exemption	The exemption for brokering under a contract with a United States agency, subject to conditions.
Ineligible person	A person barred under the regulations, whose involvement removes the exemptions.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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