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Viewing cable 09STATE108901, MISSILE TECHNOLOGY CONTROL REGIME (MTCR):
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09STATE108901 | 2009-10-21 18:31 | 2011-08-24 00:00 | UNCLASSIFIED | Secretary of State |
VZCZCXYZ0004
PP RUEHWEB
DE RUEHC #8901 2941853
ZNR UUUUU ZZH
P 211831Z OCT 09
FM SECSTATE WASHDC
TO AMEMBASSY PARIS PRIORITY 0000
MISSILE TECHNOLOGY CONTROL REGIME COLLECTIVE
UNCLAS STATE 108901
SIPDIS
PARIS FOR POL: NOAH HARDIE
BRASILIA FOR POL: JOHN ERATH
E.O. 12958: N/A
TAGS: MTCRE ETTC KSCA MNUC PARM TSPA FR BR
SUBJECT: MISSILE TECHNOLOGY CONTROL REGIME (MTCR):
BROKERING CONTROLS IN THE UNITED STATES
¶1. (U) This is an action request. Please see paragraph 2.
¶2. (U) ACTION REQUEST: Department requests Embassy Paris
provide the interagency cleared paper "Brokering Controls in
the United States" in paragraph 3 below to the French Missile
Technology Control Regime (MTCR) Point of Contact (POC) for
distribution to all Partners and posting on EPOC. Info
addressees also may provide to host government officials as
appropriate. In delivering paper, posts should indicate that
the U.S. is sharing this paper as part of our preparation for
the Information Exchange that will be held in conjunction
with
the MTCR Plenary in Rio, November 9-13, 2009. NOTE:
Additional IE papers will be provided via septels. END NOTE.
¶3. (U) BEGIN TEXT OF PAPER:
(UNCLASS)
Brokering Controls in the United States
U.S. Department of State
In July 1996, the United States Congress amended the Arms
Export Control Act (AECA) to include the registration and
licensing of arms brokers and brokering activities in order to
prevent transfers of U.S. defense articles and or foreign
defense articles by U.S. persons from one non-U.S. person to
another without the benefit of review and approval from the
United States Government (USG). In December 1997, the
International Traffic in Arms Regulations (ITAR), which
implements the AECA, was amended to expand the definitions of
broker and brokering activities, as well as to establish
requirements for broker registration, licensing of brokering
activities, prohibitions on brokering involving certain
countries or persons under U.N. or U.S. embargoes or
sanctions, and for an annual brokering activity report.
Responsibilities for the regulation of broker and brokering
activities were assimilated into the offices already
established within the U.S. Department of State to administer
arms export registration and licensing. The enforcement
provisions of the AECA and the ITAR cover brokering
activities.
United States law, regulations, and policy regarding arms
brokers:
¶A. United States Law
22 United States Code (U.S.C.) Section 2778(b)(1)(A)(ii),
outlines the requirements for registration and licensing
requirements for arms brokers. Specifically, this section
requires that every person engaging in brokering activities
pay a fee and register with the U.S. Department of State, the
USG agency responsible for implementing Section 2778. In
addition, brokers must obtain licenses for brokering
activities other than certain activities by or for USG
agencies. When a brokering license request is submitted for
the export of defense items (defense articles, to include
technical data, and defense services), the following
evaluation criteria are considered to determine whether the
proposed transaction will:
* Contribute to the arms race;
* Aid in the development of weapons of mass
destruction/their means of delivery;
* Support international terrorism;
* Increase the possibility of outbreak or escalation of
conflict; or
* Prejudice the development of bilateral or multilateral
agreements relative to arms control or non-
proliferation.
¶B. U.S. Regulations and Policies
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 and
further delegated to the Deputy Assistant Secretary of State
for Defense Trade Controls and the Managing Director,
Directorate of Defense Trade Controls (DDTC). The ITAR
implements the AECA.
Definitions
Part 129 of the ITAR covers brokering controls, but other
sections of the regulation also apply - particularly as
related to key definitions of persons, defense articles,
defense services, eligibility to engage in exporting or
brokering activities , policy on embargoes and other
proscriptions , registration requirements and the reporting
of commissions, political contributions or fees.
Specifically, Part 129 provides:
* A definition of a broker as any person who acts as an
agent, in the broadest sense, in negotiating or
arranging, contracts, purchases, sales or transfers of
defense articles or defense services in return for a
fee, commission, or other consideration. But, acting
as an agent is just one way of engaging in brokering
activities. The 1997 Federal Register notice notifying
the public of the brokering amendment offers another
explanation of brokering that includes: "...any
person...who is in the business of brokering transfers of
defense articles or services is required to register
and pay a fee. This would include for example, persons
who act as agents for others in arranging arms deals,
as well as so-called finders and other persons who
facilitate such deals." Examples may include a U.S. or
foreign person sales representatives of a U.S.
manufacturer of U.S. defense articles; a U.S. person
finding buyers for a foreign manufacturer of foreign
defense articles; or an internet company that matches
buyers and sellers involving defense articles based on
agreements with one or the others.
* The definition of a broker applies not only to U.S.
persons, whether living in the U.S. or overseas, but to
foreign persons otherwise subject to U.S. jurisdiction.
For example, a foreign person who serves as a finder,
or facilitates the sale of U.S. defense articles or
defense services, would be under U.S. jurisdiction. In
addition, a U.S. person who serves as a finder or
facilitates the sale of U.S. or foreign defense
articles or defense services is covered by the
brokering regulations.
* Section 129.2(b) of the ITAR states that "brokering
activities mean acting as a broker, and includes the
financing , transportation, freight forwarding, or
taking of any other action that facilitates the
manufacture, export, import or transfer of a defense
article or defense service, irrespective of its origin."
However, the ITAR also provide exemptions for "persons
exclusively in the business of financing, transporting,
or freight forwarding, who business activities do not
also include brokering defense articles or defense
services." In addition, air carriers who merely
transport or arrange transportation, or banks that
provide commercially available lines of credit, for
defense items are not required to register.
Licensing
* With respect to the licensing of brokering activities,
the same policies established in the regulations for
the licensing of defense articles and defense services
apply, except U.S. or foreign registered brokers may
apply for brokering licenses. Brokers must identify
the defense articles to be brokered, the end-user,
potential entities or individuals who will be involved
in the activity, etc. This information is critical to
ensuring that brokering activities requiring licenses
are thoroughly vetted and screened to ensure all
parties are eligible and not subject to embargoes,
sanctions or debarment, for example.
* Brokering activities involving defense articles and
defense services -- including MTCR items -- always
require prior approval from the U.S. Government.
Reporting Requirements
The ITAR requires all registered brokers to submit an annual
report providing details of brokering activities conducted
during the prior year. The annual report is to include who
was involved, what countries were involved, what defense
articles or services were involved, whether brokering
activities occurred or not, and the potential consideration to
be paid or value of the transaction. Additionally, those
engaging in brokering activities may be required to submit
quarterly activity reports to the Licensing Office, imposed as
a condition of their approval of their brokering request.
Violations
The regulation of brokering activities under the ITAR and the
AECA are supported by more than a decade of enforcement
activity. Education and coordination continue with U.S.
Immigration and Customs agents, Customs and Border Protection
Inspectors, the Federal Bureau of Investigation, and Assistant
U.S. Attorneys on the regulations and necessary enforcement
actions. The Directorate of Defense Trade Controls also has
the authority to initiate civil enforcement actions and, as
necessary impose fines and penalties, and to direct remedial
compliance measures. DTCC can impose remedial measures as
part of consent agreements.
The ITAR was amended to include an explicit violation --
involving the engagement in the business of brokering
activities for which registration, a license or written
approval is required -- without first registering or obtaining
the required brokering license from the Directorate of Defense
Trade Controls. Importantly, any person who is granted a
license or other approval under the regulations is responsible
for the acts of employees, agents, and all authorized persons
to whom possession of the license defense article or technical
data has been entrusted regarding the operation, use,
possession, transportation, and handling of such defense
articles or technical data abroad. This applies irrespective
of the number of intermediate transfers and bounds those
having custody (to include a broker should they be provided a
defense article to include related technical data) to the same
extent as the original owner or transferor.
Penalties for Violations
Any person who willfully violates any provision of Sections
38-39 of the AECA, or makes any untrue statement of material
fact, or omits a material fact required to be stated in a
registration, license application or report required by the
law or regulation may be subject to a fine not to exceed
$1,000,000 for each violation or imprisonment of no more than
ten years or both. Civil fines may not exceed $500,000 for
each violation.
Trends
The number of brokers registered with the U.S. now totals more
than 1,000. This represents significant growth in the past
three years. We have seen a growing trend involving brokers
who engage in activities in many more countries than
previously. We also see a growing trend in brokers who find
suppliers overseas, and the delivery of the actual defense
articles never passes through U.S. territory and may therefore
be subject to an export license issued by another governmental
export authority.
END TEXT OF PAPER.
¶4. (U) Please slug any reporting on this or other MTCR
issues for ISN/MTR. A word version of this document will be
posted at www.state.sgov.gov/demarche.
CLINTON