Export Reform, Continued

Faithful readers of this column are well aware of the ongoing efforts to modernize and streamline the current procedures for the export of small arms from the United States. Recent media reports attribute the recent proposed changes to the Trump presidency, but in reality, export control reform has been underway since 2009, at the request of President Obama. Undertaken with the goal of strengthening national security and increasing the competitiveness of U.S. manufacturing, the reform effort has focused on current threats while adapting to changing economic and technological landscapes. The reform effort has taken two noteworthy avenues: ITAR category revisions and EAR/ITAR definition harmonization. Back in 2016, this column predicted that “[t]rue export reform will not occur for most readers until USML Categories I, II and III are completed; however, at this juncture it seems unlikely that massive changes will be made to these categories.” This author could not have been more wrong.

Transfer of Jurisdiction

The U.S. State Department currently controls jurisdiction over most small arms and ammunition, with the exception of shotguns and shotgun ammunition, which are governed by the U.S. Commerce Department. Under the May 15 proposed regulatory change, all semiautomatic firearms would transfer from State to Commerce. Small arms that were once in USML Category I will be moved to Commerce ECCN categories 0A501 and 0A502. Firearms that fire caseless ammunition, fully automatic firearms, sound suppressors, magazines with a capacity exceeding 50 rounds and firearms that are specially designed to integrate fire control, automatic tracking or automatic firing will remain within USML Category I and under State jurisdiction.

Exports of previously State-regulated firearms should become easier under Commerce, albeit, probably slower. The U.S. State Department currently processed export license applications rather quickly, with Commerce taking quite a bit longer. Nevertheless, there is no fee to file an export license under the Commerce Department. Which leads us to…

ITAR Registration Fees

ITAR registration fees have been a major sticking point to firearm manufacturers. Prior to 2012, the annual registration fee was $1,750. In 2012, the registration fee was redesigned on a sliding scale, with $2,250 as the base fee, $2,750 for companies that export 10 times or less per year and $2,750 plus $250 per export over 10 transactions per year. Application of the fee was routinely applied to firearm manufacturers but was also extended to manufacturers of firearm parts and accessories. Enforcement efforts were exhaustive, with reports of the U.S. State Department contacting major distributors and asking for ITAR registration for each firearm parts supplier. For many small businesses that conducted little or no international business, the registration scheme was burdensome and excessive. Several very small businesses discontinued business rather than pay the ITAR registration fee.

With the transfer of jurisdiction from the U.S. State Department to the U.S. Commerce Department, many current registrants may not be required to register under ITAR, unless they currently manufacture suppressors, magazines that exceed 50-round capacity, caseless ammunition and the weapons that fire caseless ammunition, or fully automatic weapons.

Rifle Scopes

Jurisdiction of rifle scopes depends upon whether the optic is “manufactured to military specifications.” Under the proposed regulations, all optics would transfer to the Commerce Department unless they incorporate night vision or infra-red capabilities that are defined under USML Category XII. All optics would be classified under ECCN 0A987 under the proposed regulations.

Performance of Defense Services

Defense services are currently regulated under the ITAR. Teaching a class on anything more advanced than basic use and maintenance of a rifle is deemed a licensable event under the ITAR. With the transfer of jurisdiction of semiautomatic firearms to Commerce, training that would have required a license under the old rules will not require a license if the new rules are adopted.

Export of Technical Data

Frequent readers of this column will recall the argument between 1st Amendment rights to free speech versus the U.S. State Department’s determination on what constitutes “export activity.” Recently, legal action was taken against Defense Distributed for posting plans online on how to use a 3D printer to manufacture a handgun. Under the ITAR, this was a deemed export, and the U.S. State Department sent a cease and desist letter to Defense Distributed in an attempt to prevent further “deemed exports.”
The BIS notice of proposed rulemaking states: “Part 734 makes clear that publication of technology on the Internet is not an export of that technology to the rest of the world; rather it is a release of that technology from export controls.” Should jurisdiction transfer from State to Commerce, the actions undertaken by Defense Distributed would not be illegal.

The government has historically had difficulty in striking an appropriate balance between national security and national competitiveness via export control. The new proposed regulations are just that–proposed. There is no timeline on when the new rules will take effect, and the final rules could be different from what has been proposed. Both the State and Commerce Departments will be taking comments (for, or against) the proposed regulatory changes through June 30. Interested parties may submit comments on the proposed regulations by emailing DDTCPublicComments@state.gov with the subject line, “ITAR Amendment–Categories I, II and III.” Comments received after June 30, 2018, will be considered, if feasible, but consideration cannot be assured. Comments received are subject to public disclosure, so those wishing to submit anonymous comments may do so by submitting their comments via www.regulations.gov and leaving the fields that would identify the commenter blank and including no identifying information in the comment itself.

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Mr. Wong is a Washington-licensed attorney. He regularly provides legal counsel to the firearm and defense industry via his law firm, The Firearms Law Group. Mr. Wong also manages Hurricane Butterfly, an import/export company that assists firearm manufacturers, resellers and collectors from around the world wade through the regulatory quagmire of U.S. import/export regulations.

He may be found online at FirearmsLawGroup.com.

The preceding article is not intended as legal advice and should not be taken as legal advice. If the reader has specific legal questions, seek competent legal counsel.