Concluding the initial review of the United States Munitions List (USML) that started in 2011, the Departments of State and Commerce have released their companion Export Control Reform rules USML Categories I, II, and III (firearms, artillery, and ammunition). Click here for the Department of State rule and click here for the Department of Commerce rule. The rules were published in the Federal Register on January 23, 2020 and would be effective 45 days after publication (March 9, 2020).
The new rules largely reflect proposals published in May 2018, with corrections, conforming changes, and some notable updates.
On the day of publication, 21 states filed a lawsuit against the new regulations that could delay or cancel the new rules. Assuming that the rules stay in place, read on for what to expect.
Background
Items listed on the USML are controlled by the included in the State Department’s International Traffic in Arms Regulations (ITAR). Items removed from the USML are controlled by the Commerce Department’s Export Administration Regulations (EAR).
The years-long effort is meant to limit the USML to those items that provide the U.S. with critical military or intelligence advantages as well as those items that perform an inherently military function. All of the other USML categories had been reviewed and revised between 2011 and 2016.
ITAR/USML Revisions
Previously written broadly, USML Categories I, II, and III cover most firearms, artillery systems, and ammunition. They also include catch-all parts and components categories (e.g., I(h) “Components, parts, accessories and attachments for the articles in paragraphs (a) through (g) of this category.”). Items no longer controlled under the USML will be controlled by the Department of Commerce’s Export Administration Regulations (EAR) and listed on the Commerce Control List (CCL).
As revised, USML Category I includes the following, notably excluding most non-automatic or semi-automatic firearms:
*(a) Firearms using caseless ammunition.
*(b) Fully automatic firearms to .50 caliber (12.7 mm) inclusive.
*(c) Firearms specially designed to integrate fire control, automatic tracking, or automatic firing (e.g., Precision Guided Firearms).
Note 1 to paragraph (c): Integration does not include only attaching to the firearm or rail.
*(d) Fully automatic shotguns regardless of gauge.
*(e) Silencers, mufflers, and sound suppressors.
(f) [Reserved]
(g) Barrels, receivers (frames), bolts, bolt carriers, slides, or sears specially designed for the articles in paragraphs (a), (b), and (d) of this category.
(h) Parts, components, accessories, and attachments, as follows:
(1) Drum and other magazines for firearms to .50 caliber (12.7 mm) inclusive with a capacity greater than 50 rounds, regardless of jurisdiction of the firearm, and specially designed parts and components therefor;
(2) Parts and components specially designed for conversion of a semi-automatic firearm to a fully automatic firearm.
(3) Parts and components specially designed for defense articles described in paragraphs (c) and (e) of this category; or
(4) Accessories or attachments specially designed to automatically stabilize aim (other than gun rests) or for automatic targeting, and specially designed parts and components therefor.
(i) Technical data (see §120.10 of this subchapter) and defense services (see §120.9 of this subchapter) directly related to the defense articles described in this category and classified technical data directly related to items controlled in ECCNs 0A501, 0B501, 0D501, and 0E501 and defense services using the classified technical data. (See §125.4 of this subchapter for exemptions.)
(x) Commodities, software, and technology subject to the EAR (see §120.42 of this subchapter) used in or with defense articles.
Note to paragraph (x): Use of this paragraph is limited to license applications for defense articles where the purchase documentation includes commodities, software, or technology subject to the EAR (see §123.1(b) of this subchapter)
Note 1 to Category I: The following interpretations explain and amplify the terms used in this category:
(1) A firearm is a weapon not over .50 caliber (12.7 mm) which is designed to expel a projectile by the deflagration of propellant;
(2) A fully automatic firearm or shotgun is any firearm or shotgun that shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger; and
(3) Caseless ammunition is firearm ammunition without a cartridge case that holds the primer, propellant, and projectile together as a unit.
Except for scopes controlled in Category XII (night vision), riflescopes manufactured to military specifications move to the CCL where they will join other, already EAR-controlled riflescopes.
The Category II revision includes expanded technical notes and specifications for control and enumerate the parts and components that will remain on the USML. The Category III is rewritten to control ammunition based on technical attributes rather than merely being “for the articles in Categories I and II.” Both Category I and Category II include paragraphs controlling developmental products funded by the Department of Defense.
ITAR revisions also include conforming changes throughout where references to firearms needed to be removed or updated. Some Part 129 brokering rules continue to apply to firearms moved to the CCL by adding a reference to the ATF’s United States Munitions Import List (USMIL).
EAR/CCL Revisions
Concurrently, the Department of Commerce rule creates seventeen new Export Control Classification Numbers (ECCNs) for the items leaving the USML. Reorganizing to put similar items already controlled on the CCL with new related entries, the rule revises eight ECCNs and removes nine. Items currently controlled in Category II would be controlled under new “600 series” ECCNs “to control items of a military nature” and Category I and III items would be controlled under new “500 series” ECCNs “because, for the most part, they have civil, recreational, law enforcement, or other non-military applications.”
The rule also revises various sections of the EAR to accommodate the new items and establish licensing policies where needed. Among these, a policy of denial is in place for 500 series items to the Peoples Republic of China and Country Group E:1.
Furthermore, to address the controversy over 3D printing files, EAR §734.7(c) is added to maintain EAR controls even when “published”:
The following remains subject to the EAR: “software” or “technology” for the production of a firearm, or firearm frame or receiver, controlled under ECCN 0A501, that is made available by posting on the internet in an electronic format, such as AMF or G-code, and is ready for insertion into a computer numerically controlled machine tool, additive manufacturing equipment, or any other equipment that makes use of the “software” or “technology” to produce the firearm frame or receiver or complete firearm.
This is intended to resolve the controversy related to the EAR’s release from control for “published” information, including information posted on the internet (a policy that the ITAR does not share, leading DDTC to consider posting information on the internet to be an “export.”).
Effects of Export Control Reform
Both departments noted that neither one regulates the domestic sale or use of firearms in the United States, or the transfer of firearms or related software or technology between U.S. persons within the United States. They also noted that the Department of Commerce has already been licensing similar items including shotguns, shotgun ammunition, and sighting devices for decades.
Exports still require DOC authorization, with licenses subject to interagency national security and foreign policy review as well as subject to the laws of importing countries.
The main benefits of the reforms are administrative—fewer resources will need to be devoted to licensing and registration.
The State Department expects a decrease of 10,000 licenses per year. Of those, 4,000 will be eligible for license exceptions and 6,000 will require Commerce licenses. When Commerce licenses are needed, the absence of a purchase order requirement will allow some licenses for regular customers to be consolidated. Some license exceptions will also be available, largely for minor parts and components.
This reform is especially advantageous to manufacturers of minor components as these were the only three USML categories have maintained catch-all parts and components subcategories. Under the reform, parts and components not specifically listed will be controlled on the CCL.
Manufacturers and exporters whose products are now all EAR-controlled no longer have to register with DDTC and pay the minimum $2,250 registration fee. The Commerce Department’s SNAP-R licensing system includes free registration and free license applications.
The reform also benefits gunsmiths. The State Department noted that:
…gunsmiths that do not manufacture, export, or broker articles that remain subject to the ITAR after this rule’s effective date will no longer need to determine if they are required to register under the ITAR. They may, however, still be required to comply with ATF licensing requirements.
The Commerce Department also noted that while reporting of fees and commissions under ITAR Part 130 will not apply to EAR-controlled items, “the Foreign Corrupt Practices Act (FCPA) already prohibits this type of corruption activity and provides a robust regulatory scheme. FCPA applies to all items subject to the EAR, including items that will be moved from the USML to the CCL.”
De minimis rules will also encourage foreign sales as incorporation of parts into foreign items will not necessarily subject the foreign item to U.S. export-controls.
State Department authorizations (licenses and agreements) may continue to be used after the transition of items from the USML to the CCL.
For companies that work with firearms, guns, and ammunition, this is a huge development that will pay dividends in the long run. ECS is here to help with the transition, offering training seminars and on-site training, classification assistance, and DDTC and BIS license drafting. Contact us for help.