LEGALLY ARMED: Finally! Revisions to the U.S. Munitions List

LEGAL NEWS FROM THE NATION’S CAPITAL JOHANNA REEVES, ESQ.

It’s finally happened. The long-awaited rewrite of U.S. Munitions List (USML) Categories I, II and III was published in the Federal Register on January 23, 2020. These categories are the last to be revised pursuant to the sweeping export control reform (ECR) initiated by the Obama Administration almost 10 years ago. Nevertheless, this will be the first time many in the firearms and ammunition industries will have to deal with such regulatory change. 

The purpose of ECR, including revising USML Categories I–III, is to describe more precisely the articles warranting export and temporary import control on the USML and to update the scope of the International Traffic in Arms Regulations (ITAR) to control only those articles that provide the U.S. with critical military or intelligence advantage or are inherently for military end-use. The U.S. Department of State has determined that the articles removed from the USML do not meet this standard and acknowledges that many are widely available in retail outlets in the U.S. and abroad. 

Industry was given a 45-day implementation period in order to get ready for the transition, making the effective date of the Rule March 9, 2020. All new transactions must be conducted pursuant to the new rules at this time. In this article we will walk through a brief summary of the changes and some suggestions for industry to aid in preparing for the new regulatory environment. 

Myths and Facts 

Before we delve into the changes to the regulations, it is important to dispel some popular myths that have circulated. Both the U.S. Department of State Directorate of Defense Trade Controls (DDTC) and the U.S. Department of Commerce Bureau of Industry and Security (BIS) have published a series of myths and facts from which we highlight the following: 

MYTH: Transition from ITAR to Commerce controls under the Export Administration Regulations (EAR) will result in a deregulation or ease in regulation of firearms. 

FACT: All firearms moved from the ITAR to the EAR will continue to require a license, even for export to Canada. 

MYTH: Licensing under the EAR will lead to less regulation. 

FACT: The EAR allows for a more tailored approach to licensing: for example, no purchase order requirement, coverage for projected sales over a 4-year period. Licenses will continue to be reviewed by the Department of State and the Department of Defense for national security and foreign policy concerns. End-use monitoring efforts will still occur. Commerce has enforcement analysts and Special Agents dedicated to investigating export violations. 

MYTH: Transfer from ITAR to EAR will change the status of items that are controlled for permanent import. 

FACT: ATF continues to administer permanent import controls, and these changes do not impact the U.S. Munitions Import List (USMIL). Consequently, a Form 6 import permit will continue to be required to permanently import firearms and ammunition into the United States. 

MYTH: U.S. Immigration and Customs Enforcement (ICE) and Homeland Security Investigations (HSI) will lose authority to investigate illegal exports. 

FACT: This transfer does not affect ICE or HSI authority. They will continue to enforce the regulations governing the export of firearms, firearms parts and ammunition. 

MYTH: Congressional Notification will continue to apply under the EAR. 

FACT: There will be no Congressional Notification under the EAR! When Commerce published the proposed rule in May 2018, the controlling statute at the time was the Export Administration Act (EAA), which did not contain a Congressional Notification requirement for firearms. Therefore, BIS did not include a Congressional Notification requirement because it did not want to assume congressional intent in this area, especially because Congress was considering at the time the Export Control Reform Act (ECRA), which would replace the EAA and provide the statutory basis for the EAR. On August 13, 2018, the president signed the National Defense Authorization Act for Fiscal Year 2018, which included ECRA. Notably, Congress did not include in ECRA any requirements for Congressional Notification for firearms and related items exports. Therefore, BIS did not include a Congressional Notification requirement in the Final Rule. 

MYTH: Magazines with a capacity less than 16 rounds will be classified in the catch-all designation, “EAR99” and not require an export license for most destinations. 

FACT: These lower capacity magazines will be classified on the Commerce Control List (CCL) under Export Control Classification Number (ECCN) 0A501 in paragraph .x and will require a license or license exception to export to every country, including Canada. 

MYTH: Technology for 3D-printed guns will not be controlled once the Final Rules take effect. 

FACT: Certain technology and software for firearms will remain subject to the EAR and will not become uncontrolled because of publication on the internet. The Commerce Final Rule provides that technology and software ready for insertion into an automated manufacturing tool that makes use of the software or technology to produce a firearm frame, receiver or complete firearm is subject to the EAR, consistent with the regulation of such software and technology when previously controlled under the USML. 

The Revisions 

As a result of the revisions, certain items will be removed from USML Categories I, II and III and transition over to the EAR’s control list known as the Commerce Control List (CCL). To house its new occupants, the CCL will have 17 newly created Export Control Classification Numbers (ECCNs). 

What’s Staying on the USML 

Remaining on the USML are those items the government deems inherently military or not otherwise widely available for commercial sale. Examples of items that will continue to be classified on the USML Category I are firearms using caseless ammunition, fully automatic firearms to .50 caliber (12.7mm) inclusive, fully automatic shotguns, silencers, mufflers and sound suppressors. Barrels, receivers (frames), bolts, bolt carriers, slides or sears “specially designed” for those firearms also remain in USML Category I. Controls on parts, components, accessories and attachments have been narrowly drawn and apply to only those items enumerated in paragraph (h). Of particular note, parts and components “specially designed” for conversion of a semiautomatic firearm to a fully-automatic firearm remain controlled in USML Category I. All other parts, components, accessories and attachments move to ECCN 0A501. 

USML Category II continues to retain guns and armament greater than .50 caliber (12.7mm) and certain parts and components listed in paragraph (j). Items no longer identified in USML Category II have moved to ECCN 0A602. 

USML Category III will specifically list ammunition for articles that remain controlled in Categories I and II, with a new paragraph (a) (10) for DOD-funded developmental ammunition. Paragraph (b) lists ammunition/ordnance handling equipment specially designed for Category III items, and paragraph (d) lists part and components for Category III items in 15 subparagraphs. All other ammunition has moved to ECCN 0A505. 

Paragraph (x) has been added to USML Categories I, II and III, just as was done for all other USML revisions under ECR. This new paragraph allows for “commodities, software and technology subject to the EAR used in or with defense articles” to be exported along with those defense articles on an ITAR license. It is important to note that 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. You also must provide the end user and consignees the appropriate EAR classification for each item exported under paragraph (x). This includes ECCN or EAR99 designation. 

In addition to adding paragraph (x), Categories I, II and III, now use the “specially designed” designation to better define those items that are intended to be enumerated in each category. While “specially designed” can be a rather complex analysis to determine whether an item may be released into the controls of the EAR, it is a welcomed addition to these categories. Please do note that the “specially designed” release cannot be used unless the control paragraph contains the words “specially designed.” 

What’s Transitioning to the CCL 

Of likely most interest to our readers, non-automatic and semiautomatic firearms to .50 caliber (12.7mm) inclusive and all parts, components, accessories and attachments for those articles are being removed from USML Category I and transitioned to the CCL under new ECCN 0A501: Firearms and related commodities. Ammunition for such firearms has also been removed from the USML and will not be controlled under new ECCN 0A505: Ammunition and certain related commodities. 

As noted above, a license will continue to be required to export firearms and ammunition to every country in the world. This is because the reasons for control that attach to firearms under ECCN 0A501 and for ammunition under 0A505 are National Security (NS), Regional Stability (RS), Firearms Convention (FC), United Nations (UN) and Anti-Terrorism (AT). 

Some of the other clean-up revisions include a definition for “complete breech mechanism” and clarification that magazines with a capacity under 16 rounds are indeed controlled under ECCN 0A501 and will require authorization (license or license exception) to export to every country (after the proposed rule came out in May 2018, a myth circulated that such items would be classified as “EAR99” and not require a license for most destinations. This has now been clarified). Similarly, the Final Rule has removed all references to “combat shotguns” to improve clarity, and the value limit for the Limited Value Shipments (LVS) license exception for firearm parts and ammunition has increased from $100 to $500. 

EAR licenses are subject to an interagency review process that includes review by the Departments of State, Defense and Energy. In other words, the same government stakeholders that reviewed ITAR license applications, with the exception of Congress, will review EAR license applications. The interagency review process for Commerce licenses is specified in Executive Order 12981 and in part 750 of the EAR. 

There are some license exceptions that apply to firearms, but exporters must be careful to ensure: (1) the exception applies to their transaction; and (2) the transaction falls squarely within the four corners of the exception at all times. Like the ITAR, EAR license exceptions are very specific and carry many conditions. The failure to pay attention to the limitations of each license exception could 

result in an unlicensed export or reexport and a violation of the EAR. 

The Final Rule also contains special reporting requirements for exports of firearms and ammunition. All such exports (except exports authorized under the personal baggage license exception known as “BAG”) will require Electronic Export Information (EEI) entries into the Automated Export System (AES). The EEI entries for temporary exports must include the serial numbers, make, model and caliber of each firearm. This requirement may also be triggered if an export license contains a proviso requiring such information be entered into the AES. The Final Rule explains that “BIS has confirmed with CBP and the U.S. Census Bureau that AES on the ACE platform can accommodate EEI filers to submit the serial number, make, model and caliber information.” 

The Commerce Department monitors the AES. Indeed, it issues this warning in its Final Rule: 

The EAR includes robust recordkeeping requirements that have been enhanced further for the firearms being moved to the CCL. BIS can and does on a regular basis contact parties to a transaction to request all records related to a particular export or reexport or series of exports or reexports. These record requests may also involve in-person visits from representatives of [the Office of Export Enforcement]. 

Other Items of Note 

The ITAR will continue to control brokering activities related to items described on the U.S. Munitions Import List (USMIL). This means that articles transferred that to the CCL but are on the USMIL for permanent import purposes remain subject to ITAR Part 129 brokering requirements, including facilitation in their manufacture abroad, permanent import, transfer, re-export or retransfer. 

There are two carve-outs to brokering that were created: (1) activities by persons to facilitate manufacture in the U.S. of an item subject to the EAR are NOT considered brokering; and (2) activities by persons to facilitate the reexport or transfer of an item subject to the EAR that has been approved pursuant to a license, license exception or NLR under the EAR are NOT considered brokering. Bottom line, you will need to remain registered as a broker to engage in brokering activities for items on the USMIL that do not meet the carve-outs. 

And finally, one aspect of the revisions that has gotten a lot of attention is the revision to EAR Part 734 (Scope of the EAR), so that certain “software” or “technology” pertaining to firearms remains “subject of the EAR” even if published. Specifically, the Final Rule adds a paragraph (c) to §734.7 stating that “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 and that may be directly loaded without further modification by the machine operator 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, remains “subject to the EAR.” 

State Attorneys General Lawsuit 

On the day the State and Commerce Departments published their companion rules, 21 states, from New York to Hawaii, filed suit to stop or delay the March 9, 2020, implementation of the Final Rule. The main crux of the lawsuit centers on the transfer of 3D-printed gun technology from the ITAR to the EAR. The State Attorneys General assert that even with the revisions to the EAR that will make “software” or “technology” pertaining to firearms “subject of the EAR” even if published, there will be easier access to such technology which could make it easier for 3D-printed guns to get in the wrong hands. As of the date of this article, there has been no further action on this case, but there is still time for the judge to grant an injunction and halt the implementation of the Final Rule. 

• • • 

The information contained in this article is for general informational and educational purposes only and is not intended to be construed or used as legal advice or as legal opinion. You should not rely or act on any information contained in this article without first seeking the advice of an attorney. Receipt of this article does not establish an attorney-client relationship. 

About the Author 

Johanna Reeves is the founding partner of the law firm Reeves & Dola, LLP in Washington, D.C. (reevesdola.com). For more than 15 years she has dedicated her practice to advising and representing U.S. companies on compliance matters arising under the federal firearms laws and U.S. export controls. Since 2011, Johanna has served as Executive Director for the Firearms and Ammunition Import/Export Roundtable (F.A.I.R.) Trade Group (fairtradegroup.org). She has also served as a member of the Defense Trade Advisory Group (DTAG) since 2016. Johanna can be reached at jreeves@reevesdola.com or 202-715-9941.