INDUSTRY NEWS – DECEMBER 2004

By Robert Hausman

Approximately 200 industry-related representatives attended the third annual ATF & The Imports Community meeting held in Alexandria, Virginia on July 19-20, 2004. Issues addressed were a new U.S. Customs program bringing the benefit of less frequent inspections on imported goods, an announcement that the U.S. government’s policy on the re-importation of U.S. origin firearms is about to change and details on the status of post-ban over 10-round firearm magazines if the federal ban expires in September.

The meeting opened with a notation by Lewis P. Raden, ATF Assistant Director, Office of Enforcement, Programs and Services that the National Firearms Act (NFA) Forms 2 and 9 are expected to become available electronically next year. Problems in developing an E-signature process are holding back the debut of the electronic versions of the forms. Raden emphasized, however, “ATF is committed to making its regulation of the industry more efficient.”

The ATF Imports Branch was still operating without a chief during the time of the meeting and Raden said the agency was working to find a qualified person who will want to stay in the position. ATF has experienced a high turnover rate of Imports Branch chiefs in recent years.

Change in U.S. Origin Retransfer Policy

An anticipated change in the U.S. government’s retransfer policy (of presumptive denial) on import of U.S.-origin defense articles (to one of presumptive approval) was detailed by David Quinn, Deputy Director, U.S. Dept. of State Bureau of Political-Military Affairs, Office of Regional Security and Arms Transfer Policy. This change, if made, will result in the allowance for importation of a great many historical firearms. The change may or may not affect the importation of U.S.-origin ammunition.

Foreign-produced copies of firearms, the designs for which originated in the U.S., such as M-1 Garands, would be treated as qualifying for U.S. importation, Quinn said. He added, however, that the U.S. government would likely seek reimbursement for the firearms if they were provided to the foreign government under a foreign assistance program. Reimbursement would also be sought for foreign-produced copies of firearms that originated in the U.S. (such as the M-1 Garand) under the theory that the copies were produced based on U.S. technology. He acknowledged that it was possible for the Dept. of State to consider waiver applications for the reimbursement fees if the individual situation was deemed to warrant it.

Though the government’s position will change to look more favorably on such imports, every transfer would still have to be reviewed by the State Dept. to ensure the proposed transfer is legally appropriate. Importers seeking to re-import such goods would have to have the seller seek authorization to transfer the goods to the importer for reimportation into the U.S. in advance of the transaction.

As background, Quinn explained that Section 38(b)(1)(A)(i) of the Arms Export Control Act (AECA) states, “Such regulations shall prohibit the return to the U.S. for sale in the U.S. (other than for the U.S. armed forces and its allies or for any state or local law enforcement agency) of any military firearms or ammunition of the U.S. under this Act or any other foreign assistance or sales program of the U.S….”

In December 1987, Section 38(b)(1)(B) enacted a limited exception for “curios and relics” pursuant to 18 U.S.C. Section 925(e)(1). However, by its own terms, this provision does not override the Secretary of State’s authorities under the Foreign Assistance Act of 1961 and Section 2 of the AECA to control retransfers and disposition of U.S.-origin arms, Quinn detailed. The 1987 amendment does not affect the Secretary of State’s power to “consent” to retransfers and does not require that firearms covered by it be licensed for import; rather it simply forbids application to these firearms of the rule that the regulations must prohibit their return to the U.S., Quinn said.

The President of the U.S. has control over the export and import of defense articles. This power derives from Section 38(1) of the AECA which states in relevant part, “In furtherance of world peace and the security and foreign policy of the U.S., the President is authorized to control the import and export of defense articles and defense services and to provide foreign policy guidance to persons of the U.S. involved in the export and import of such articles and services.”

Executive Order 11958 of January 18, 1977 delegates the President’s authority to issue permanent import licenses pursuant to section 38(a) of the AECA to the Secretary of the Treasury. However, as specified by delegation orders, “In carrying out such functions, the Secretary of the Treasury shall be guided by the views of the Secretary of State on matters affecting world peace, and the external security and foreign policy of the U.S.”

What all this means to importers is that the divesting government is required to have the prior consent of the President of the U.S. (or the Secretary of State by delegation) prior to the transfer of U.S. government-origin defense articles to another country or a private entity. The Secretary of State has statutory control over the retransfer of such defense articles, Quinn explained.

For transfers of “significant military equipment” (such as cannon, mortars and the like) the presumption of denial policy will apparently remain in place. The very limited exceptions to a presumption of denial would be an import in support of a government contract or for use in a demilitarized static museum display. A U.S. private entity desiring to import such articles would have to provide end-use and retransfer assurances and title may not transfer until the goods are within the territory of the U.S.

Questions to be Answered

In a review of questions the Dept. of State often asks of importers desiring to bring goods into the U.S., Quinn recounted the following queries which importers should be prepared to answer:

• How did the seller acquire the defense articles, from whom and when?
• Can the seller prove that the goods were not derived from a government-to-government transaction?
• Can you, the importer, prove to the State Dept. that these articles were not derived from a government-to-government transaction?
• Did these articles originate in or transit through a proscribed country?
• If these articles were exported via direct commercial sales, do you have documentation to evidence their lawful export/retransfer with consent of the Directorate of Defense Trade Controls?

Quinn added that the Directorate of Defense Trade Controls has become busier in recent years. It is now processing 60,000 applications a year, compared to 40,000 annually seven years ago.

Project Shield America

An industry outreach program, called Project Shield America, designed to obtain assistance and cooperation from manufacturers, sellers, importers and exporters of U.S. origin technology, dual-use items and munitions in enforcing America’s import and export regulations was detailed by special agent William Puff, Arms and Strategic Technology Investigations, U.S. Immigration and Customs Enforcement (ICE).

ICE works with several governmental entities to enforce export and import controls, the Dept. of State, Directorate of Defense Trade Controls regarding the export of military items, the Dept. of Commerce, Office of Export Enforcement on the export of dual-use items, and ATF on import of arms and munitions.

A variety of investigative techniques is used to enforce the regulations, Puff revealed, including overt investigations and undercover operations. This includes undercover operations in which items prohibited from export from the U.S. are offered to exporters in an attempt to see if they would be willing to break the law. Thus, it is incumbent upon exporters to know the law and to know whom they are dealing with. Operation Blue Lantern is a joint program with the Dept. of State to verify that exported commodities did reach the persons listed on end-use certificates.

AWB Expiration

At the time of the meeting (mid-July) the question of whether or not Congress would renew the federal ban on so-called “assault weapons” had not yet been decided. The likely consequences for industry of the expiration of the 1994 ban were detailed by Teresa Ficaretta, ATF Associate Chief Counsel, explosives (firearms & arson).

If the law did sunset on September 13, ATF would have issued an open letter to the industry advising that the restrictions on post-ban over ten-round law enforcement magazines as well as those for receivers of those firearms presently designated under federal law as so-called ‘assault weapons’ were “meaningless,” Ficaretta said. The result would be that such magazines “could be freely sold.”

Ficaretta cautioned however that the restrictions in federal law on the importation of firearms designated as so-called “semi-automatic assault weapons” would remain in place after September 13 as these restrictions are contained in a different section of federal law that is not due to expire.

International Regulations

The U.S. government conducts an average of 10,000 traces of firearms annually on behalf of foreign governments, noted keynote luncheon speaker Stephanie Pico, Senior Policy Advisor, small arms/light weapons for the Dept. of State, in a presentation on international efforts to control the international arms trade. The U.S. federal government opposes international registration of firearms as has been considered by organizations within the United Nations, but the U.S. does support implementation of international marking requirements for firearms consistent with current U.S. federal law, Pico explained. Form 6 Update

ATF is working to allow electronic filing of attachments to the E-Form 6 in MS Word format, noted Mary Jo Hughes, the then outgoing chief of the ATF Firearms and Explosives Services Division.

Hughes noted that ATF is only getting 30-40% return filings of Form 6A for imported goods at their offices from importers. She stressed that the burden remains on the importer, not the broker, to file Form 6A for every import coming into the U.S.

Hughes also held up a thick stack of returned imports conference invitations that were mailed to all holders of Type 08 and Type 11 licenses to stress the ATF reporting of change of address requirement. When a licensee moves, the new address must be reported to ATF within 30 days. Licensees should keep local zoning regulations in mind when considering a new site as ATF will not renew licenses for businesses situated in locations that are in violation of local zoning ordnances. The imports conference was the last one in which Hughes appeared in her role as Chief of the Firearms and Explosives Services Division, a position she has held for the past 3-1/2 years. She has since become Chief of Staff, Enforcement and Programs Directorate at ATF.

Hughes’ successor in the Imports Services branch, Audrey Stucko, was introduced at the meeting. She is said to have an extensive background at ATF.

C-TPAT Members Inspected Less

A U.S. Customs and Border Protection program, which brings the benefit to member firms of an 8-times less likely chance of being chosen for Customs inspection, was detailed by Jerome Luczkowski, the program’s manager.

Customs – Trade Partnership Against Terrorism (C-TPAT), first announced in November 2001, now has nearly 6,800 members composed of importers, brokers, carriers, etc. It was mentioned that the number of inspections for those firms who are not members have increased recently. To learn more about joining C-TPAT, go to: www.cbp.gov, click on “imports,” and then click on the C-TPAT banner.

At the conclusion of the seminar, Hughes said it would likely be held again next year, possibly in a location that will allow a greater number of attendees if the agency’s budget allows.

The author is the publisher of the small arms industry’s most widely read trade publication, The New Firearms Business (a bi-weekly that covers the domestic small arms industry). For subscription information, send an e-mail to: FirearmsB@aol.com