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Industry News: V19N1

SAR Staff by SAR Staff
August 2, 2022
in Articles, Articles by Issue, Columns, News & Opinion, Search by Issue, V19N1 (Jan 2015), Volume 19
Industry News: V19N1
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By Robert M. Hausman

Synopsis of Annual Imports Conference

The following is a synopsis of the 13th annual Importer Licensee Conference held by the F.A.I.R. Trade Group (an importer’s industry organization) and the National Shooting Sports Foundation in Washington, D.C. in August. This was the 13th year of the conference, which was attended by about 150 persons.

ATF Panel

The opening panel was from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the agency responsible for administering the import provisions of the Federal firearms laws. Alphonso Hughes, Chief of the Firearms and Explosives Services Division, announced a number of staffing changes, including recent hires to assist in processing import applications and National Firearms Act documents. Chief Hughes announced a goal of reducing the current processing time for tax-paid NFA forms (Forms 1 and 4) from 9 months to 6 months.

Desiree Dickinson, Imports Industry Liaison, discussed the mismatch between terms of validity for ATF’s import permit (2 years) and the International Import Certificate (IIC), which is 6 months. Dickinson advised that the Department of Commerce, which has ownership of the IIC, will soon extend the term of validity to 1 year. She suggested that industry members discuss extension of the IIC to 2 years with Commerce.

Dickinson reviewed the changes made to the U.S. Munitions Imports List (USMIL) by an ATF final rule published in March, 2014 (rule can be accessed at www.gpo.gov/fdsys/pkg/FR-2014-03-27/pdf/2014-06778.pdf). The rule removed a number of categories from the USMIL as part of the Administration’s export control reform initiative.

William Majors, Chief of the Imports Branch, emphasized the staffing challenges presented by the increasing volume of import licenses. Majors made it clear ATF will entertain requests to expedite import applications only with documentation the articles sought for importation are required for a law enforcement agency or other government agency.

Lee Alston-Williams, a senior specialist from the Firearms and Explosives Services Division, gave an update on ATF’s e-Forms. Due to problems with the current software, ATF has removed a number of NFA forms from the e-Forms system. Alston-Williams stated the system currently supports the Form 6 import application, Form 6A, Release and Receipt of Imported Firearms, and the ATF Form 1, Application to Make and Register a Firearm. ATF is working with a new e-Forms contractor and hopes to provide the firearms industry with new and improved e-Forms in the future.

The final speaker on the ATF panel was Helen Koppe, Chief of the Firearms Industry Programs Division. This Division is responsible for marking variances for firearms, which are generally processed within 90 days. Koppe announced that the responsibility for responding to marking variance requests will be transferred to the Firearms Technology Branch in the Fall 2014.

During the question and answer session, a question was raised about publication of the final rule relating to the notice of proposed rulemaking on NFA trusts (ATF 41P, published in the Federal Register September 9, 2013, (www.gpo.gov/fdsys/pkg/FR-2013-09-09/pdf/2013-21661.pdf). Andrew Lange, Chief of ATF’s Regulations Division, stated that the large quantity of public comments may delay publication of the final rule until 2015.

Alphonso Hughes answered a question about possible suspension of permits authorizing import of firearms and ammunition from Russia. Chief Hughes announced that all permits would remain valid until the Department of State directs otherwise. He stated that ATF would process all new applications for permits unless the application lists a party blocked by the Office of Foreign Assets Control (i.e., Kalashnikov Concern).

Automated Export System

Joe Cortez of the Census Bureau’s Trade Division gave an update on the Automated Export System (AES). Cortez outlined recent changes made to the Foreign Trade Regulations and the data elements added to the system by those changes.

United Nations Arms Trade Treaty

Bill Kullman, Deputy Chief of ATF’s International Affairs office, and Rick Patterson, Executive Director of the Sporting Arms Ammunition Manufacturers Institute (SAAMI), gave a presentation on the United Nations Arms Trade Treaty.

Kullman emphasized the role of the United States as raising the small arms import and export requirements of the world to the “gold standard” of the United States and to avoid committing the U.S. to additional unnecessary requirements. Patterson stated that the firearms industry should be concerned about the treaty’s lack of definitions for terms including “small arms,” “ammunition,” and “stockpiles.” He said these omissions are deliberate and provide a placeholder for future amendments that could be detrimental to legitimate commerce in firearms. Patterson also mentioned end-use certificates and more burdensome transshipment requirements as potential problem areas in the treaty.

Round-Table Sessions a Big Hit

Sponsors of the conference made a major change in format by devoting most of the afternoon of the first day to round-table discussions. Ten different tables were set up with government experts ready to discuss imports, National Firearms Act transactions, Firearms Industry Programs issues, ATF e-Forms, ATF field compliance inspections, Immigration and Customs Enforcement, firearms and ammunition excise tax (Treasury’s Tax and Trade Bureau), Automated Export System (Census Bureau), State Department Licensing and Policy, and sanctions imposed by Treasury’s Office of Foreign Assets Control. The smaller groups and informal discussions resulted in many lively interchanges between government experts and industry members. Experts and attendees said the format resulted in great communication and should be continued.

ICE Emphasizes Criminal Smuggling Violations

The final session for Day 1 was from David Whalen of Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI). Mr. Whalen’s experience investigating cross-border firearms smuggling was evident as he gave attendees examples of “red flags” that should raise suspicion in international import and export transactions. He assured attendees that HSI is interested in investigating egregious criminal violations, rather than technical regulatory violations.

Add-On Session for Basic Import/Exports Training

Based on feedback from previous conferences, F.A.I.R. and NSSF offered attendees an optional 2-hour basic course on importation and exportation. Approximately 60 attendees signed up for the course, many new to import/export. Teresa Ficaretta, a Federal retiree with 28 years of ATF experience, gave the imports section of the training, which included an overview of the import provisions of the Gun Control Act, the National Firearms Act, and the Arms Export Control Act. Jim Bartlett, Partner and Director of U.S. Operations for Full Circle Compliance, gave the export portion of the training, covering State Department regulations, Commerce Department’s Export Administration Regulations, and sanctions imposed by the Office of Foreign Assets Control. F.A.I.R. and NSSF report positive feedback for this type of basic training and may expand it at future conferences.

Day 2: ITAR Registration, Brokering, Voluntary Disclosures, and Compliance Programs

Day two of the conference was devoted to the controls over exports of defense articles governed by the Department of State, Directorate of Defense Trade Controls (DDTC). Danielle Pressler from DDTC Compliance gave an overview of registration requirements of the International Traffic in Arms Regulations (ITAR), recent amendments to the brokering requirements of ITAR, and the elements of an effective compliance program. She also discussed voluntary disclosures of violations to DDTC and encouraged self-audits to identify such violations. Pressler emphasized the fact that 99% of all voluntary disclosures are closed without further action.

Pressler’s remarks meshed well with a presentation from a panel titled “Designing and Maintaining an Effective Compliance Program.” James Bartlett from the Law Office of James E. Bartlett III, LLP, Johanna Reeves, Managing Partner of Reeves and Dola, and Thomas Trotto, from Immigration and Customs Enforcement HSI, made up the panel. Many of the compliance program elements emphasized by Bartlett and Reeves were similar to those in Pressler’s presentation. Attendees had questions for the panel about potential violations and when they warrant disclosure to State.

The final presentation at the conference was by Julio Santiago, a licensing officer with DDTC licensing. Santiago made remarks on licensing, end-user monitoring, permanent exports, temporary imports, temporary exports, congressional notification, and licensing exemptions.

The above synopsis was prepared by the F.A.I.R. Trade Group.

Additional Points Noted at the Importer’s Conference

ATF announced that three of its publications are undergoing revision in contemplation of the release of updated editions. The National Firearms Act Handbook and the Imports Guidebook are being revised and industry may bring needed revisions to the attention of ATF at the following e-mail addresses: nfahandbook@atf.gov and importsguidebook@atf.gov, respectively. ATF projects that new revisions of these publications will be available in time for the January 2015 SHOT Show.

ATF provided an update on their e-Forms. ATF has not yet even awarded the contract to the firm that will re-design that part of the system. Once a contract is awarded, the contractor’s personnel will need to go through background checks before they can begin work on the project. So, it could be mid-October before the contractor even learns the details of the issues to be addressed. The e-forms revisions are not expected to take place until sometime in 2015.

NFA Branch

William Boyle, III is now the NFA Branch Chief. Kimberly Ramsburg is now NFA Section Chief.

By October 2014, ATF expects to have 24 examiners in the NFA Branch to help clear up the backlog. By December 2014, they hope to have total of 29 examiners.

Alphonso Hughes, Division Chief, Firearms and Explosives Services Division (FESD) said that he is taking aggressive steps and “hopes” to have Form 1 and Form 4 processing time down to 6 months and Form 3 processing time down to 30 days by the end of the year. He recognized that this is optimistic but it is his goal to achieve.

Average monthly NFA Branch revenue is $1.5 million. The highest revenue month was December 2013 with $2.5 million received in revenue (thanks to the ATF-41P issue).

The NFA Branch is receiving on average 8,838 calls per month. In FY 2013, there were 44 Congressional Inquiries.

Presently, it is the first time since 2009 that the NFA Branch is processing more applications per month, than are received. The backlog is approximately 56,000 Forms, which is down from 81,000 in February.

Import Branch

It was announced that under Category 1 of the U.S. Munitions List, scopes no longer require a Form 6 to import.

Category 7 of the U.S. Munitions List has been modified somewhat substantially.

Under Category 14 of the U.S. Munitions List, gas masks no longer require a Form 6 to import.

Shotgun barrels must be brought in on a Form 6, even though they are not on the U.S. Munitions List, because the GCA says they must have a sporting purpose. It is to be treated as an implement of war and the model must be listed on the Form 6. Barrels are NOT being considered a firearm part.

eForms Updates

eForm 1s are back online. eForm 2s should be back online soon, by the end of the year or early next year.

eForm 3 and 4s will be next to go live, on the new site that ATF is developing, which may not be until sometime in 2015.

ATF still cannot update the website to reflect the one additional (not listed) requirement for the eForms password. eForms passwords must have 5 alpha characters.

Marking Variances and Electronic Recordkeeping

There is presently a 90 day turn around on Marking Variance Requests.

ATF says it is updating the Federal Firearms Regulations Reference Guide with new rulings and Q&A. The book hasn’t been updated since 2005.

In response to a question, ATF confirmed that it is a VIOLATION to use cloud storage for electronic A&D Records.

ATF-41P

ATF Counsel Andrew Lang stated that ATF is currently on track to make a decision by January 2015; however, he acknowledged that many of the comments filed by attorneys raised some issues that ATF hadn’t considered.

He stated that the rulemaking may get significantly sidetracked internally, depending on internal responses to their review of the comments and proposals on how to address the concerns.

In response to a question on why ATF didn’t provide the underlying materials used for drafting the proposed rule, Attorney Lang, in addition to saying the petition was posted by the NFATCA at some point in time on its website, said ATF hasn’t had requests for such material in the past (indicating in the words of one attorney present, that ATF may be in violation of the Administrative Procedures Act).

ATF Suspends Imports from 9 Russian Entities

On August 13, 2014, ATF announced immediate action to suspend import permits authorizing the importation of firearms, ammunition, and other defense articles involving Kalashnikov Concern and eight additional defense-related entities.

ATF initiated this action pursuant to guidance from the Department of State under the Arms Export Control Act, 22 U.S.C. 2778 (AECA), which directed ATF to implement the sanctions previously imposed by the Treasury Department’s Office of Foreign Assets Control (OFAC).

Background

On July 16, 2014, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Kalashnikov Concern as a Specially Designated National (SDN) as part of the Obama Administration’s sanctions on persons and entities in Russia determined to be contributing to the situation in Ukraine. They also identified seven other entities involved in the arms or defense industries in Russia.

It is important to note, however, that ATF’s actions prohibiting imports of defense articles from the targeted entities is under its authority of the AECA and is therefore broader than the OFAC economic sanctions. As mentioned earlier, the State Department has directed ATF to implement the economic sanctions pursuant to its authority under the AECA. The AECA authorizes the President, in supposed furtherance of world peace and the security and foreign policy of the United States, to control the import of defense articles. Consequently, the Administration’s authority under the AECA extends beyond economic sanctions and gives ATF the authority to prohibit the importation of defense articles involving any of the sanctioned entities, regardless of whether the targeted entities retain a financial interest in the defense articles. If the defense articles are manufactured by or otherwise involve one of these entities, they are prohibited from importation into the United States.

Russian Arms Industry Replacing Ukrainian Suppliers

The Russian arms industry has developed a plan to replace its Ukrainian suppliers, lost during the crisis in Ukraine, with companies in Belarus and Kazakhstan, an influential Russian daily reports.

Before the crisis, about 400 Russian defense contractors used materials and components produced in Ukraine, and 70% of all companies supplying the Ukrainian defense industry are located in Russia.

As the new Kiev regime started severing economic contact with Moscow, President Vladimir Putin urged Russian officials to ensure defense orders are fulfilled, and to start replacing Ukrainian suppliers with domestic production or imports.

FDIC Says It Will No Longer Target Firearms Retailers

Gun retailers are no longer on a hit list deemed “high risk” by the Federal Deposit Insurance Corp. after the banking regulator formally withdrew the list it put together that outlined what merchants may be considered risky for banks to do business with as part of the Obama administration’s “Operation Choke Point.”

The agency said its explanatory warning list “led to misunderstandings” about how it’s supervising banks’ ties to third-party payment providers, according to Bloomberg News. The regulator said it never meant to prevent banks from doing financial transactions with the types of businesses on the list.

Those that are operating with the appropriate systems and controls will not be criticized for providing payment-processing services to businesses operating in compliance with applicable law,” the FDIC said in its updated industry guidelines.

Richard Osterman, the agency’s acting general counsel, admitted to the American Banker newspaper that the list had been “misinterpreted” by financial institutions.

Republican lawmakers have criticized the FDIC for unfairly targeting legitimate businesses that operated in its so-called ‘high-risk’ category, including gun retailers and payday lenders. The Washington Times reported in May that many banks were dropping businesses in these high-risk industries as the bankers wanted to avoid higher scrutiny from the federal regulator.

The FDIC has been helping the Department of Justice run “Operation Choke Point,” which is intended to combat online fraud by cutting off fraudsters’ access to payment systems. House Committee on Oversight and Government Reform Chairman Darrell Issa, California Republican, has said the effect of the program has been to squeeze out legitimate businesses.

“If you empower the government to pick winners and losers within lawful enterprises, then there’s no place to stop,” Mr. Issa said in an appearance at the libertarian Cato Institute.

Industry advocates pushing to repeal Operation Choke Point said the FDIC did not go far enough. “Altering a website is window dressing and doesn’t end the unjust practices associated with Operation Choke Point,” said Brian Wise, a senior adviser for the U.S. Consumer Coalition, which is seeking an end to Operation Choke Point.

“While we support the FDIC’s decision to remove the list of ‘high-risk merchants’ from the FDIC website, damage has already been done to countless businesses across the country who have already lost their bank accounts,” he added. “Whether the list is published on the FDIC’s website or not, we expect banks will still be fearful of doing business with these lawful industries.” The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. He may be reached at: FirearmsB@aol.com.

This article first appeared in Small Arms Review V19N1 (January 2015)

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Tags: 2015Industry NewsJANUARY 2015Robert M.HausmanV19N1
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