LEGAL NEWS FROM THE NATION’S CAPITAL JOHANNA REEVES, ESQ.
On November 12, 2019, Judge Robert S. Lasnik in the U.S. District Court for the Western District of Washington at Seattle found the U.S. Department of State acted in an arbitrary and capricious way when it allowed the U.S. company, Defense Distributed, to post on its website certain 3D printing instructions. This article explores the judicial reasoning in this decision and how it may impact the administration’s efforts to modernize export controls pertaining to commercially available firearms and ammunition.
Background—The Defense Distributed Case
In December 2012, Defense Distributed posted certain three-dimensional (3D) printing files on its website, DEFCAD.org, for several firearm-related items, including “Ghost Gunner” files and other CAD files (the “Published Files”). Some of the Published Files included downloadable instructions to produce a fully functional firearm on a 3D printer. In May 2013, Defense Distributed received a letter from the U.S. Department of State, Directorate of Defense Trade Controls (DDTC), the federal agency responsible for compliance and enforcement of the Arms Export Control Act (22 U.S.C. §2778) and the implementing International Traffic in Arms Regulations (ITAR). In the letter, DDTC directed Defense Distributed to remove the Published Files from its website on the grounds that the Published Files constituted ITAR-controlled technical data related to firearms, and the act of making the Published Files widely available on the internet constituted an unlicensed export of “technical data” in violation of the ITAR.
As readers may recall from previous columns, the ITAR controls not just hardware, known as “defense articles,” but also certain information related to defense articles, including that which is required for design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification. Such controlled information, known as “technical data,” may be in the form of blueprints, drawings, photographs, plans, instructions or documentation.
Currently, almost all firearms up to and including .50, as well as parts, components, attachments and accessories for said firearms, are captured under Category I of the U.S. Munitions List (USML), the ITAR control list that identifies all items, including technical data, considered to be defense articles and therefore subject to the ITAR export license requirements. The only exceptions to this broad coverage are so-called “noncombat shotguns” with barrels 18 inches or longer, BB, pellet and muzzle loading firearms, as well as attachments or accessories that do not enhance the usefulness, effectiveness or capabilities of the firearm, component and parts. Such items are controlled under the Department of Commerce export controls, known as the Export Administration Regulations (EAR).
In its cease and desist letter to Defense Distributed, DDTC explained:
Pursuant to 127.1 of the ITAR, it is unlawful to export any defense article or technical data for which a license or written approval is required without first obtaining the required authorization from the DDTC. Please note that disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad, is considered an export under 120.17 of the ITAR.
In accordance with the DDTC letter, Defense Distributed removed the Published Files from its website and in June 2013, submitted a Commodity Jurisdiction (CJ) request. Almost 2 years later, having received no response to the CJ request, Defense Distributed along with the Second Amendment Foundation (SAF), sued DDTC in the Western District of Texas. The lawsuit alleged the ITAR prior approval requirement for posting technical data on the internet was an unconstitutional prior restraint on protected First Amendment speech and also violated the Constitution under the Second and Fifth Amendments.
While the case was pending, the Plaintiffs filed a motion with the court seeking a preliminary injunction against DDTC to prevent DDTC from enforcing the ITAR prepublication approval requirement pertaining to the Published Files. The district court denied the motion, holding that the national security interests of the United States outweighed the potential harm to Defense Distributed. Defense Distributed and SAF appealed the decision to the U.S. Court of Appeals for the Fifth Circuit, which affirmed the district court decision, noting, however, that its decision was limited and did not address the merits.
This case presents a number of novel legal questions, including whether the 3D printing and/or CNC milling files at issue here may constitute protected speech under the First Amendment, the level of scrutiny applicable to the statutory and regulatory scheme here, whether posting files online for unrestricted download may constitute “export,” and whether ITAR regulations establish an impermissible prior restraint scheme. These are difficult questions, and we take no position on the ultimate outcome other than to agree with the district court that it is not yet time to address the merits. On remand, the district court will eventually have to address the merits, and it will be able to do so with the benefit of a more fully developed record.
Defense Distributed v. U.S. Department of State, 838 F.3d 451, 464 (5th Cir. 2016).
Defense Distributed then petitioned the U.S. Supreme Court for writ of certiorari on the preliminary injunction motion, which the Court denied on January 8, 2018. Once the Supreme Court denied cert, the Texas trial court lifted the stay on the underlying case proceedings. In April 2018, the federal government filed a motion with the court to dismiss the underlying case, arguing that the subject CAD files could facilitate the creation of defense articles abroad, and “the Department of State has consistently and reasonably concluded that it is not possible to meaningfully curtail the overseas dissemination of arms if unfettered access to technical data essential to the production of those arms is permitted.” In its motion, the government argued,
At issue in this litigation is the United States’ ability to control the export of weapons–a system of laws and regulations that seeks to ensure that articles useful for warfare or terrorism are not shipped from the United States to other countries (or otherwise provided to foreigners) without authorization, where, beyond the reach of U.S. law, they could be used to threaten U.S. national security, U.S. foreign policy interests or international peace and stability.
The Settlement Agreement
Not long after the government presented this argument against publication of the CAD files, the parties agreed to settle the case on the merits. The parties signed the agreement on June 29, 2018, and the agreement was made public on July 10, 2018. In consideration of Plaintiffs’ agreement to dismiss their claims against DDTC with prejudice, DDTC agreed to the following:
- Commit to fully pursue a proposed and final rule revising U.S. Munitions List (USML) Category I to exclude the technical data that was the subject of the Action. It should be noted that DDTC had already published a Notice of Proposed Rulemaking to revise the USML pertaining to firearms and ammunition and related technical data on May 18, 2018. As of the date of this article, the final rules have yet to be published.
- While the above-referenced final rule is in development, announce that it (DDTC) would temporarily modify the USML, consistent with ITAR section 126.2, to exclude “the technical data that is the subject of the Action. ITAR section 126.2 permits the Deputy Assistant Secretary for Defense Trade Controls to order the temporary suspension or modification of any or all regulations in the ITAR in the interest of the security and foreign policy of the United States.”
- Issue a letter to Defense Distributed advising the Published Files are approved for public release in any form and are exempt from export licensing requirements of the ITAR because the files satisfy the criteria of ITAR section 125.4(b)(13). This section exempts technical data from export approval that is approved for public release (i.e., unlimited distribution) by the cognizant U.S. government department or agency or Office of Freedom of Information and Security Review. This exemption is applicable to information approved by the cognizant U.S. government department or agency for public release in any form. It does not require that the information be published in order to qualify for the exemption.
- Acknowledge and agree that the temporary modification of USML Category I permits any U.S. person, including Defense Distributed customers and SAF members, to access, discuss, use, reproduce or otherwise benefit from the “technical data that is the subject of the Action.”
State Attorneys Sue the State Department
Just days after the settlement was made public and DDTC published the temporary modification, eight states and the District of Columbia filed a lawsuit against the Department of State alleging the Department violated the Administrative Procedures Act (APA) and the Tenth Amendment to the U.S. Constitution. In August 2018, 11 more states and commonwealths were added to the suit. Subsequently, these plaintiffs filed a Motion for the Seattle Court to invalidate the temporary modification of the USML on the grounds that it was arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law.
Judge Lasnik agreed. Pointing to the Arms Export Control Act, which requires Congress be notified 30 days in advance of removing any item from the USML (22 U.S.C. §2778(f) (1)), Judge Lasnik rejected the Department of State’s argument that the temporary modification did not trigger the Congressional notification requirement because the modification did not affect a whole group or category of defense articles described on the USML. In his decision, Lasnik writes “[t]o the extent the federal defendants are relying on 22 C.F.R. §126.2 as authority for the temporary modification, its use of that procedure to immediately redesignate an item that was previously covered by the USML without Congressional notice violates the governing statute.”
However, Judge Lasnik seems to ignore the fact that the Settlement Agreement made clear that the modification covered ONLY the “technical data that is subject of the Action.” Such technical data was not a limitless bucket containing all ITAR-controlled technical data pertaining to firearms. In fact, the Settlement Agreement defined the words, “technical data that is subject of the Action” specifically to mean only the following: “(1) the Published Files; (2) the Ghost Gunner files; (3) the CAD files; and (4) the Other Files insofar as those files regard items exclusively: (a) in Category I(a) of the [USML], as well as barrels and receivers covered by Category I(g) of the USML that are components of such items, or (b) items covered by Category I(h) of the USML solely by reference to Category I(a), excluding Military Equipment [as defined in the Settlement Agreement].”
DDTC did not agree to amend the USML to exclude all similar technical data or related hardware, or make any other revisions to Category I, much less any other USML Category. In fact, DDTC agreed to revise the USML Category I “to the extent authorized by law (including the Administrative Procedures Act)” to exclude only “technical data that is subject of the Action.”
It is also important to note that nowhere in the Settlement Agreement did DDTC indicate the Published Files were not considered ITAR-controlled technical data. In fact, the agreement to utilize the powers of §126.2 to exclude the Published Files from the ITAR by using the §125.4(b)(13) public release process clearly supports the argument that DDTC still considers the files to be technical data. If the information was not technical data, then there would be no need to go through these regulatory hoops to authorize its release. Simply put, DDTC did not ever move from its position that the Published Files were technical data, and the Settlement Agreement does more to underscore this position than to prove otherwise.
This, coupled with the clear language of the Settlement Agreement that the document could not be used as precedent in further cases, could fairly be interpreted to mean the release from ITAR controls applied only to the information that was the subject of the Defense Distributed case. Other individuals or companies with similar technical data cannot rely on the fact that Defense Distributed was authorized to release the Published Files as a permission to do the same. To be sure, it seems one must still seek authorization from DDTC or public release approval from another cognizant U.S. government agency before publishing similar technical data to the internet.
Judge Lasnik also found the Department of State’s action in temporarily modifying the USML was arbitrary and capricious, because there was no reasoned explanation for removing the CAD files from the ITAR controls. Lasnik emphasized in his ruling that when the parties entered into the Settlement Agreement, the government offered no findings of fact or other statements that addressed or invalidated the federal government’s prior position that publication of the CAD files would undermine national security and world peace. “Because it is arbitrary and capricious to ignore the contradiction in these circumstances, the agency action must be invalidated.”
Judge Lasnik held DDTC’s temporary modification of the USML to allow the publication of the CAD files constituted removal of one or more items from the USML without the required Congressional notice.
What is also eye opening about this decision is Judge Lasnik’s reasoning in determining the state Plaintiffs had standing to challenge the temporary modification of the USML.
The agency’s focus on exports, national security, and world peace does not, however, mean the States’ domestic interests are unrelated or marginally related to the AECA’s purpose … . Given that the CAD files and the resulting weapons can be transported, undetected, virtually anywhere in the world, these same impacts would likely arise within the United States even if the plastic weapons are manufactured abroad. The States’ interests in curbing violence, assassinations, terrorist threats, aviation and other security breaches and violations of gun control laws within their borders are at least marginally related to the interests protected or regulated by the AECA.
Impact on Trump Administration Efforts to Reform Export Controls over Firearms and Ammunition
Judge Lasnik did not permanently enjoin the State Department from modifying the USML. Indeed, the administrative process for revising the USML Categories governing firearms and ammunition has continued in the background. In February 2019, after multiple and extensive inter-agency review, the Department of State formally notified Congress under the AECA (Arms Export Control Act) of its intent to remove firearms and ammunition from the USML that no longer warrant controls under the AECA, including commercial items widely available in retail outlets and less sensitive military items. However, publication of the final transition rules did not occur because Senator Menendez, the ranking member in the Senate Foreign Relations Committee, placed a hold on the process over concerns that included 3D-printed firearms technology.
On November 12, 2019, the same date Judge Lasnik handed down his ruling, the Department of State once again notified Congress of its intent to revise USML Categories I, II and III. This notification included reference to the fact that Commerce had revised its rules to address concerns raised by some members of Congress and the public regarding certain access to 3D printing technology and software for firearms. At time of writing, the 30-day notification clock was set to run on December 11, 2019. However, on December 10, Senator Menendez issued another hold to block the transition rules from publishing. Although such a hold does not have the force and effect of law, it remains to be seen whether the State Department will observe the hold as it did in February. We shall see.
This past November marked the 10-year anniversary since the Obama Administration first drafted revisions to the firearm and ammunition categories on the USML—10 years and still no final rules, the inaction due primarily to politics and the belief that export controls over firearms impact domestic crime control and public safety. Given the goals of export control reform were to right-size U.S. controls over international trade with our allies and partners and improve U.S. businesses ability to compete in the world market, what has the delay on firearms and ammunition really accomplished?
(Portions of this article first appeared in a Reeves & Dola Alert, dated July 18, 2018, authored by Johanna Reeves & Katherine Heubert (available at reevesdola.com/alerts).)
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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, DC (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 (http://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.
| This article first appeared in Small Arms Review V24N3 (March 2020) |
