News from Reeves & Dola, LLP 
*** R|D ALERT ***


In anticipation of the government publishing the final rules to transition most firearms and ammunition away from the export controls of the U.S. Department of State and over to the Department of Commerce, we continue our series reviewing the key differences between the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR). In this alert, we will examine how export authorizations of the two licensing regimes compare.

Before we do that, however, we will address very briefly the hold that Sen. Menendez placed on the Department of State's Section 38(f) congressional notification of the proposed revisions to the U.S. Munitions List (USML) Categories I-III. Sen. Menendez announced the hold on February 26, 2019 out of "concern about a proposal to drastically weaken firearms export regulations." (Ranking Member's Press, "Menendez Announces Hold on Trump Admin's Proposed Move to Weaken Regulatory Control Over U.S. Guns Sales Abroad," February 26, 2019). In his letter to Secretary of State Mike Pompeo, Sen. Menendez outlined his two major concerns about the proposed rules: (1) removal of firearms exports from Congressional information and review, and (2) the proliferation of 3D gun printing technical information. The 38(f) notification was supposed to run (March 5), so we should known soon how the Administration has responded to the issues Sen. Menendez raised.

So now we will continue onward and upward with our series comparing the EAR to the ITAR. Below is another chart showing the differences between exports of defense articles (USML articles) under the ITAR, and exports of commercial items, dual-use items and certain military items subject to the EAR.

Export license applications under both the ITAR and EAR are submitted via electronic filing, unless otherwise authorized by the respective agency. ITAR license applications are submitted through the Directorate of Defense Trade Control (DDTC) DTrade system and EAR license applications are submitted through the Bureau of Industry and Security (BIS) Simplified Network Application Processing system ( SNAP-R ). One major distinction between the electronic filing systems, one which industry certainly will enjoy, is that there is no fee associated with submitting license applications through SNAP-R, nor is there requirement to register as an exporter or manufacturer (or pay an associated fee) with BIS. All an exporter needs to do is get established on the SNAP-R system, which is an on-line process. This difference alone could save certain members of industry a fair amount of money.
As you will also see below, all types of EAR export transactions that require a license utilize a single license form from BIS. This single form is called the Form BIS-748P: Multipurpose Application. Unlike the ITAR, the license application does not need be limited to a single shipment (or purchase order) but may represent a reasonable estimate of items to be shipped throughout the validity of the license and can cover a variety of types of transactions. EAR Part 748 provides detailed guidance for completing export applications.

Permanent Export (Hardware or Information)
DSP-5 (or exemption)  
(or exception)
Temporary Export (Hardware)
DSP-73 (or exemption)
(or exception)
Temporary Import
DSP-61  (or exemption)
See Note 1 below
Distribution (Hardware)
Warehouse & Distribution Agreement
See Note 2 below
Defense Service
Type of authorization depends on the activity covered:

DSP-5 (limited use for "exceptional cases," see ITAR 124.1(a)).

Technical Assistance Agreement (agreement for performance of a defense service or disclosure of technical data; no production rights or manufacturing know-how).

Manufacturing License Agreement (authorization to manufacture defense articles abroad).
See Note 3 below

Paper letter submission (if license required).
See Note 4 below

Note 1 The temporary entry of EAR-controlled items into the U.S. does not require a license from BIS (though it may trigger other requirements from different U.S. agencies (e.g., ATF for short barrel firearms)). However, the return of the item to its originating source or other foreign location may require authorization from BIS, if a license is required to that country. The return (export) of the temporarily imported item would be covered by a Form BIS-748P license (or exception).

Note 2 The export of hardware is a controlled event under the EAR. If you require a license to provide the hardware for the identified end-uses or end-users, then complete and submit a Form BIS-748P license application that identifies the distribution chain.

Note 3: As we noted in our previous alert, generally speaking, there is no analogous concept to defense services under the EAR. The EAR focuses on the provision of EAR-controlled "technology" when one is giving assistance or simply disclosing the "technology." If you require a license to provide "technology" for the identified end-use or end-user, then complete and submit a Form BIS-748P license application. We note, however, that the EAR (section 744.6(a)(2)) prohibits U.S. persons from engaging in activities, including services, that directly support certain nuclear, missile, chemical, or biological end-uses without a license.

Note 4: The EAR does not regulate "brokering" of items subject to the EAR. However, for firearms and ammunition moving over to the CCL, the proposed rules indicated that  all defense articles described in either the U.S. Munitions Import List (USMIL) or the USML are subject to the brokering controls administered by DDTC in Part 129 of the ITAR. The final rules, once published, should be carefully studied to determine how brokering requirements under the ITAR may impact transactions that are subject to the EAR.

As you can see, the forms of export authorizations differ between the ITAR and the EAR. You should also know that the supporting documentary requirements under the EAR are also different from what the ITAR requires. Part 748 in the EAR provides detailed guidance to aid in determining what, if any supporting documentation is required for a particular type of export transaction. 

The good news is that under the EAR, export license preparation should be more streamlined, as there is only one form that industry will have to use. However, exporters must still know the chain of custody, including the intended end-user and ultimate end-use. As we have noted many times before, the transition of items from the USML to the CCL is not a decontrol. Reviewing the transaction for license requirements will continue to be necessary .

Next up - we will analyze noteworthy export enforcement activity under the EAR.

The above alert is for informational purposes only and is not intended to be construed or used as legal advice. Receipt of this alert does not establish an attorney-client relationship.     

Questions about this alert may be directed to: 

Katherine Heubert : 202.715.9940  [email protected]

About Reeves & Dola

Reeves & Dola is a Washington, DC law firm that specializes in helping clients navigate the highly regulated and complex world of manufacturing, sales and international trade of defense and commercial products. We have a deep understanding of the Federal regulatory process, and use our expertise in working with a variety of Federal agencies to assist our clients with their transactional and regulatory needs.

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