News from Reeves & Dola, LLP
STATE DEPARTMENT ISSUES GUIDANCE ON REGISTRATION REQUIREMENT FOR FIREARM MANUFACTURERS AND GUNSMITHS
On July 22, 2016, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC), published
addressing the registration requirements of the International Traffic in Arms Regulations (ITAR) as it relates to gunsmithing activities.
In the guidance, DDTC presents what it sees is the differences between manufacturing and gunsmithing, and concludes that many, but not all, "traditional" gunsmithing activities do not constitute manufacturing for ITAR purposes and do not require ITAR registration.
DDTC's decision to issue guidance on what manufacturing activities trigger the ITAR registration requirements can be a positive development, especially when the result is to remove activities from such a financially burdensome requirement (the minimum annual registration fee is currently $2,250.00).
Unfortunately, the guidance also captures activities that many in the firearms industry have never considered to rise to "manufacturing" captured by the ITAR registration requirement because the activity has no bearing on the U.S. national security interests.
DDTC should have published the guidance for comment first so industry could have input into the particular activities that will require registration and the language used to describe such activities.
The Arms Export Control Act (AECA) requires manufacturers of defense articles to register with DDTC. Articles designated as "defense articles" are listed in the United States Munitions List (USML) at 22 C.F.R. § 121.1. USML Category I includes non-automatic and semi-automatic firearms to caliber .50 inclusive, fully automatic firearms to .50 caliber inclusive, combat shotguns, riflescopes manufactured to military specifications, and components, parts, and accessories for firearms. USML Category II includes guns over caliber .50 and all components and parts therefore. USML Category III includes ammunition for the firearms in USML Categories I and II and all components, parts, and accessories for such ammunition.
The ITAR requires any person in the United States who engages in the business of manufacturing, exporting, or temporarily importing defense articles to register with DDTC. Manufacturers must register even if they do not engage in any exporting. The term "manufacture" is not defined in the AECA or the ITAR. Because of this, many engaged in gunsmithing activities historically have found it difficult to determine whether they were required to register under the ITAR.
DDTC POLICY GUIDANCE
Distinguishing the Arms Export Control Act (AECA) from the GCA, DDTC states that persons who do not actually manufacture ITAR-controlled defense articles are not required to register with DDTC, even if they have a Federal Firearms License (FFL) issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) issued under the GCA. Conversely, a number of gunsmithing activities that ATF allows to be done with GCA dealer license may nevertheless require ITAR registration. The reason for this is that the "Arms Export Control Act ... and the Gun Control Act [GCA] are two distinct U.S. laws that concern manufacturing of firearms" and that "the requirements for obtaining FFLs under the GCA are separate and distinct from the requirement under the AECA and ITAR to register with DDTC."
In determining whether a firearms-related activity constitutes manufacturing for ITAR purposes, DDTC states that it applies "the ordinary, contemporary, common meaning of the term [manufacturing]." According to DDTC, many so-called traditional gunsmithing activities do not constitute manufacturing for ITAR purposes and, therefore, do not require registration under the law or regulations. This is particularly the case where such activities "do not require cutting, drilling, or machining and do not improve the accuracy, caliber, or operation of the ITAR-controlled firearm beyond its original capabilities."
But some in the firearms industry may ask what constitutes "gunsmithing," especially in light of the fact that this has been an ongoing question of great concern, and at times debate with ATF, because gunsmithing does not trigger the controls of GCA, whereas manufacturing does. But, as DDTC points out repeatedly, the AECA is distinct from the GCA. Consequently, DDTC will apply the ordinary, contemporary, common meaning, which DDTC explains traditionally has broadly included designing, making, or repairing guns.
The specific policy guidance provided in the July 22 document clearly states it is limited to U.S. activities involving firearms as defined in Category I(j)(1) of the USML and related ammunition that is .50 caliber or smaller. The guidance states it is limited to Category I(a), I(b), I(e)-(h), and ammunition in Category III(a). Activities involving items in Category I(c) , I(d), and II are not included in the scope of the guidance. We reprint pertinent excerpts from the policy guidance below:
Not Manufacturing - Registration Not Required
- Occasional assembly of firearm parts and kits that do not require cutting, drilling, or machining;
- Firearm repairs involving one-for-one drop-in replacement parts that do not require any cutting, drilling, or machining for installation;
- Repairs involving replacement parts that do not improve the accuracy, caliber, or other aspects of firearm operation;
- Hydrographic paint or Cerakote application or bluing treatments for a firearm;
- Attachment of accessories to a completed firearm without drilling, cutting, or machining-such as attaching a scope, sling, or light to existing mounts or hooks, or attaching a flash suppressor, sound suppressor, muzzle brake, or similar item to a pre-threaded muzzle;
- Cosmetic additions and alterations (including engraving) that do not improve the accuracy, caliber, or other aspects of firearm operation beyond its original capabilities;
- Machining new dovetails or drilling and tapping new holes for the installation of sights which do not improve the accuracy or operation of the firearm beyond its original capabilities; and
- Manual loading or reloading of ammunition of .50 caliber or smaller.
Manufacturing - Registration Required
- Use of any special tooling or equipment upgrading in order to improve the capability of assembled or repaired firearms;
- Modifications to a firearm that change round capacity;
- The production of firearm parts (including, but not limited to, barrels, stocks, cylinders, breech mechanisms, triggers, silencers, or suppressors);
- The systemized production of ammunition, including the automated loading or reloading of ammunition;
- The machining or cutting of firearms, e.g., threading of muzzles or muzzle brake installation requiring machining, that results in an enhanced capability;
- Rechambering firearms through machining, cutting, or drilling;
- Chambering, cutting, or threading barrel blanks; and
- Blueprinting firearms by machining the barrel.
Registration Required - Other than Manufacturing
- Assisting foreign persons in the design, development, and repair of firearms may constitute the export of a defense service (see 22 CFR § 120.9) and require ITAR registration with and authorization from DDTC; and
- Exporting a firearm or any other item on the USML requires ITAR registration with and authorization from DDTC.
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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.