Classification Classification

Departments of State and Commerce issue proposed revisions to rules on the export of firearms and

A change in jurisdictional control over the export of many firearms, ammunition, and related parts and technology from State to Commerce will likely bring both benefits and challenges for business, write David A. Ring, Jared Clark and Matt Cvercko.

n 24 May 2018, the civilian use. If the proposed rules are jurisdiction and classification determ- departments of State and adopted, US businesses exporting inations, US exporters must follow the O Commerce jointly unveiled products affected by the changes will USML and CCL ‘orders of review’ to long-anticipated proposals to need to initiate top-to-bottom reclassify their products as necessary. streamline the nation’s export laws as reclassification procedures to ensure The table below summarises some part of the US government’s ongoing that they are in compliance with the of the most significant classification Export Control Reform (‘ECR’) new regulations. As with all export changes under the proposed rules. initiative. The proposed rules, published in the Federal Register at 83 Items transitioning to the CCL Items remaining on the USML FR 24198 (State) and 83 FR 24166 (Commerce), would shift jurisdictional Non-automatic and semi-automatic firearms Fully automatic firearms; firearms firing control and licensing authority over the (other than ) with a caliber of less caseless ammunition; fully automatic shotguns; export of many firearms, ammunition, than or equal to .50 inches; and non-automatic firearms specially designed to integrate fire and related parts and technology from and non-semi-automatic rifles, carbines, control, automatic tracking, or automatic firing , and pistols with a caliber greater systems; and parts and components specially the Department of State to the than .50 inches but not greater than .72 inches designed to convert a semi- Department of Commerce. to a fully automatic firearm Specifically, the changes would affect defence articles currently Antique and armament (manufactured Guns and armament with a caliber greater than enumerated on the State Department’s between 1890 and 1919); BB guns; pellet .50 inches, including howitzers, artillery, rifles; paint ball guns; and air rifles cannons, mortars, recoilless rifles, grenade United States Munitions List (‘USML’) launchers, and developmental guns funded by Category I (Firearms, Close Assault the Department of Defense Weapons and Combat Shotguns), Category II (Guns and Armament), and Detachable magazines with a capacity of Magazines for firearms with a caliber of .50 greater than 16 rounds but less than 50 inches or greater with a capacity of greater than Category III (Ammunition and rounds specially designed for the firearms 50 rounds Ordnance). The articles removed from described above the USML would be listed on the Commerce Department’s Commerce Riflescopes without night vision or infrared Riflescopes with night vision or infrared Control List (‘CCL’) and subject to the capabilities capabilities Commerce Department’s Export Flash suppressors Silencers, mufflers, and sound suppressors Administration Regulations (‘EAR’), rather than the State Department’s Barrels, receivers (frames), bolts, bolt carriers, Barrels, receivers (frames), bolts, bolt carriers, International Traffic in Arms triggers, hammers, pistol grips, and sears slides, and sears specially designed for articles specially designed for the firearms described remaining listed on the USML Regulations (‘ITAR’). above The proposed reforms, while intended to reduce regulatory burdens Flame throwers with an effective range of less Flame throwers with a minimum effective range on US businesses dealing in firearms than 20 meters of 20 meters and related commodities, also raise Ammunition for small arms (generally those Ammunition: (a) for the firearms described new considerations and challenges for with a caliber of less than or equal to .50 above; (b) with little or no civil use, or that is US exporters and their domestic and inches) and ammunition for firearms not inherently military, such as ammunition foreign supply chain partners. specifically listed in USML Category III preassembled into links or belts, caseless ammunition, projectiles with a hardened tip or core, and explosive projectiles; and (c) Product reclassification specifically listed USML in Category III The departments of State and Commerce proposed the revisions to Technology required for the development, Technical data and defense services directly USML Categories I-III for the purpose production, operation, installation, related to the articles described above of establishing a brighter line between maintenance, repair, or overhaul of the items described above defence articles and items common to

1 World ECR www.worldecr.com Classification Classification

Brokering subject to the ITAR’s brokering (‘EEI’) in the Automated Export The Department of State imposes requirements or whether their System (‘AES’). The export clearance registration, reporting, and export activities are covered by the carve-out requirements would apply to exports licensing obligations on companies discussed above. It is critical that of all such firearms, including and individuals who engage in certain businesses make the correct temporary exports, regardless of value ‘brokering activities’ related to defence determination, as violations of or destination. To assist US law articles or services listed on the USML, enforcement officials in verifying that as does the Department of Justice’s The proposed reforms, such exports are authorised and Bureau of Alcohol, Tobacco, Firearms conform to the export clearance and Explosives (‘ATF’) with regard to while intended to reduce procedure, the proposed rules would items listed on the United States regulatory burdens on increase the amount of information Munitions Import List (‘USMIL’). required in AES filing for these items Under the ITAR, such ‘brokering US businesses dealing in to include serial numbers, make, activities’ generally include any action firearms and related model and calibre. taken on behalf of another to facilitate The proposed rules would also the manufacture, export, permanent commodities, also raise amend the EAR’s record-keeping import, transfer, reexport, or new considerations and requirements in two ways: first, with retransfer of defence articles or challenges for US regard to many firearms and shotguns, services controlled by the USML the exporter or any other ‘party to the and/or USMIL. exporters and their transaction’ that creates or receives the The proposed regulatory reforms domestic and foreign EAR-required record – including the include ‘conforming changes’ to the serial number, make, model, and ITAR’s brokering provisions, clarifying supply chain partners. calibre of the export – would be the that certain defence articles would person responsible for retaining the transition from the USML to the CCL brokering regulations can result in records; second, the proposed rules but still remain listed on the USMIL – civil and criminal fines, denial of would narrow the scope of an EAR and thus continue to be subject to the export privileges, and even record-keeping exemption regarding ITAR’s brokering requirements. imprisonment. warranty certificates, requiring However, in another conforming exporters to maintain such certificates change, the proposed rules explicitly Firearms training and ‘Defense when issued for many firearms and carve-out from the ITAR’s list of Services’ shotguns. activities triggering brokering The State Department requires requirements those activities that authorisation under the ITAR to Entry clearance process for facilitate the export, reexport, or provide ‘defense services’, which are temporary imports transfer of an item subject to the EAR defined to include training or Under the proposed rules, the EAR that has been approved pursuant to a instructing foreign persons in the use would regulate temporary imports into licence or licence exception under the or operation of defence articles. In the US of firearms, ammunition, and EAR, or a licence or other approval contrast, as the proposed rules state, other items previously under the under the ITAR. 1 This carve-out may ‘[t]he EAR does not include a concept jurisdiction of the Department of provide relief to companies engaged in of “defense services,” and the State. Although the temporarily brokering activities related to the “technology” related controls are more imported items would now be listed on export or transfer of items that narrowly focused and apply in limited the CCL, some of these items would transition from the USML to CCL but contexts as compared to the ITAR.’ remain on the USMIL, the ATF’s remain on the USMIL; however, Therefore, under the proposed control list for permanent imports; the companies engaging in brokering rules, US persons providing training or proposed rules would establish a new activities related to the manufacture or instruction to foreign persons in the entry clearance process for such items permanent import of such items would use or operation of firearms that would so that US businesses would not need still be subject to brokering transition from the USML to the CCL to obtain temporary import requirements. would no longer need to obtain authorisation from two different If the proposed rules are adopted, authorisation to provide such training, government agencies. US businesses dealing in items assuming that the training is not The entry clearance process would transitioning from the USML to the military-based or otherwise caught also facilitate US law enforcement CCL will need to examine the nature of under the ITAR’s definition of defense officials’ ability to track items their activities in relation to such items services. temporarily imported into the US and to determine whether they remain listed on both the CCL and USMIL by Export clearance and record- requiring businesses to furnish certain keeping requirements for information on such imports which Links and notes transitioning firearms could then be used to identify the 1 The proposed rules would add a new paragraph (x) to USML Categories I-III, allowing ITAR licensing for Under the proposed rules, exporters of items upon their subsequent export. items subject to the EAR, provided the items are to firearms transitioning from the USML US exporters temporarily importing be used in or with defense articles listed in USML to CCL would be required to follow an items that would transition to the CCL Categories I-III and are described in the purchase documentation submitted with the application. export clearance procedure, including under the new rules and which are filing electronic export information listed on the USMIL would not need to

2 World ECR www.worldecr.com Classification Classification

obtain a licence for the export of such exporters could take advantage of EAR licence exceptions apply to their items, but would be required to make licence exceptions for items exports. use of EAR License Exception TMP. transitioning from the USML to the Significant proposals affecting EAR CCL would be no more restrictive than licence exceptions include those below. Export licence exceptions those that currently apply to the items Under the proposed regulatory under the ITAR’s licence exemptions. reforms, US businesses would still Although the proposed rules David A. Ring is a partner and need to obtain an EAR licence for should provide exporters with equal or Jared Clark and Matt Cvercko exports of most firearms, ammunition, greater ability to take advantage of are associates at Wiggin and and related technology that would licence exceptions than under the Dana LLP. transition to the CCL for all current rules, the conditions under destinations. Nonetheless, the which such exceptions apply remain [email protected] Departments of State and Commerce tightly circumscribed, and exporters [email protected] drafted the proposed rules with the would need to undertake a critical [email protected] intent that the conditions under which analysis to determine whether EAR

EAR license Eligible items Ineligible items exception

n Parts, components, accessories, and n Complete non-automatic and semi-automatic attachments for most non-automatic and semi- firearms automatic firearms (other than shotguns), except n Receivers (frames), complete breech those specified in the Ineligible Items column mechanisms, including castings, forgings or [$500 limit on net value per shipment] stampings thereof for most non-automatic or n Guns and armament manufactured between semi-automatic firearms (unless the ultimate 1890 and 1919 and flame throwers with an destination is Canada) effective range less than 20 meters [$500 limit LVS n Ammunition for most non-automatic and semi- on net value per shipment] automatic firearms n Parts and components of ammunition for most non-automatic and semi-automatic firearms [$100 limit on net value per shipment] n Test, inspection, and production equipment for most non-automatic and semi-automatic firearms and related ammunition [$3,000 limit on net value per shipment]

n Certain firearms and shotguns transitioning from n Most firearms, shotguns, and related ammunition the USML to the CCL and listed on the USMIL* to destinations in Country Group D:5** or n Firearms controlled under new ECCN 0A501 and shipped from or manufactured in Russia, TMP any with a barrel length less than 18 Georgia, Kazakhstan, Kyrgyzstan, Moldova, inches controlled under new ECCN 0A502 to Turkmenistan, Ukraine, or Uzbekistan exhibitions or demonstrations or for inspection, test, calibration, or repair

n Most non-automatic and semi-automatic n Any ‘500 series’ item to be exported to GOV firearms, as well as related parts, components, destinations in Country Groups E:1 or E:2**, and ammunition*** unless narrow exceptions apply

n Most non-automatic and semi-automatic firearms BAG (maximum of three per person), and up to 1,000 rounds of related ammunition

n Certain parts, components, accessories, and n Most non-automatic and semi-automatic firearms STA attachments specially designed for non- and related parts, components, accessories, and automatic or semi-automatic firearms or for attachments ITAR-controlled firearms not specifically listed n Most shotguns and discharge-type arms and either on the CCL or USML related parts and components

* See ‘Entry Clearance Process for Temporary Imports’ above. ** See Supplement No. 1 to EAR Part 740. *** Under the proposed rules, both non-automatic and semi-automatic firearms would be eligible to use EAR License Exception GOV; only non-automatic firearms are eligible to use the current ITAR license exemption.

3 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

*3 (a) Non-automatic and semi-automatic firearms to REVISED caliber .50 inclusive (12.7 mm) n Would control only firearms that fire caseless ammunition

*(b) Fully automatic firearms to .50 caliber inclusive NO CHANGE I

Y (12.7 mm) R

O *(c) Firearms or other weapons (e.g. insurgency- REVISED G

E counterinsurgency, close assault weapons systems) Would control firearms specially designed to

T n

A having a special military application regardless of integrate fire control, automatic tracking, or C caliber automatic firing systems n Articles previously described in paragraph *(c) and still warranting ITAR control would be controlled by paragraphs *(a), *(b), or *(c) or by USML Category II

*(d) Combat shotguns. This includes any shotgun with a REVISED barrel length less than 18 inches. n Would control fully automatic shotguns regardless of gauge

*(e) Silencers, mufflers, sound and flash suppressors REVISED for the articles in (a) through (d) of this category and n Would continue to control silencers, mufflers, their specifically designed, modified or adapted and sound suppressors, and specially designed components and parts parts and components, but flash suppressors would be controlled by the EAR

(f) Riflescopes manufactured to military specifications RESERVED 4 (See category XII(c) for controls on night sighting n Riflescopes with night vision or infrared devices) capabilities would be controlled by USML Category XII; all others would be controlled by the EAR

*(g) Barrels, cylinders, receivers (frames) or complete REVISED breech mechanisms for the articles in paragraphs n Would control barrels, receivers (frames), bolts, (a) through (d) of this category. bolt carriers, slides, and sears specially designed for articles listed in USML Category I n Would no longer be designated SME

(i) Technical data (as defined in § 120.10 of this REVISED subchapter) and defense services (as defined in n Would control technical data and defense § 120.9 of this subchapter) directly related to the services directly related to articles listed in USML defense articles described in paragraphs (a) Category I through (h) of this category. Technical data directly n Would control classified technical data directly related to the manufacture or production of any related to items controlled by new ECCNs 0A501 , defense articles described elsewhere in this 0B501 , 0D501 , and 0E501 and defense category that are designated as Significant Military services using the classified technical data Equipment (SME) shall itself be designated SME.

(j) The following interpretations explain and amplify the RESERVED terms used in this category and throughout this subchapter: 1. A firearm is a weapon not over .50 caliber (12.7 mm) which is designed to expel a projectile by the action of an explosive or which may be readily converted to do so. 2. A rifle is a shoulder firearm which can discharge a bullet through a rifled barrel 16 inches or longer. 3. A carbine is a lightweight shoulder firearm with a barrel under 16 inches in length.

4 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

(j) 4. A pistol is a hand-operated firearm having a chamber integral with or permanently aligned [continued] with the bore. 5. A is a hand-operated firearm with a

I revolving cylinder containing chambers for

Y individual cartridges. R

O 6. A submachine , ‘machine pistol’ or ‘machine G

E gun’ is a firearm originally designed to fire, or T

A capable of being fired, fully automatically by a

C single pull of the trigger.

(k)-(w) N/A [Paragraphs to be added under proposed rules] NEW [Reserved]

(x) N/A [Paragraph to be added under proposed rules] NEW n Would allow ITAR licensing for commodities, software, and technology controlled by the EAR that are: (1) to be used in or with defense articles controlled in USML Category I; and (2) described in the purchase documentation submitted with the license application

Notes Note: This coverage by the U.S. Munitions List in REVISED paragraphs (a) through (i) of this category excludes n Would clarify which non-automatic firearms, any non-combat shotgun with a barrel length of 18 semi-automatic firearms, non-automatic inches or longer, BB, pellet, and muzzle loading shotguns, BB guns, pellet guns, and muzzle (black powder) firearms. loading firearms, and parts, components, This category does not cover riflescopes and accessories, and attachments for firearms and sighting devices that are not manufactured to shotguns listed in USML Category I would be military specifications. It also excludes accessories controlled by the EAR and attachments (e.g., belts, slings, after market n Would clarify the meaning of the following terms rubber grips, cleaning kits) for firearms that do not as used in USML Category I: ‘firearm,’ ‘fully enhance the usefulness, effectiveness, or automatic firearm,’ ‘shotgun,’ and ‘caseless capabilities of the firearm, components and parts. ammunition’ The Department of Commerce regulates the export of such items. See the Export Administration Regulations (15 CFR parts 730- 799). In addition, license exemptions for the items in this category are available in various parts of this subchapter (e.g., §§ 123.17, 123.18 and 125.4).

2 These visual representations of the proposed revisions to USML Categories I-III capture the bulk of the most significant rule changes, but they are not exhaustive and omit many important changes proposed by the new rules. While intended to be useful as a starting point for exporters seeking to understand how the pro - posed rules would affect their operations, they are not a substitute for a thorough review of the proposed rules themselves. 3 ‘*’ indicates that articles within the paragraph are designated ‘Significant Military Equipment’. 4 ‘Reserved’ indicates that the contents of the paragraph have been removed and the paragraph is reserved for future use while remaining listed on the USML.

5 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

*(a) Guns over caliber .50 (i.e., 12.7 mm), whether REVISED towed, airborne, self-propelled, or fixed, including n Would include articles removed from reserved but not limited to, howitzers, mortars, cannons, paragraph (c) still warranting ITAR control recoilless rifles, and grenade launchers. n Would add new paragraph (a)(5) controlling I

I developmental guns and armaments, and

Y specially designed parts and components for R

O these articles, funded by the Department of

G Defense E T

A n Would add 5 new Notes clarifying guns and C armament to be controlled by revised paragraph (a) n Would remove the designation of SME from paragraph (a) as a whole, but would designate certain articles controlled by paragraph (a) as SME

(b) Flame throwers specifically designed or modified for REVISED military application n Would control flame throwers with a minimum effective range of 20 meters n Would remove the designation of SME from paragraph (b)

(c) Apparatus and devices for launching or delivering RESERVED ordnance, other than those articles controlled in n Would control articles previously controlled by Category IV. paragraph (c) and still warranting ITAR control by new paragraph *(a)(4)

*(d) Kinetic energy weapon systems specifically REVISED designed or modified for destruction or rendering n Would control kinetic energy weapon systems mission-abort of a target. specially designed for destruction or rendering mission-abort of a target n Would add new Note clarifying kinetic energy weapons systems controlled by revised paragraph *(d)

(e) Signature control materials (e.g., parasitic, REVISED structural, coatings, screening) techniques, and n Would control signature reduction devices equipment specifically designed, developed, specially designed for the guns and armament configured, adapted or modified to alter or reduce listed in USML Category II the signature (e.g., muzzle flash suppression, radar, infrared, visual, laser/electro-optical, acoustic) of defense articles controlled by this category.

*(f) Engines specifically designed or modified for the RESERVED self-propelled guns and howitzers in paragraph (a) n Articles formerly controlled by paragraph *(f) of this category would be controlled by new ECCN 0A606

(g) Tooling and equipment specifically designed or RESERVED modified for the production of defense articles n Articles formerly controlled by paragraph (g) controlled by this category would be controlled by new ECCN 0B602

(h) Test and evaluation equipment and test models RESERVED specifically designed or modified for the articles n Articles formerly controlled by paragraph (h) controlled by this category. This includes but is not would be controlled by new ECCN 0B602 limited to diagnostic instrumentation and physical test models.

6 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

(i) Autoloading systems for electronic programming of RESERVED projectile function for the defense articles n Certain articles formerly controlled by paragraph controlled in this Category (i) still warranting ITAR control would be controlled under paragraph (j) I I

Y (j) All other components, parts, accessories, REVISED R

O attachments and associated equipment specifically n Would be revised to specifically enumerate the G designed or modified for the articles in paragraphs E articles controlled under paragraph (j) T (a) through (i) of this category. This includes but is A

C not limited to mounts and carriages for the articles controlled in this category

(k) Technical data (as defined in § 120.10 of this REVISED subchapter) and defense services (as defined in n Would control technical data and defense § 120.9 of this subchapter) directly related to the services directly related to articles listed in USML defense articles described in paragraphs (a) Category II through (j) of this category n Would control classified technical data directly related to items controlled by new ECCNs 0A602 , 0B602 , 0D602 , and 0E602 and defense services using the classified technical data

(l)-(w) N/A [Paragraphs to be added under proposed rules] NEW [Reserved]

(x) N/A [Paragraph to be added under proposed rules] NEW n Would allow ITAR licensing for commodities, software, and technology controlled by the EAR that are: (1) to be used in or with defense articles controlled in USML Category II; and (2) described in the purchase documentation submitted with the license application

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

*(a) Ammunition/ordnance for the articles in Categories REVISED I and II of this section. n Would be revised to specifically enumerate the ammunition controlled under revised paragraph

I *(a); ammunition not enumerated in revised I I paragraph *(a) would be controlled by the EAR Y

R n Would add new paragraph (a)(10) controlling O

G developmental ammunition, and specially E

T designed parts and components for such

A ammunition, funded by the Department of Defense C n Would add three notes clarifying which ammunition would be controlled by the EAR

(b) Ammunition/ordnance handling equipment REVISED specifically designed or modified for the articles n Would be revised to control ammunition/ controlled in this category, such as, belting, linking, ordnance handling equipment specially designed and de-linking equipment. for the articles controlled in USML Category III

7 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes]

(c) Equipment and tooling specifically designed or RESERVED modified for the production of defense articles n Articles formerly controlled by paragraph (c) controlled by this category would be controlled by the EAR

I (d) Components, parts, accessories, attachments and REVISED I I associated equipment specifically designed or Y n Would be revised to specifically enumerate the R modified for the articles in this category: parts and components controlled under revised O

G *(1) Guidance and control components for the paragraph (d); parts and components not E

T articles in paragraph (a) of this category; enumerated in revised paragraph (d) would be A controlled by the EAR C *(2) Safing, arming and fuzing components (including target detection and localisation devices) for the articles in paragraph (a) of this category; and (3) All other components, parts, accessories, attachments and associated equipment for the articles in paragraphs (a) through (c) of this category

(e) Technical data (as defined in § 120.10 of this REVISED subchapter) and defense services (as defined in n Would control technical data and defense § 120.9 of this subchapter) directly related to the services directly related to articles listed in USML defense articles described in paragraphs (a) Category III through (d) of this category. Technical data directly n Would control classified technical data directly related to the manufacture or production of any related to items controlled by new ECCNs 0A505 , defense articles described elsewhere in this 0B505 , 0D505 , and 0E505 and defense category that are designated as Significant Military services using the classified technical data Equipment (‘SME’) shall itself be designated SME

(f) The following explains and amplifies the terms used RESERVED in this category and elsewhere in this subchapter: 1. The components, parts, accessories and attachments controlled in this category include, but are not limited to cartridge cases, powder bags (or other propellant charges), bullets, jackets, cores, shells (excluding shotgun shells), projectiles (including canister rounds and submunitions therefor), boosters, firing components therefor, primers, and other detonating devices for the defense articles controlled in this category 2. This category does not control cartridge and shell casings that, prior to export, have been rendered useless beyond the possibility of restoration for use as a cartridge or shell casing by means of heating, flame treatment, mangling, crushing, cutting or popping 3. Equipment and tooling in paragraph (c) of this category does not include equipment for hand- loading ammunition. 4. The articles in this category include any end item, component, accessory, attachment, part, firmware, software, or system that has been designed or manufactured using technical data and defense services controlled by this category 5. The articles specifically designed or modified for military application controlled in this category include any article specifically developed, configured, or adapted for military application

8 World ECR www.worldecr.com Classification Classification

Visual representation of proposed changes to USML categories I-III 2

Paragraph Articles controlled Pre-ECR Post-ECR [summary of changes] I I I

Y (g)-(w) N/A [Paragraphs to be added under proposed rules] NEW R

O [Reserved] G E T

A (x) N/A [Paragraph to be added under proposed rules] NEW C n Would allow ITAR licensing for commodities, software, and technology controlled by the EAR that are: (1) to be used in or with defense articles controlled in USML Category III; and (2) described in the purchase documentation submitted with the license application

This article is reprinted from the July 2018 of WorldECR , the journal of export controls and sanctions.

www.worldecr.com

9 World ECR www.worldecr.com