The latest on Russia sanctions from the International Trade and Supply Chain Team
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On Thursday, January 23, 2020, the U.S. Department of State – Directorate of Defense Trade Controls (“DDTC”) and U.S. Commerce Department – Bureau of Industry and Security (“BIS”) published new coordinated final rules which will take effect on Monday, March 9, 2020.  On that date, the DDTC rule will remove specifically identified firearms, ammunition, accessories and associated technical data from the United States Munitions List (“USML”) and the BIS rule will create new Export Control Classification Numbers (“ECCNs”) to classify the same items on its Commerce Control List (the “CCL”).  As a result, the items covered by these rules will no longer be subject to export and temporary import controls imposed under the DDTC’s International Traffic in Arms Regulations (“ITAR”) and will instead be subject to export controls imposed under the BIS’s Export Administration Regulations (“EAR”).  The items to be transferred from the USML to the CCL under these new rules include (but are not limited to) non-automatic and semi-automatic firearms with up to .50 caliber and ammunition of up to .50 caliber (except for ammunition with special features that warrant its continued listing on the USML).

The DDTC made this decision as part of its multi-year review of the USML, after determining that the transferred items no longer “provide[d] the United States with a critical military or intelligence advantage” or “performed an inherently military function”.  However, both the DDTC rule and the BIS rule specifically state that exports of these items are not being deregulated.  The newly created ECCN classifications for the transferred items will continue to impose extensive licensing requirements for exports of the transferred items to most countries (including, in some instances, Canada), except DDTC will no longer have the primary responsibility for issuing such licenses.  Instead, BIS will now have the primary responsibility for reviewing license applications and issuing licenses. DDTC will remain involved in the process by performing interagency reviews of all license applications submitted to BIS for firearms and related technology exports.

There are some other interesting developments to consider as a result of these new rules:

  • The BIS rule also made many revisions to the EAR’s various License Exceptions to address when those License Exceptions will and will not authorize exports of the transferred firearms, ammunition and accessories without first obtaining a BIS export license.
  • Data that is capable of producing 3D-printed firearms, firearm frames or receivers will continue to be subject to BIS export licensing requirements, even if such data has been posted publicly on the internet. As a result, the new BIS rule has amended the EAR’s “publication” exception to exclude such 3D printing data.
  • Relevant statutes authorize DDTC to regulate temporary imports of defense articles into the U.S., but the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) is authorized to regulate their permanent import into the U.S. The new DDTC rule only removes the transferred items from the USML and does not remove them from the separate United States Munitions Import List (“USMIL”) administered by the ATF.  As a result, permanent U.S. import transactions involving the firearms, ammunition and accessories covered in the BIS and DDTC rules may still require licensing approval from the ATF.  Likewise, because the transferred items remain on the USMIL, persons engaged in brokering activities with respect to those items will continue to remain subject to the ITAR’s brokering restrictions and registration requirements.

Although the specific export regulations applicable to the firearms, ammunition and accessories described in these new rules will change effective March 9, 2020, it is important to understand that export activities involving these items will continue to be heavily regulated.  As a result, anyone contemplating an export of such items or planning to take such items with them while traveling outside the U.S. after March 9, 2020 should carefully consider whether the EAR will prohibit such activities.  In some instances, one of the EAR’s License Exceptions may authorize such activities, but it might also be necessary for the exporter to first obtain a BIS license.

If you have any questions regarding these new rules, please contact Cortney Morgan or Grant Leach with Hush Blackwell’s Export Controls & Sanctions team.