This is the third post in a series of blogs about the proposed changes to USML Categories I, II and III. Please check back for further articles in this series. For more information about these changes, and the movement of items from ITAR to EAR, check out Part 1 and Part 2 in our series and read the latest firearms Export Control Reform updates.
Part 3: Registration and Licensing
Let’s say you are currently an exporter of firearms, parts, components and/or accessories. You know these products have historically been ITAR controlled and you are already registered with the U.S. Department of State, Directorate of Defense Trade Controls (DDTC). You’ve been renewing that registration each year with the required forms and the payment to DDTC. Also, when required by the ITAR regulations, you have been applying for – and receiving – licenses to authorize your exports or reexports.
Now things are changing. Many, if not all, of the products that you export might not be under the jurisdiction of the ITAR any longer, with the pending changes and transition to the Export Administration Regulations (EAR). What do you need to do?
Firearms licenses for ITAR and EAR
Review all the items that you export and confirm which ones will be controlled by the EAR if the pending changes occur. Classify those items with the new ECCN numbers from the Commerce Control List (CCL). Begin the process of applying for BIS licenses to export – and remember – licenses will be required for exports and re-exports. Do not worry about rushing to get new licenses submitted and approved. You will have a two-year period allowing you to continue to utilize the current ITAR license that you have; at least until the point that it either expires (by date, quantity or value) or the two year “grandfather” deadline is reached. We do, however, recommend that you not delay the process of converting your licenses for too long.
When you begin exporting with your new BIS licenses, remember to enter (or have entered for you) the correct Electronic Export Information in CBP’s Automated Export System (also known as ACE/AES). Remember, you will be required to enter into the Automated Export System the serial numbers, make, model and caliber for the firearms that are being exported pursuant to the license. This is a big change from the ITAR.
However, just like the ITAR, you will still be required to obtain an import permit (the importing country requires such permits for import of firearms) prior to submitting the export application. Also remember that EAR Part 762 will require that you maintain records for a five-year period. These records will need to include the serial numbers, make, model and caliber for the firearms that you exported.
DDTC Registration: To lapse or not to lapse?
If all of the items that you export have been properly reviewed and classified and you are sure that you are not manufacturing or exporting any ITAR-controlled items, then you may consider letting your registration with DDTC lapse at the next renewal time. Although you are not required to notify DDTC that you are allowing your registration to lapse, we recommend sending a notification to DDTC’s Compliance & Registration Division advising them of this. It will save you from considerable explanations and the requirements to pay back registration fees for a lapsed registration if (in the future) your company is required to register again because it is back in the business of manufacturing or exporting defense articles controlled by the ITAR.
Other reminders on ITAR exemptions and EAR exceptions
If you were previously using ITAR exemptions to export your items, you may no longer do so as exemptions are for ITAR controlled items only. The only caveats here are: (1) if a previously exported item has been returned for repair, then you may continue to use the exemption authority under which the part was imported for re-export or may use an EAR authorization; and (2) If an item, which has transitioned to the EAR, was exported to Canada under the authority of §126.5, the exemption may continue to be utilized as the export authority for the return of the item to the United States.
There are some limited EAR exceptions that you may be qualified to use. For example:
- Shipments of Limited Value (LVS) –
- Complete firearms which are not be eligible for License Exception LVS.
- Firearms “parts,” “components,” “accessories,” and “attachments”, other than receivers (frames), and complete breech mechanisms, including castings, forgings or stampings thereof, would be eligible for License Exception LVS, with a limit of $500 (based on the actual selling price or fair market value) per shipment.
- Receivers (frames), and complete breech mechanisms, including castings, forgings or stampings thereof, would be eligible for License Exception LVS if the ultimate destination is Canada.
- Guns and armament manufactured between 1890 and 1919 and for military flame throwers with an effective range less than 20 meters would be eligible for License Exception LVS, with a limit of $500 net value per shipment.
- Ammunition which transitioned from ITAR control to EAR control would not be eligible for License Exception LVS; however, ammunition parts and components would be eligible with a limit of $100 net value per shipment.
For more on this topic, check out our previous blog: Export Control Reform for Firearms & Ammunition: Part 2.
If you need help understanding these changes and how they impact your business, schedule a no-charge consultation with one of our team members today.
Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.