April 30, 2024

EXPORT LICENSE REVOCATIONS AHEAD

Commerce Publishes New Firearms License Requirements

Today, the Bureau of Industry and Security (BIS) published an Interim Final Rule (IFR) to enhance the controls over exports of firearms and related "items," including ammunition at 89 Fed. Reg. 34680 (Apr. 30, 2024). The sweeping changes, which BIS argues will counter diversion and misuse of firearms and advance human rights, will result in several significant changes to firearms and ammunition licensing when the rule takes effect on May 30, 2024. In addition, BIS, in consultation with the State Department, has created a new list of 36 high-risk destinations subject to a presumption of denial for firearms and ammunition export license applications involving non-government end users. On July 1, 2024, BIS will REVOKE all currently valid licenses (export and reexport) for firearms and related items to non-government end users in these High-Risk Destinations for Firearms and Related Items. For countries outside these areas, BIS will modify all existing firearm/ammunition export and reexport licenses on May 30, 2024 by reducing the validity period to end on May 30, 2025, one year from the effective date of the IFR.

This alert will be the first of a multi-part series in which we will dive into the details of the IFR and the consequences for industry. Today we will provide an overview of the upcoming changes to the EAR and the corresponding effective dates. As a reminder, "quotes" indicate the term is defined in Part 772 of the EAR.

I. EAR Changes Effective May 30, 2024

The IFR amends the Export Administration Regulations (EAR) pertaining to firearms and related items, including ammunition, as follows:

1. Creation of new Export Control Classification Numbers (ECCNs) to capture semiautomatic firearms;
2. Addition of Crime Control (CC) -related controls and license exception restrictions;
3. Creation of a new list of high-risk destinations;
4. Expand requirements for support documentation for license applications; and
5. Formalize an Interagency Working Group for firearms license applications.

A. New Classifications for Semi-automatic Firearms

BIS is adding four new ECCNs to better track the export, reexport, transfer (in-country) and diversion of semi-automatic firearms and related items. The new ECCNs are as follows:

• 0A506 - semi-automatic rifles
• 0A507 - semi-automatic pistols
• 0A508 - semi-automatic shotguns
• 0A509 - certain ‘‘parts,’’ ‘‘components,’’ devices, ‘‘accessories,’’ and ‘‘attachments’’ for items controlled under ECCNs 0A506, 0A507, and 0A508

For exports, there will be new mandatory reporting requirements in the Automated Export System (AES). With these new requirements, BIS will be able to identify and track shipments of semi-automatic firearms as well as the "parts," "components," devices, "accessories," and "attachments" controlled under the new ECCN 0A509. The IFR also implements changes to the export clearance process to require identification of firearms in AES.

B. Crime Control (CC) - Related Controls and License Exception Restrictions

To address human rights-related concerns, BIS is adding CC as a reason for control to the ECCNs for firearms and related items. This will also result in restricting the use of license exceptions for most destinations.

Blanket CC restrictions will apply to all firearms. CC restrictions will not apply to certain specific firearm "parts" and "components" controlled under ECCN 0A501.y and ammunition controlled under ECCNs 0A505.c, 0A505.d, and 0A505.x because they raise relatively few concerns related to human rights or other foreign policy objectives. BIS expects the CC changes to result in an increase of 1,115 license applications annually.

BIS is also adding a new term to the EAR in Part 772, "CARICOM," which refers to the Caribbean Community, an intergovernmental organization consisting of 15 member states (Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Lucia, Suriname, St. Kitts and Nevis, St. Vincent and the Grenadines, and Trinidad and Tobago) and five associate members (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, and Turks and Caicos). CARICOM is an important addition to the new limitations that will apply to the license exceptions LVS (Low Value Shipments) and BAG (Baggage) for exports and reexports of firearms and related items. Effective May 30, 2024, LVS will no longer be available for ECCNs 0A501, 0A502, 0A504 (except 0A504.g), 0A505, 0A506, 0A507, 0A508, and 0A509 when they are destined for destinations in "CARICOM" or destinations specified in both Country Groups B and D:5.

In addition, use of BAG for ECCNs 0A501, 0A502, 0A504, 0A505, 0A506, 0A507, 0A508, and 0A509 will be limited to destinations other than those specified in Country Group D:5 (except for Zimbabwe) or destinations in ‘‘CARICOM.’’ Further, there will be a limit of three shotguns and firearms in total that U.S. citizens may take in a single trip.

C. Firearms Review Policy and High-Risk Destinations

In reviewing license applications for firearms and related items for any country, BIS will consider several factors to determine the potential risks associated with a given transaction. These factors include (but of course are not limited to) the nature of the end user, the capabilities, potential uses, and lethality of the item plus the following destination-specific factors: (i) national security and foreign policy risk factors, including firearms trafficking, terrorism, human rights concerns and political violence, state fragility, corruption, organized crime or gang activity, and drug trafficking; and (ii) instances of past diversion or misuse.

Pursuant to the overarching national security and foreign policy concerns driving these changes, BIS is also creating a new list, titled "High-Risk Destinations for Firearms and Related Items," which will be in a new Supplement No. 3 to Part 742. Applications to export firearms and related items to non-government end users in any of the countries listed in Supp. 3 will face a PRESUMPTION OF DENIAL. The list was developed by the State Department, at Commerce's request, and detailed in a guidance memorandum dated April 8, 2024.

In preparing the list, the State Department identified several destination-specific factors correlating with an increased risk of diversion or misuse of a firearm in a manner adverse to U.S. national security and foreign policy. The countries that will be subject to a presumption of denial for exports and reexports of firearms and related items to non-government end users are as follows (in alphabetical order):

1. The Bahamas
2. Bangladesh
3. Belize
4. Bolivia
5. Burkina Faso
6. Burundi
7. Chad
8. Colombia
9. Dominican Republic
10. Ecuador
11. El Salvador
12. Guatemala
13. Guyana
14. Honduras
15. Indonesia
16. Jamaica
17. Kazakhstan
18. Kyrgyzstan
19. Laos
20. Malaysia
21. Mali
22. Mozambique
23. Nepal
24. Niger
25. Nigeria
26. Pakistan
27. Panama
28. Papua New Guinea
29. Paraguay
30. Peru
31. Suriname
32. Tajikistan
33. Trinidad and Tobago
34. Uganda
35. Vietnam
36. Yemen

According to BIS, the presumption of denial is not an absolute prohibition. Applicants may be able to overcome the presumption of denial by demonstrating a transaction does not present a substantial risk of diversion or misuse. BIS claims it will have flexibility to tailor its review to the individual facts and related policy interests of the particular country. For example, BIS may recommend approval of a transaction involving a non-government security service charged with protecting a third-country embassy in one of the above countries. BIS argues the presumption of denial in the firearms context is generally consistent with its licensing review policies under the EAR, including in connection with other sensitive items and destinations of concern.

D. Expansion of Required Support Documents for License Applications

The IFR updates and expands the requirements for support documentation submitted with all license applications for firearms and related items.

1. Import certificate: must be submitted as part of the application packet for Organization of American States (OAS) member countries and all other countries that require an import certificate of equivalent official document for firearms and related items.
2. Purchase orders: required for all non-Wassenaar member countries (countries not listed in Commerce Country Group A:1).
3. Passport/National Identity Card: a passport or national identity card be submitted for exports and reexports of firearms and related items for all named individual recipient end users in non-A:1 countries.

II. License Revocations and Modifications

Pursuant to the policy detailed in the IFR, BIS will revoke or modify existing licenses for firearms and related items to non-government end users.

A. License Revocations on July 1, 2024

On July 1, 2024, BIS will revoke all currently valid licenses to non-government end users in High-Risk Destinations for Firearms and Related Items. For any license that is revoked, the license holder may appeal a revocation to the Under Secretary for Industry and Security pursuant to 15 C.F.R. § 756. Procedures for filing such an appeal are described in detail in § 756.2(b) and will be included in the BIS notification letters, which many of you have already started receiving today. BIS is distributing advance notification letters to ensure that planned shipments may be completed without disruption to ongoing trade. It is important to note that an appeal must be received no later than 45 days after the date of revocation (the date of revocation is July 1, 2024, not the date of the letter or the IFR publication). The appeal should include a written statement on why VIS should reverse or modify the revocation and submitted to AppealsCoordinator@bis.doc.gov. If submitting in hard-copy, the address is the Office of the Under Secretary for Industry and Security, 14th Street and Pennsylvania Avenue, N.W., Room H-3898, U.S. Department of Commerce, Washington, D.C. 20230.

Holders of revoked licenses may also submit a new application to export or reexport the items listed on the revoked license. However, remember that BIS will apply a presumption of denial for any license application (export and reexport) for firearms and related items to any country in the high-risk list.

B. License Modifications Effective May 30, 2024

On May 30, 2024, BIS will modify existing licenses for exports and reexports to non-government end users in destinations outside the High-Risk Destinations for Firearms and Related Items, Country Group A:1, Israel, and Ukraine if there is more than one year remaining on the license validity period. The modification will shorten the validity period to end one year from the effective date of the IFR (May 30, 2025). These modifications will not affect licenses to non-government end users in Country Group A:1, Israel, and Ukraine (which implement export controls consistent with the Wassenaar Arrangement), or to High-Risk Destinations for Firearms and Related Items.

III. BIS Request for Comments

The IFR takes effect on May 30, 2024, and BIS will accept comments through July 1, 2024. Comments may be submitted to www.regulations.gov under the ID BIS-2024-0003. Comments should reference RIN 0694-AJ46.

In addition to seeking public comment on the changes identified in the IFR and the four new ECCNs, BIS is seeking public comment on further potential limitations on license exception BAG (please refer to the IFR, 89 Fed. Reg. at p. 34697):

• The expected impact on individuals, as well as industry, should BIS impose a time limit on the use of § 740.14 BAG License Exception for firearms classified under ECCNs 0A501, 0A502, 0A506, 0A507, and 0A508. Such limits would require the items to be returned to the United States or other country of re-export within the specified time limit, or to otherwise be disposed of in accordance with the EAR, e.g., by obtaining a BIS license to authorize a longer temporary export or a permanent export. For temporary exports or reexports longer than the BAG time limit, a license would be required to authorize the export or reexport. In considering revisions to BAG, BIS identified that imposing a time limit of 45-, 60-, 90-, or 180-days on how long the exporter is eligible to keep the firearms out of the country could help address diversion risks.

• Potential additional revisions to § 740.14 of the EAR to require exporters of applicable firearms and related commodities authorized under License Exception BAG to submit EEI filings in AES under § 758.1(b)(9). The IFR does not make changes to the exemption from the EEI filing requirements for License Exception BAG authorized exports or the export clearance requirements under § 758.11, which will continue to require submission of the CBP Form 4457. However, BIS seeks comments on the potential impact on individuals if BIS were to remove the requirements in § 758.11 and instead require mandatory EEI filing in AES. BIS is aware of concerns about requiring individuals to file EEI in AES for License Exception BAG authorized exports; because of the benefits to increasing transparency and reducing the chance of diversion, BIS is considering whether additional changes may be warranted in this export clearance area. BIS also welcomes comments that provide alternative suggestions for increasing transparency and reducing diversion risk without imposing a mandatory EEI filing requirement in AES for exports authorized under License Exception BAG. 

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This concludes Part 1 of our Alert on BIS's new rules on exports of firearms and related items. For our subsequent alerts, we will don our scuba gear and go on a deep dive exploring these upcoming changes in depth.