Frequently, I am asked whether, as an 07 manufacturer, the Federal Firearms Licensee (FFL) needs to register with the Directorate of Defense Trade Controls (DDTC) of the State Department under the Arms Export Control Act (AECA), which is implemented through the International Trafficking in Arms Regulations (ITAR). While very few 07 FFLs register under ITAR, they are generally required to do so and the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) recently discussed this issue on page 3 in its November 2012 Newsletter.
22 C.F.R. Section 122.1 states, “Any person who engages in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services is required to register with the Directorate of Defense Trade Controls.” (emphasis added) The only possible exception for a manufacture, unless the item is not a defense article, is for “Persons who engage only in the fabrication of articles for experimental or scientific purpose, including research and development.” As for what constitutes a defense article, it is those items which are designated by the President and listed in the US Munitions List, pursuant to 22 C.F.R. Section 120.2. Currently, although there is a push to reform the list and remove general firearms from ITAR and move them over to the Bureau of Industry and Security under the Department of Commerce, any firearm, with the exception of a non-combat shotgun with a barrel length over 18″, are defense articles, pursuant to 22 C.F.R. Section 121.1.
The penalties for violating ITAR are severe. 22 C.F.R. Section 127.1(b)(3) declares, “It shall be unlawful:…(3) To engage in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services without complying with the registration requirements.” 22 C.F.R. Section 127.3 states “Any person who willfully:…(a) Violates any provision of §38 or §39 of the Arms Export Control Act (22 U.S.C. 2778 and 2779) or any rule or regulation issued under either §38 or §39 of the Act, or any undertaking specifically required by part 124 of this subchapter;…shall upon conviction be subject to a fine or imprisonment, or both, as prescribed by 22 U.S.C. 2778(c).”
22 U.S.C. 2778(c) declares, “Any person who willfully violates any provision of this section, section 2779 of this title, a treaty referred to in subsection (j)(1)(C)(i), or any rule or regulation issued under this section or section 2779 of this title, including any rule or regulation issued to implement or enforce a treaty referred to in subsection (j)(1)(C)(i) or an implementing arrangement pursuant to such treaty, or who willfully, in a registration or license application or required report, makes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, shall upon conviction be fined for each violation not more than $1,000,000 or imprisoned not more than 20 years, or both.”
If that weren’t bad enough, ITAR also allows for civil penalties, pursuant to 22 C.F.R. Section 127.10. “The Assistant Secretary of State for Political-Military Affairs is authorized to impose a civil penalty in an amount not to exceed that authorized by 22 U.S.C. 2778, 2779a, and 2780 for each violation of 22 U.S.C. 2778, 2779a, and 2780, or any regulation, order, license, or written approval issued thereunder. This civil penalty may be either in addition to, or in lieu of, any other liability or penalty which may be imposed.”
Accordingly, the BATFE’s November 2012 newsletter informs all manufacturers that they must register under ITAR, unless you are exempted by the DDTC.
If you are an 07 manufacturer and haven’t registered, you should immediately contact competent counsel on how to handle registration, as there are provisions relating to Voluntary Disclosures. Many 07s are reluctant or unwilling to register, as they mistakenly believe that since they haven’t been contacted or hassled by the ATF or DDTC in the past, they don’t need to register. This is all starting to change, as several 07s have now received correspondences from the DDTC acknowledging their lack of registration and requesting an explanation. This is NOT a situation you want to find yourself or your company in, especially with the potential consequences!
By Joshua Prince, Esq. of the Firearms Industry Consulting Group, a division of Prince Law Offices, P.C. devoted to the protection of the Second Amendment at the federal level across the United States and now, internationally – Nothing in the above article should be construed as legal advice on any state’s laws.
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