The BIS ‘Revision of Firearms License Requirements’ has been published and is scheduled to officially change the related U.S. export control and U.S. government’s export licensing environment on May 30, 2024.

These changes add an additional burden of effort in developing related BIS export license applications, increase the number of licenses U.S. exporting programs will require, are independently assessed as highly likely to increase the U.S. government application review period, and ‘now’ provide the U.S. government with options to reject U.S. export applications for ‘firearms trafficking or diversion, terrorism, corruption, human rights concerns, political violence, state fragility, organized crime or gang-related activity, and drug trafficking.’ BIS will also consider prior instances of diversion or misuse; the capabilities, potential uses, and lethality of the item; the nature of the end user; and other factors as appropriate.

We added the text highlights within the quotes for some of the most significant changes for U.S. exporters, and they are:

Buried within the changes under the Crime Control and Detection Reasons for Control section (Part 742.7(a)(5)) is the statement counter to the seemly continuance of the option to still use STA and LVC license exceptions for ECCN 0A501.x parts and 0E501 firearms and their associated equipment and software controlled information related and “required” for “development,” “production,” operation, installation, maintenance, repair, or overhaul.  It states “A license is required to countries listed in CC Column 2 (supplement no. 1 to part 738 of the EAR).”  And all but Canada, Liberia and the embargoed countries now include CC Column 2 as a reason for control AND the EAR definition of “license” as described in Part 772 includes the statement: “The term “license” does not include authority represented by a “License Exception.””  We don’t think this was a deliberate action, however, without additional U.S. government clarification that goes counter to other EAR language precedent, the implications of the new change’s addition of the above detail to the Crime Control and Detection section, causes the requirement such that it appears to require ALL items and information related to the “0x5zz” controlled elements to gain a BIS issued export license for U.S. export. Though there are indications in language explaining that this change may not be the process outcome that had been intended, these BIS provided explanations are NOT what is in the regulation.  The above is what is going to be “in” the regulations.  As an example of the contradiction, in the change notice’s section Supplementary Information:, A. Background, paragraph 2. Firearms Licensing Pause, just before transitioning to paragraph 3. Findings and Policy Review and Engagement, is the following: “Note that License Exception LVS is not available for end-item firearms but is available for certain “parts” and “components” of firearms when for export or reexport to a Country Group B destination.” Even if License Exception LVS may still be available for CC Column 2 for permanent export to authorized destinations, the authorization is limited to non-automatic and non-semi-automatic parts and components that are NOT specially designed for semi-automatic firearms, semi-automatic shotguns, and revolvers capable of firing .50 BMG rounds.  And again, this last sentence is counter to the control requirement in Part 742.7(a)(5) requiring a BIS issued export license for any CC Column 2 controlled element.

“Under this IFR, the requirement that all license applications for firearms and related items include an import certificate or equivalent official document as part of the submission will minimize the risk of an exporter failing to obtain an import certificate or equivalent official document if required by the importing country.”

“[For license applications for firearms related items] a purchase order be submitted for exports and reexports of firearms and related items to non-A:1 countries.” And “…purchase orders must be dated within 1 year of their submission with a license application.”

“BIS will generally limit the licensed quantity to the quantity specified on the purchase order. However, applicants may request up to a 10% increase in quantity from the purchase order amount, which will be reviewed on a case-by-case basis.”

“[For license applications to foreign individuals, applications will] require that a passport or national identity card besubmitted for exports and reexports of firearms and related items to natural persons in non-A:1 countries.”

“[The U.S. government is] formalizing an interagency working group on the review process for licensing involving firearms and related items, BIS seeks to ensure proactive tracking across relevant stakeholder agencies of licensingand export data, ongoing review of licenses or pending applications of concern, and collaboration on addressing issues in various countries or with specific end users.”  Of which, “…BIS has participated in an informal interagency working group with representatives from State since summer 2023 to ensure appropriate focus on firearms license applications.”

“[License applications for firearms related items to non-government end users] will additionally be reviewed under a presumption of denial if one of two conditions (detailed in paragraphs (b)(1)(ii)(A) and (B)) are met:

(A) the items are being exported or reexported to a destination identified in the Firearms Guidance Memorandum as a destination in which it determined that there is a substantial risk that firearms exports to non-governmental end users will be diverted or misused in a manner adverse to U.S. national security and foreign policy, or

(B) there is otherwise a substantial risk that the items will be diverted or misused in a manner that would adversely impact U.S. national security or foreign policy.”

“This [change] amends the EAR to reduce the general validity period from four years to one year for all future licenses involving firearms and related items. Because national security and foreign policy considerations (including human rights-related considerations) in destinations abroad can change rapidly, the risks or potential benefits associated with certain transactions can be difficult to predict several years in advance.

Limiting the length of the license validity period will lead to more frequent reviews of exports and thus enable BIS to account for developments and often fluid circumstances in destinations; doing so enables more precise and timely consideration of diversion risk and national security and foreign policy interests. A shortened validity period also reduces the risk of shipments on an expired import certificate, as well as the risk that BIS has to suspend or revoke a license based on rapidly developing national security and foreign policy concerns.

There are additional details that cover situational specific nuances. For example, the new regulations segregate semi-automatic firearms, pistols, shotguns, and their specially designed parts into four distinct control paragraphs from 0A501. Additionally, the semi-automatic rifle section now controls pistols built with, e.g., AR- or AK-style receivers (frames)—yes, that is exactly how it is published; no, that is not a typo in this article. The semi-automatic pistol section also governs items, through a Technical Note description but not in the control paragraph itself, to include firearms chambered for the .50 BMG cartridge, including revolvers or those that may be developed to fire .50 BMG cartridges. Furthermore, the codification in U.S. regulations now defines a ‘large capacity magazine’ as any magazine holding more than 10 rounds in the semi-automatic rifle control paragraph. Other item characteristics included in the new control paragraphs appear unusual. Additional details are scattered throughout the regulation, alongside all the existing requirements and nuances before this change.

Regarding the implementation of these changes, BIS has begun issuing ‘Advance Notice of Revocation of Export License(s)’ emails. These notices are sent from the email address ‘LicenseRevocations@bis.doc.gov‘ to the individuals whose email addresses are linked to the company’s SNAP-R account that holds the licenses in question. This could include third-party support services, like Orchid for some. Currently, the revocations seem to target only licenses for firearms related to countries deemed ‘of concern,’ specifically the 36 countries identified as ‘high diversion risk’ in the change notice. These revocations will take effect on July 1, 2024, and can be appealed, as outlined in the EAR and accompanying letter.”

Orchid Advisors, of which includes the U.S. Export Advisory and Support Services, is part of the Orchid LLC Family of Companies whose primary drive is to help the firearms and ammunition industry profitably manufacture, distribute, and sell products with great efficiency and the utmost compliance.

As such, the Orchid Advisors U.S. Export Advisory and Support Services team will be providing more impact assessment and way forward details related to this change over the coming months. To include a client invite webinar to:

1. 1. Further communicate assessed general industry impacts to business operations of these changes and
   2. Provide practical methods, approaches, and perspectives to use to continue to U.S. export through this U.S. government export control environment disruption and
   3. Gain additional insights and understanding on specific U.S. export control and compliance considerations related to these changes to support more informed business activities decision making.

This webinar took place on May 6th, but you can click here to watch it on demand.

The Orchid Advisors’ U.S. Export Advisory Services team can help you and your business navigate the U.S. export environment compliantly, clarify the impact of these changes to your business operations, and/or assist you and your business through the U.S. export control and compliance processes, to include this U.S. governmental environmental disruption to what may be the next new normal.  If you would like for us to assist you and your business with these, or any of our other Orchid services, please reach out by contacting us via https://orchidadvisors.com/contact-orchid/ .