Source: https://www.lawcustoms.com/2012/01/16/knowledge-burden-of-an-empowered-official/
Timestamp: 2019-07-16 20:54:35
Document Index: 552571953

Matched Legal Cases: ['§921', '§ 921', '§ 921', '§122', '§121', '§129', '§127', '§126', '§123', '§479', '§479', 'art 3', '§479', '§479', '§479', '§123', '§5801', '§5845', '§479', '§479']

Home > 2012 > January > 16 > Exporting Firearms, Weapons, and Related Equipment from the United States Lawfully
Thinking about starting firearms export business? Think twice. Then stop. Think some more, and then keep on reading. This article is designed for those entrepreneurs that are in “think some more” stage of the thought process.
If you live in the United States and are looking for a business opportunity, then engaging in firearms trade makes sense. One of your influential supporters would be David Ricardo and his famous book On the Principles of Political Economy and Taxation. Mr. Ricardo’s theory of comparative advantage calls for the United States to capitalize on what it relatively does better than other nations – production of firearms and related components. It is a known wisdom that the United States is currently the world’s hegemon and in that capacity strives to maintain its military superiority. The externality effect of the U.S. strive to maintain the military superiority and hegemonic position is its relative advantage in the firearms industry.
One should also be mindful of a warning made by the President Eisenhower about the U.S. military industrial complex, which, if true, would support those in the business of firearms.
[youtube=http://www.youtube.com/watch?v=dAo2dTWEYPE&feature=fvst&w=240&h=240]
While engaging in international firearms trade in the United States is theoretically advantageous, the reality is encumbered with a multitude of barriers that frightened some of the biggest names in the world of e-commerce. The internet is a great marketing platform that brings together buyers and sellers all over the world. The internet gave rise to marketing giants such as Ebay, Amazon, and Craigslist. But even those well-financed and sophisticated entities stay away from international trade in firearms and related equipment (e.g. rifle scopes and night vision equipment). Ebay’s “firearms, weapons, and knives” policy, for example, states that “[m]ost weapons can’t be listed on eBay because of strict federal and state government regulations and international laws banning the sale of these items.” Amazon has a similar policy that prohibits the listing of weapons, including sports and hunting guns. One should be mindful that these policies reflect business decisions made by these corporate entities and do not reflect the legality aspect of firearms trade. Weapons trade, including the export of firearms, is a legitimate practice so long as it complies with applicable laws, rules and regulations.
Empowered Official: Find One or Become One
First and foremost, find a right person who knows rules and regulations related to export of firearms and related equipment. Hire that person or make her your business partner. Of course, those persons may be difficult to come by, so you must become acquainted with rules and regulations yourself. In other word, you must become or befriend an empowered official.
Concept empowered official comes from International Traffic in Arms Regulations (“ITAR”), which are rules governing exports and temporary imports of firearms and related equipment. Natural or legal U.S. persons seeking to engage in exports of defense articles need to have someone to sign documents that approve those exports. Those persons, using the ITAR jargon, are known as “empowered officials.” 22 CFR 120.25. Authority to sign, does not mean authority to prepare, which may be done by an attorney or a consultant. The signing authority, however, does carry a requirement of a certain package of knowledge. Specifically, the empowered official is required to understand, which implies the knowledge and comprehension of, provisions and requirements of (1) export control statutes and regulations and (2) liabilities and penalties of Arms Export Control Act and ITAR regulations. This requirement entails a substantial package of knowledge that an empowered official is required to carry at any given time. Fortunately, ITAR suggests a list of laws and regulations that an empowered official should know:
Arms Export Control Act. Section 38 of the Act, as suggested by ITAR’s 120.27(a)(1) and enumerated under the United States Code 22 U.S.C. 2778.
Export Administration Act. Section 11 of this 1979 Act, as suggested by ITAR’s 120.27(a)(2) and enumerated under the United States Code 50 U.S.C. app. 2410.
Espionage Involving Defense or Classified Information. Suggested by ITAR’s 120.27(a)(3) and enumerated under 18 U.S.C. 793, 794, 798.
Material Support to Terrorists. Suggested by ITAR’s 120.27(a)(3) and enumerated under 18 U.S.C. 2339A.
Trading with the Enemy Act. Section 16 of the Act, as suggested by ITAR’s 120.27(a)(4) and enumerated under the United States Code 50 U.S.C. app. 16.
International Emergency Economic Powers Act. Section 206 of the Act, as suggested by ITAR’s 120.27(a)(5) and enumerated under the United States Code 50 U.S.C. 1705. The provision relates to foreign assets control.
Securities and Exchange Act. Section 30A of the 1934 Act, as suggested by ITAR’s 120.27(a)(6) and enumerated under the United States Code 15 U.S.C. 78dd-1.
Foreign Corrupt Practices Act. Section 104 of the Act, as suggested by ITAR’s 120.27(a)(6) and enumerated under the United States Code 15 U.S.C. 78dd-2.
Sabotage. Suggested by ITAR’s 120.27(a)(7) and enumerated under 18 U.S.C. 105.
Internal Security Act. Section 4(b) of this 1950 Act, as suggested by ITAR’s 120.27(a)(8) and enumerated under the United States Code 50 U.S.C. 783(b). This provision relates to communication of classified information.
Atomic Energy Act. Sections 57, 92, 101, 104, 222, 224, 225, 226 of the Act, as suggested by ITAR’s 120.27(a)(9) and enumerated under the United States Code 42 U.S.C. 2077, 2122, 2131, 2134, 2272, 2274, 2275, 2276.
National Security Act. Section 601 of this 1947 Act, as suggested by ITAR’s 120.27(a)(10) and enumerated under the United States Code 50 U.S.C. 421. This provision relates to the protection of the intelligence identities.
Anti-Apartheid Act. Section 603(b) and (c) of this 1986 Act, as suggested by ITAR’s 120.27(a)(11) and enumerated under the United States Code 22 U.S.C. 5113(b) and (c).
Conspiracy. Suggested by ITAR’s 120.27(a)(12) and enumerated under 18 U.S.C. 371. The conspiracy pertains to violation of any of the above statutes.
Prevention of Terrorist Access to Destructive Weapons Act. Sections 3, 4, 5, and 6 of this 2004 Act, as suggested by ITAR’s 120.27(a)(13) and enumerated under the United States Code 50 U.S.C. 421. These provisions relate to the missile systems designed to destroy aircraft. 18 U.S.C. 2332.g. Provisions related to prohibitions governing atomic weapons are also included. 42 U.S.C. 2122. Radiological dispersal services and variola virus are also covered. 18 U.S.C. 2332h; 18 U.S.C. 175b.
Guns Control Act of 1968. Suggested by ITAR’s 126.11.
This article should probably end here, because once you befriend or become that empowered official with the requisite package of knowledge, you should know it all and therefore lose the interest in reading further (hence there is no reason to continue writing). But we are imperfect and therefore the above mentioned laws are imperfect, which makes the analysis of international trade in arms worthwhile and interesting.
Set Up a Physical Shop
This is simply a suggestion to find a physical place from which you can conduct your international trade in firearms. One needs to be aware of the local zoning laws and ordinances prohibiting the trade in firearms and weapons on the local level. At this stage you should also obtain local permits (e.g. business, warehouse, etc.), insurance, and licensing as required by the local authorities.
This can be a tricky step for new entrepreneurs, because it involves a question as to what should be done first: getting a Federal Firearms License (FFL) from Alcohol Tobacco Tax and Trade Bureau (TTB) or applying for Permanent Export License from Directorate of Defense Trade Controls (DDTC). One may logically conclude that export license and registration should come first, because without one, no export and therefore no sale can be done in the first place. In other words get export approval for sale first, then take care of miscellaneous paperwork later. Unfortunately, opting for the export license prior to acquiring FFL license would cause one to violate Guns Control Act of 1968.
Section 922(a)(1)(A) of the Gun Control Act of 1968 provides that it is unlawful for any person: except a licensed importer, licensed manufacturer, or licensed dealer, to engage in the business of importing, manufacturing, or dealing in firearms, or in the course of such business to ship, transport, or receive any firearm in interstate or foreign commerce. The Act defines a dealer as “any person engaged in the business of selling firearms at wholesale or retail.” 18 U.S.C. §921(a)(11)(A). “Engaged in the business” is defined as: a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases or firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms. 18 U.S.C. § 921(a)(21)(C). The term “with the principal objective of livelihood and profit” means that “the intent underlying the sale or disposition of firearms is predominantly one of obtaining livelihood and pecuniary gain, as opposed to other intents, such as improving or liquidating a personal firearms collection.” 18 U.S.C. § 921(a)(22). Furthermore, the firearms business does not have to be primary business and profit does not have to be made in order to come within the scope of the Act. See United States v. Masters, 622 F.2d 83, 88 (4th Cir.1980) (“The government does not have to show, however, that defendant’s primary business was dealing in firearms or that he made a profit from such dealing.”).
Purchase order or a “firm order” is one of the requirements for filing export license application. Purchase order / firm order requirement was officially pronounced on April 12, 1999 in the Federal Register. 64 Fed. Reg. 17532. This policy was reaffirmed in January 16, 2010 Guidelines for the Permanent Export, Temporary Export, and Temporary Import of Firearms and Ammunition by DDTC. In obtaining a purchase order one devotes time, attention, and labor. Such devotion may bring one within the “engaged in business” clause of the Gun Control Act, which requires a person to be licensed. Therefore, under this “chicken and egg” scenario, new entrepreneurs would need to obtain Federal Firearms License as the next step in the process.
22 C.F.R. §122.1 requires “[a]ny 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 Office of Defense Trade Controls.” Engaging in the business of exporting is more narrowly defined by ITAR than “engaged in the business” sister definition under Gun Control Act of 1968. 22 C.F.R. §121.5(a)(5) states “[f]or the purposes of this subchapter, engaging in the business of … exporting defense articles … requires only one occasion of … exporting a defense article …” Accordingly, an eager entrepreneur may proceed to the next step of seeking a purchase order / firm order and then seek to obtain registration (and a license) prior to that one occasion of exporting a defense article ? No. ITAR has a provision for brokering activities, that include ” financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import or a defense article or defense service, irrespective of its origin.” 22 C.F.R. §129.2. Solicitation of purchase or a firm order may be deemed as facilitation of export defense article and therefore regarded as brokering activity, which without a registration may be construed as ITAR violation pursuant to 22 C.F.R. §127.1(a)(6) (“It is unlawful: To engage in the business of brokering activities for which registration, a license or written approval is required by this subchapter without first registering or obtaining the required license or written approval from the Directorate of Defense Trade Controls.”). Thus, DDTC registration should follow (or at least be concurrent with) the FFL licensing process.
Obtain a Purchase Order / Firm Order
Next step is obtaining the purchase order from the prospective buyer overseas. But this is not all about marketing. The buyer should be the ultimate end-user and the purchase order must be a “firm commitment and not speculative.” Guidelines suggest that U.S. company invoices, proforma invoices, letters of intent, and blanket orders are not sufficient. Additionally, see if the prospective buyer is in trouble with the U.S. government, or is located in the country that the U.S. government does not like. This step is done by going checking appropriate regulations, such as 22 C.F.R. §126.1 covering general denial policies, embargoes by the United Nations and other restrictions. One may also explore the post previously made by LawCustoms: “Websites to check prior to proceeding with U.S. Exports and Imports.”
Entrepreneurs need to find forwarders that are willing to export licensed firearms (see e.g. DHL). Once you find the forwarder, see if the freight charges are acceptable to you or the prospective foreign buyer. If these charges are acceptable, you need to find out about the routing matrix of the forwarder. If the matrix suggests the transhipment through third countries, you may need to obtain a permit or a license to transship a firearm through that third country. If both (1) transhipment permit/license and (2) forwarder’s charges are acceptable and within your reach, then you are ready to go to DDTC for their blessing.
File a License Application with DDTC
If planning to do a permanent export, one needs to become familiar with D-Trade and DSP-5 application. January 16, 2010 Guidelines for the Permanent Export, Temporary Export, and Temporary Import of Firearms and Ammunition are designed in a form of a check sheet that exporter can use for guidance. It is important to note DDTC’s policy about the end-user certificate DSP-83, which DDTC may not require. Even if DSP-83 is not requested by DDTC pursuant to policy under 63 Fed. Reg. 17532 (Apr. 12, 1999) and mentioned under “Guidelines for Permanent Export, Temporary Export, and Temporary Import of Firearms and Ammunition,” the written approval is still required before resell or transfer of the firearm pursuant to 22 C.F.R. §123.9.
After you complied with all DDTC requirements and received approvals, you are ready to move to the next step.
Obtain Export Approval from TTB and CBP
Firearms may not be shipped until a permit, Form 9 (Firearms), is received from the Director of the Bureau of Alcohol, Tobacco and Firearms. 27 C.F.R. §479.116. Furthermore, two copies of the form must be addressed to the District Director of Customs at the port of exportation, and must precede or accompany the shipment in order to permit appropriate inspection prior to lading. 27 C.F.R. §479.116. Director will, after the merchandise has been duly exported, execute the certificate of exportation (Part 3 of Form 9 (Firearms)). One copy of the form will be retained with the shipper’s export declaration and the remaining copy thereof will be transmitted to the Director. 27 C.F.R. §479.117.
Be aware of taxes. TTB is the agency generally charged with tax collection. If entrepreneur acts as an exporter who paid taxes, that person may be eligible for refund. Where it is desired to make a transfer free of tax to another person who in turn will export the firearm, the transferor must likewise file an application supported by evidence that the transfer will start the firearm in course of exportation, except, however, that where such transferor and exporter are registered special-taxpayers, the transferor will not be required to file an application on Form 9 (Firearms). 27 C.F.R. §479.114. A claim for a refund may be submitted on Form 843 if proof of exportation is presented after the firearms transfer tax was paid. If the manufacturer waives all claim for the amount to be refunded, the refund must be made to the exporter. A claim for a refund by an exporter of tax paid by a manufacturer must be accompanied by waiver of the manufacturer and proof of tax payment by the latter. 27 C.F.R. §479.120.
Book the Shipment with the Forwarder
Now, that you have the requisite government approvals (including those of a transshipping country) you are ready for export. You must use the forwarder that your chose previously and indicated on your export license. If for any reason, you cannot use that forwarder, you must amend the export license with DDTC prior to shipment.
File Electronic Export Information (EEI) with Census
With booking information on hand, file the EEI through Automated Export System (AES) or the compatible software. Perform your denied parties screening (one more time). Obtain you internal transaction number (ITN) and deliver the goods with documents to the forwarder. They are ready for a lawful departure.
Post Exportation Work
Depending on the country and the type of firearm, you may be required to perform “Delivery Verification Procedure,” under 22 C.F.R. §123.14(b), as well as possible reporting requirements by DDTC and other agencies.
Once you succeed in developing and sustaining a lawful export business in firearms, you’ll be come a contributor to David Ricardo’s theory of comparative advantage and the prediction/warning that President Eisenhower made in 1961.
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Jim Bartlett said:
This is an excellent summary. Who wrote it? The author should receive credit for good work.
Co-Author, United States Export Controls, Sixth Edition (Aspen Publishers, 2011), by Liebman, Thomsen & Bartlett
Author, The Annotated ITAR (2012)
Kim Pritula said:
The author is incorrect in the paragraph “Obtain Export Approval from TTB and CBP”. First, the ATF Form 9 permit quoted by the author is only required for National Firearms Act (NFA) firearms, NOT all firearm exports. NFA firearms have a higher level of control, and encompass items such as machine guns, silencers, etc. These regulations do NOT apply to exports of sporting and hunting firearms, which constitute 95% of total firearm exports. Second, TTB does not grant any authorities under the Gun Control Act – ATF does. TTB is only responsible for the taxation portion of the regulations.
lawcustoms said:
The article does not make a distinction between NFA firearms and other firearms. Thank you Kim for pointing this out. National Firearms Act has been codified into 26 U.S.C. §5801 et. seq. §5845 is the section dealing with definitions (also stated under 27 CFR §479.11):
Firearm.–The term “firearm” means (1) a shotgun having a barrel or barrels of less than 18 inches in length; (2) a weapon made from a shotgun if such weapon as modified has an overall length of less than 26 inches or a barrel or barrels of less than 18 inches in length; (3) a rifle having a barrel or barrels of less than 16 inches in length; (4) a weapon made from a rifle if such weapon as modified has an overall length of less than 26 inches or a barrel or barrels of less than 16 inches in length; (5) any other weapon, as defined in subsection (e); (6) a machinegun; (7) any silencer (as defined in section 921 of Title 18, United States Code); and (8) a destructive device. The term “firearm” shall not include an antique firearm or any device (other than a machinegun or destructive device) which, although designed as a weapon, the Secretary finds by reason of the date of its manufacture, value, design, and other characteristics is primarily a collector’s item and is not likely to be used as a weapon.
Rifle.–The term “rifle” means a weapon designed or redesigned, made or remade, and intended to be fired from the shoulder and designed or redesigned and made or remade to use the energy of the explosive in a fixed cartridge to fire only a single projectile through a rifled bore for each single pull of the trigger, and shall include any such weapon which may be readily restored to fire a fixed cartridge.
So one can see that a hunting rifle having a barrel of 16 inches or longer may fall outside NFA firearm definition, and therefore fall outside of 27 C.F.R. §479.116, which states that a “shipment may not be made until the permit, Form 9 (Firearms), is received from the Director.”
Comment on ATF/TTB is also fair. In 2002, ATF was split into ATF and TTB pursuant to The Homeland Security Act of 2002, Pub. L. No. 107-296, 116 Stat. 2135. ATF became part of the Justice Department, while TTB remained with the Treasury Department.