Sometimes attorneys get interesting questions, and these common questions and answers can help guide your thinking into the right direction and area in preparing to seek legal advice on your specific issue. The answers here are not intended to provide any user with legal advice; please see Disclaimer.

 

Questions and Answers

I run a company that designs firearms, parts, and accessories. My main customer base is the U.S. Civilian Market and my products are tailored to that sector. I have recently received inquiries from foreign customers. What set of regulations will apply to me?

First, congratulations on your success, and that your designs are so successful that organizations outside the country are taking note! Since you so far have been catering to the domestic market, the export of most of your products will likely be subject to Department of Commerce regulation under the Export Administration Regulations (“EAR”). However, some of your parts and accessories might fall under the ITAR. A few examples of these are parts that can be used to convert semi-automatic firearms to fully-automatic ones, magazines that hold more than 50 cartridges, and optical sighting systems that allow a firearm to track a target and are specially designed as integral parts to their intended firearm.

Furthermore, even if the firearms, parts, assemblies, and accessories you intend to export are of the type that fall completely under the EAR, the ITAR still impose reporting, broker-licensing, and recordkeeping requirements on you for your transactions. Therefore, studying both sets of regulations, and at least as importantly, having a lawyer who knows them well working for you, are critical.

I am in the process of closing a deal for a shipment of rifles to a foreign buyer. I am not totally sure, based on the buyer’s behavior, that the government he represents really is where my products are going to end up. Do I have a responsibility to look into this, or may I ship as long as I am compliant with the export regulations on their face?

You have noticed something very important, and as it turns out, looking into, and reporting, if necessary, shady behavior like this by a potential buyer of defense articles is a duty that you, as the exporter, have. While the ITAR and EAR do not require you to chase down every suspicion to the ends of the earth and make absolutely sure of the veracity of your buyer, you are responsible for doing due diligence to make sure that the purported importer of your exports is being truthful about their final destination.

The EAR in particular contains many helpful hints and examples of behavior and other red flags and warning signs on which an exporter would need to check. When selling rifles like you are, you might look into whether the country where the buyer’s agent or broker is claiming they will end up manufactures or is able to acquire in quantity the caliber of ammunition in which your arms are chambered. For example, if you are selling rifles chambered in the calibers most common in America like 5.56x45mm and 7.62x51mm, but the purported end user is the military of a country that exclusively fields former-Soviet-pattern arms in calibers like 7.62x39mm, 5.45x39mm, and 7.62x54r, and that has no plans to change over, like by joining NATO and allying with the U.S., your products may actually be intended for shipment onto an embargoed country, or for the use of an embargoed paramilitary organization or terrorist group. That is something that one not only has a legal duty to try and prevent, but I think we would all agree a moral duty to block as well.

I have received State Department approval for a transaction of 60-round drum magazines specially designed for the Howa Type 89 infantry rifle, which I am exporting to a local police force in Japan.

To get these products that my company has labored for years to design to their end users, I have to use a commercial carrier for my goods, and my japanese customers are using an international banking consortium to finance the deal.

Do I need to discuss any details of my shipment with these third parties involved in the transaction?

This is a very good question, and one that is often overlooked by exporters. It turns out that your suspicion is a correct one: the federal regulations concerning export of small arms, parts, accessories, and ammunition do put duties on financial houses that supply capital for transactions in defense articles, and also regulate the conduct of the commercial carriers and even freight-forwarding firms that handle such shipments.

Therefore, while I would need more details of your transaction to give you actual, specific legal advice, it is a useful rule to remember that all parties to your transaction need to be in the loop as to what they are transporting, in what jurisdictions they may and may not offload, even temporarily, the items in shipment, and what the rules are as to financing legal arms deals.