Firearms sales are booming over the past several years, sparked by recent mass shootings and the prospect of tighter gun control. As the demand for guns has increased, so too has the number of firearm manufacturers.
According to federal data for 2015, the number of licensed gun makers and dealers is nearly 140,000, with over 10,000 new licenses issued in 2015 alone.
When you think of gun manufacturers, you think of Smith & Wesson, or Colt, or other large manufacturing companies. But that’s not always the case. Rather, the ATF’s definition of a manufacturer includes small-sized businesses that have licenses to put the pieces of weaponry together and sell the finished product as a gun, or those that make components for gun manufacturers to use in their manufacturing process.
If someone with all the parts goes to a gunsmith and asks for it to be assembled, that is not considered manufacturing. But if someone puts it together himself and sells it as a gun, that is manufacturing.
With a manufacturing license, gun shop owners and firearms enthusiasts are able to obtain parts and assemble weapons as well as produce ammunition for sale.
Most local gun makers are mom-and-pop businesses that focus on customizing weapons rather than creating them, working out of their home or workshop part-time.
Recently, the federal government stepped in and issued some guidelines affecting gun manufacturing.
Unable to ram gun control measures down the throats of Americans, the Obama administration is taking a different approach.
At issue are the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) policies requiring any U.S. business that manufactures, exports or imports “defense articles or furnishes defense services” to pay an annual $2,250 registration fee. The policies, administered by the State Department through something called the Directorate of Defense of Trade Controls (DDTC), are not new, but have become a topic of concern among gunsmiths after the DDTC clarified in July who was subject to registration requirements.
The DDTC has issued a letter setting forth more executive gun controls–guidelines for some gunsmiths to register with the DDTC and pay fees requisite to that registration based on the ITAR.
This new directive has caused some consternation among those engaged in repairing and modifying firearms for themselves and for sale to others.
We turned to U.S. Law Shield of Pennsylvania Independent Program Attorney Justin McShane for his analysis of the impact the new guidelines have on the firearms industry.
Here is what he had to say:
There are a lot of things that can be said about this current presidential administration. It is indisputable that this administration has issued more Executive Orders (EO) that have a direct impact on the firearms industry than any other administration perhaps in the history of the United States.
In light of the new Executive Order from President Obama issued on July 22, 2016 many FFLs who perform light gunsmithing pursuant to their FFL01 status and even manufacturers of firearms (FFL07) and manufacturers of ammunition (FFL07/FFL06) are worried about ITAR. There are a lot of questions all hovering around whether they have to pay the rather substantial registration payment required under ITAR. The reason that these folks are worried is that the ITAR required payment is substantial- to the tune of $2,250.00 per year.
So what is all the hub-bub about and is this new Executive Order really the “gunsmith killer” and does it keep even hobbyists from reloading as claimed all over the internet?
In short, the answer is probably not. Most jobs that FFL01 gunsmiths have been performing before this EO and without worrying about ITAR registration will not likely change. What activities that a FFL01 gunsmith performed properly before the EO that would now be restricted to only ITAR registrants are activities like threading muzzles to add suppressors.
Other than that, most normal gunsmithing activity will still be allowed without registering for ITAR.
Hobbyist hand loaders will also not have to register and pay, contrary to some internet mumbling.
The manual hand loading (meaning not autodrive or Camdex like automated systems) of anything less than .50 caliber (and shotgun shells) is exempted.
The manufacturing requirement for hand loading applies only to automated systems (like a Mark VII, Camdex or Ammobot), and even then only if you are “engaged in the business.” A reloading press with a Mark VII in your garage will not subject you to ITAR registration and paying the fee so long as you are not trying to sell your hand loads to others.
What is ITAR? Why does it exist?
ITAR stands for International Traffic in Arms Regulations and controls the manufacture, export and import of defense related articles and services. ITAR is designed to safeguard U.S national policy, and through registration helps to monitor the import and more importantly the export of defense articles. The theory is that with the advanced technology that exists in the US, we do not want it to end up in foreign bad guy hands. ITAR goes well beyond firearms and ammo, it includes aircraft, ships, technical data and information technology as well as.
Who enforces it?
ITAR and what constitutes the export and import of defense-related articles and services on the United States Munitions List (USML) is interpreted and controlled by the Department of State, Directorate of Defense Trade Controls (DDTC). Physical enforcement that happens at borders and may be through the Department of Homeland Security, and Border Control.
What are the penalties for non compliance?
Penalties for non-compliance can be severe and should be taken seriously. Under the Arms Export Control Act (“AECA”), the following penalties may be assessed for violations of ITAR:
Civil penalties of Up to $500,000 per violation;
criminal fines for willful violations of up to $1 million and/or 20 years imprisonment;
debarment from participating directly or indirectly in the export of ITAR-controlled defense articles, technical data or defense services; and
denial of export privileges under the Export Administration Regulations (EAR).
Who does it cover? What activities qualify?
This is where the water starts to get murky and the internet explodes. As we are a firearms blog, we are going to restrict our view of ITAR to the context of the firearms industry. There are two standards that need to be met for an article to be covered by ITAR.
First it must be a type of article listed on the “Munitions list.” (https://www.pmddtc.state.gov/regulations_laws/documents/official_itar/ITAR_Part_121.pdf)
Secondly you must be engaged either in exporting, temporarily importing, or manufacturing that article (even if you are not intending to export it).
ITAR §122.1, says that “any person who engages in the United States in the business of either manufacturing or exporting or temporarily importing defense articles or furnishing defense services is required to register with DDTC. Manufacturers who do not engage in exporting must nevertheless register.” The DDTC says it uses the “normal contemporary definition of manufacturing.”
Additionally, nothing in this EO changes that U.S. distributors or people who export arms outside of the United States must still register. Furthermore, anyone who engages in “brokering” of arms deals or is a “foreign military sales freight forwarder” must still register for ITAR.
The recent executive order that the President has issued on ITAR makes it quite clear that even one instance of engaging in manufacturing of an item on the munitions list items will subject you to, and require you to register for ITAR, again, even if you never plan on exporting your product.
Who does it cover? Who doesn’t it cover? What activities qualify and don’t qualify?
ITAR does not cover most standard (simple) gunsmithing activities, and does not cover work performed on items that are not included on the munitions list.
So first things first you should do if you are engaged in any form of gunsmithing is take a look at the USML (https://www.pmddtc.state.gov/regulations_laws/documents/official_itar/ITAR_Part_121.pdf). If your activities do not implicate any of these items, then you don’t have to worry about ITAR.
What this means is that if the work performed by the manufacturer would constitute manufacturing under the definitions of ITAR- such as limiting the magazine capacity of a Remington 870 (work changing magazine capacity of firearms constitutes manufacturing under ITAR), but the weapon itself is not covered on the munitions list (sporting shotguns are specifically exempted from the USML), then no ITAR payment and registration is required.
In exploring what does and does not constitute manufacturing for ITAR purposes President Obama’s executive order has given us guidelines. Remember these guidelines determine what constitutes manufacturing. To be subject to the registration and payment requirement the manufacturing must be taking place on a “munitions list” weapon.
This first list of activities below contains things that are NOT considered manufacturing, and DO NOT require ITAR registry, even if the items being worked on were munitions list items. This list includes:
a) the occasional assembly of firearm parts and kits, that do not require cutting, drilling or machining for installation;
b) repairs involving drop in parts that do not require cutting, drilling, or machining;
c) repairs that do not improve the accuracy or other aspect of a firearm;
d) painting or otherwise cosmetically refinishing a firearm;
e) attachment to a completed firearm without drilling cutting or machining scopes, lights, slings or muzzle attachments to an already threaded barrel;
f) machining new dovetails or drilling and tapping new holes for the installation of sights which do not improve the capability of the firearm (scopes improve the capability of the shooter- not the firearm), or manual reloading of ammunition .50 caliber or less.
Doing any of the work described above, even on munitions list weapons, does not require ITAR registration or ITAR payment.
From the EO, we also get a list of processes that are considered manufacturing under ITAR, and DO require registration. These activities include:
a) any sort of special tooling or equipment upgrading in order to approve the capability of assembled or repaired firearms;
b) modifications to firearms that change round capacity;
c) production of firearm parts (including suppressors);
d) systemized production of ammunition, including automated reloading;
e) machining or cutting of firearms (including threading of muzzles);
f) re-chambering through machining, cutting or drilling; chambering, cutting or threading barrel blanks;
g) blueprinting firearms by machining the barrel.
The above list is most notable for the requirement for registration for someone who threads even just one barrel on a munitions list weapon!
What if I never intend to export but I am covered by it and my activities are, does that matter?
Unfortunately for manufactures that complete the type of manufacturing covered by ITAR on the type of material included on the munitions list, the intent to export or to never export is irrelevant. The law specifically provides that the payment and registration is required even if no exporting take place. ITAR §122.1 says “manufacturers who do not engage in exporting must nevertheless register.”