ITAR is a set of regulations on gun manufacturers and exporters set by the State Department. Do they apply to your FFL business?
Your business is growing. Retail sales are up and you think maybe it’s time to expand your services. Perhaps you’ll push more gunsmithing, or maybe manufacture some of your own pieces.
When it comes to manufacturing, you should pause. Now you’re in the territory of ITAR.
When it comes to manufacturing, you should pause. Now you’re in the territory of ITAR.
The International Traffic in Arms Regulations (ITAR) are a group of federal regulations that apply to any company in the United States that manufactures or exports firearms or ammunition. It applies whether the items are sold domestically or internationally.
ITAR come from the Arms Export and Control Act of 1976. They give the President and Congress authority of any export and brokering of weapons, defense services, and defense data that take place in the United State or by a U.S. entity.
The regulations prevent the transfer of weapons to objectionable persons, countries, or groups. Manufacturers and exporters are required to know exactly who they are selling to, especially when making sales outside the country.
Essentially, the government wanted a way to protect national security and our international interests by limiting foreigners’ ability to purchase American weapons. Imagine if our enemies could simply buy their weapons from American companies and use them against us. That would be a poor recipe.
Who enforces ITAR?
Traditionally, ITAR is enforced by the Directorate of the Defense Trade Controls in the State Department. They oversee the export of all defense weapons (firearms, ammunition, military equipment, etc.), defense services (consulting, hired security, etc.) and defense data. They also control imports, but only temporarily.
DDTC works with other departments as well. They help the Defense Department process export licenses. They consult for the Justice Department in regards to criminal activity. They administer trade regulations with the U.S. Customs and Border Protection. They also work with the intelligence agencies to identify and track unauthorized transfers.
Does ITAR ever change?
The challenge manufacturers face with ITAR is that many of the terms within the regulations are left intentionally vague. No one is entirely sure what “defense article” or “defense data” mean. Defining these terms tends to fall to the enforcers at the DDTC. For all intents and purposes, ITAR regulates the sale, export, brokering, and temporary import of all weapons.
DDTC updates ITAR regulations occasionally to account for changes in the global security climate. For instance, when the terrorist organization ISIS became a threat, they were added to the list of denied parties. As the global landscape changes, denied parties are added and removed from the list.
The regulations are also adjusted for technological improvements. This ensures that new weapons that are developed by defense contractors aren’t sold without the government being aware.
Furthermore, the regulations have to be tweaked every so often when U.S. foreign policies change. This doesn’t happen that often (a majority of foreign policy never changes), but it might when a new President takes office or there’s a major international shake-up.
What are the common ITAR violations?
If you manufacture firearms, ammunition, or components in any way, you are subject to ITAR. The regulations are complex. Violating them can be easy and penalties are serious. Here are the most common ITAR violations manufacturers make.
1. Failure to Register with the State Department
Every firearms, ammunitions, or firearms component manufacturer needs to register with the DDTC. You have to register whether you intend to export your products or not. If you plan to export anything, you have to get approval from the DDTC first.
2. Transferring/Disclosing Technical Data
If you manufacture, design, or service firearms (including ammunition and components), you probably have technical data that is controlled by ITAR. It’s tough to say exactly what “technical data” means, but based on how the term has been enforced in the past, it refers to information used to manufacture, design, test, or repair firearms, ammunition, or related components.
In order to disclose or transfer this type of information to anyone, you need a license granted by the DDTC. Even if you have a license, identifying which information is considered “technical data” is your burden.
3. Failure to Identify Other Parties in a Transaction
If you manufacture firearms, the State Department holds you accountable for understanding to whom they sell products. No party in the transaction may be a denied person/entity. Even if the person isn’t denied, you can’t sell to someone if you suspect they may use the weapons against the United States, U.S citizens, or our allies.
It’s your job to make sure the people you deal with are not prohibited from ITAR-controlled transactions. Failure to protect yourself can result in harsh government sanctions.
4. Errors or Omissions in Documents
When it comes to firearms, there’s always more paperwork. Making an error or omission on export documents, Customs documents, license applications, destination declarations, foreign important certificates, registration applications, delivery verifications, purchase orders, bills-of-lading, or shipping documents can create big problems for your business. Big manufacturers employ document checkers whose job is solely to make sure paperwork is accurate and thorough.
5. Exporting Technical Data without a License
You need prior approval from the DDTC before you can send technical information to any foreign party. This means you couldn’t, for instance, send schematics or drawings to someone to receive a quote, or consult on the manufacture of a particular item unless you have a license. You can’t even have a discussion over the phone without a license. These types of violations are often performed by employees who don’t understand the strictness of the rule.
Does ITAR apply to you?
A majority of FFL dealers have a type 1 license. In this case, ITAR does not apply to you. If you have or intend to obtain your FFL types 6, 7, 8, 10, or 11, these regulations apply to you, even if you don’t export.
Here’s the passage that explains it:
“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. For the purpose of this subchapter, engaging in the business of manufacturing or exporting defense articles or furnishing defense services requires only one occasion of manufacturing or exporting a defense article or furnishing a defense service. Manufacturers who do not engage in exporting must nevertheless register.”
That emphasis is mine. In the past, there was a weird rumor going around that you could manufacture 50 items per year without registering with the State Department. This is demonstrably false.
If ITAR applies to you, you’ll have to pay the yearly DDTC fee. It’s $2,250 per year, which is pretty steep. If you plan to manufacture anything, make sure it creates a profit of more than $2,250/year to account for the licensing cost.
It’s important that you understand the difference between gunsmithing and manufacturing. Gunsmithing does not require a DDTC license, but manufacturing does.
Gunsmithing is when you receive firearms, ammunition, or components from a customer for repair, modification, embellishment, or refurbishing, and then return the items to the customer.
Manufacturing is when you make firearms, ammunition, or components for sale. For instance, if you purchased rifles and extra components from a dealer or manufacturer and then put them together yourself to create an AR-style rifle, that’s considered manufacturing. Modifying a firearm cosmetically (like adding paint or engravings) is not manufacturing.
Make sure you keep accurate records so your gunsmithing isn’t confused with manufacturing.
Final Thoughts
I can’t tell you if ITAR applies to your specific business, but violations can be uncovered during your ATF inspection. It’s important to make yourself familiar with the set of regulations, even if you don’t sell products outside of the United States. The penalties for non-compliance can be steep, so make sure you follow the rules.
If you have any questions, give us a tweet.