Industry News: Volume 2, Number 2
ATF Manufacturing and Marking Requirements Eased
On November 19, 2009, ATF released Ruling 2009-5 that relieves subcontractors from marking receivers and/or other restricted parts manufactured on behalf of another FFL, assuming all 7 conditions listed within the ruling are satisfied. Additional information regarding this ruling may be found online at: www.atf.gov/regulations-rulings/rulings/atf-rulings/atf-ruling-2009-5.pdf
CBC Ammunition Contracts with Nordic Police Forces
The ammunition brands Magtech and MEN, both part of the CBC Group, were awarded 9x19mm ammunition contracts with police forces from Nordic Countries, including Sweden, Denmark and Norway. Magtech was the winner of the tender for training ammunition and MEN won the competition for service rounds. Together, they are expected to deliver over 80 million rounds during the contracts’ period.
The Nordic countries traditionally purchase ammunition for their police forces in a unified manner. This tender is considered one of the largest and most important in Europe. With strict technical requirements and extensive testings, it is also one of the most difficult. “We are proud to succeed in this tender with two of our brands. Supplying ammunition to the Nordic countries was one of our main priorities, in line with our strategy to achieve a leadership position in the European Police market,” said Mr. Antonio Marcos Moraes Barros, President of CBC. Additional information may be found online at www.magtechammunition.com and www.elisenhuette.de.
DeYoung Takes Reins at ATK
Twenty-five year company veteran Mark DeYoung has been appointed president and CEO of Alliant Techsystems. DeYoung previously headed ATK’s Armament Systems group, where he led the group’s expansion from approximately $600 million of revenue in fiscal year 2003 to a projected $2.1 billion in fiscal year 2010.
Under his direction, Armament Systems has expanded into commercial ammunition, the tactical accessories market and international markets for non-standard ammunition and medium-caliber gun systems. “The board of directors reviewed a select group of outstanding and highly qualified internal and external candidates,” said Gen. Ron Fogleman, chairman of the board. “Mark emerged as the most qualified to lead the company. His breadth of experience across ATK’s core businesses, his strategic vision, results-driven leadership style and focus on delivering long-term shareholder value will position our company for continued success in the years to come.”
Ruger Expands Stock Repurchase to $10 Million
Sturm, Ruger & Co. (NYSE:RGR) announced that it has expanded its stock repurchase program from $4.7 million to $10 million. The company is now authorized to repurchase up to $10 million of its common stock from time to time in the open market or through privately negotiated transactions.
U.S. Firearm Sales and Manufacturing up 29%
According to the most recent Firearms and Ammunition Excise Tax Collection Report released by the U.S. Department of the Treasury, firearm and ammunition manufacturers report excise tax obligations to be more than $115.8 million in the third calendar quarter of 2009 – up 29 percent over the same time period reported in 2008. The increase follows a 52 percent increase in excise tax obligations from the previous quarter (2Q, 2009) and more than a year of record-high FBI background checks for firearm purchasers – another strong indicator of firearm sales. The report, which covers the time period of July 1 through Sept. 30, shows that $29.85 million was due in taxes for pistols and revolvers, $37.09 million for long guns and $48.89 million for ammunition. Compared to the same quarter in 2008, collections were up 50.2 percent for handguns, 33.4 percent for ammunition and 11.5 percent for long guns.
U.S. Gun Maker KBI/Charles Daly Closes Doors
Harrisburg, Pa.-based firearms manufacturer and importer KBI/Charles Daly is going out of business, President Michael B. Kassnar announced on the company’s Web site. “I wish to thank all of you that have supported our company, Charles Daly and all the other fine firearms that we have sold over the years. This spells the end of KBI, but I imagine it will certainly not mean the end of Charles Daly and CD Defense. Look for this excellent brand to resurface in the very near future,” Kassnar said.
India Gun Owners Mobilize ‘U.S. Style’ for Right to Bear Arms
Gun owners in India are “coming out of the shadows for the first time to mobilize, U.S.-style, against proposed new curbs on bearing arms,” the Washington Post reports. The recently formed National Association for Gun Rights India is lobbying against new gun controls that the government has proposed.
Premier Reticles Adopted by U.S. Marine Corps
Premier proudly announced that the United States Marine Corps adopted the Heritage 3-15×50 with Gen 2 mil-dot reticle as its new Scout Sniper Day Scope. “This acceptance, by arguably one of the world’s most storied and revered sniper organizations, speaks volumes to the quality and durability we have built into our products” said Premier Reticles’ president, Chris Thomas. “It only goes to show that when you focus your efforts on designing a product from the ground up with one purpose in mind, it can make all the difference” as this award comes after extensive and rigorous testing by the U.S. Marine Corps.
The Heritage 3-15×50 optical design features outstanding image quality across the entire field of view, superior color fidelity, sharpness and contrast ratio, a field of view that surpasses what is presently offered in comparable scopes, and excellent light transmission through the full visual spectrum. The combination of these superior optical features enhances accuracy and identification of targets with speed and clarity, making it ideally suited for the ongoing mission of today’s combat warrior.
Proposed Amendment to 22 CFR 125.4(b)(9), Export Exemptions for Technical Data
The U.S. Department of State is proposing to amend the International Traffic in Arms Regulations (ITAR) regarding an exemption for technical data, to clarify that the exemption covers technical data, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the United States.
The Department of State accepted comments on this proposed rule until January 25, 2010; a final rule is likely to be issued shortly. A full account of the Federal Register notice may be found online at: www.pmddtc.state.gov/FR/2009/74FR61292.pdf
Addition of a Sixth Exception to the 60-day Rule
On December 7, 2009, the Directorate of Defense Trade Controls (DDTC) announced in the Federal Register that it is adding a sixth exception to the 60-day processing time for export license applications. The new exemption would exempt approval of export licenses from the 60-day deadline “when a related export policy is under active review and pending final determination by the Department of State.” A full account of the Federal Register notice may be found online at: www.pmddtc.state.gov/FR/2009/74FR63497.pdf
The current five exemptions to the 60-day rule include the following situations:
1. Congressional notification is required. (i.e., the value of the export exceeds USD$1 Mil.)
2. Required Governmental assurances have not been received. (Typically applied to missile technology and cluster munitions.)
3. End-use checks have not been completed. (i.e., Blue Lantern background checks on foreign end users.)
4. The Department of Defense has not completed its review of the export application. (i.e., review of the sale of significant military equipment to foreign governments and/or foreign militaries.)
5. A Waiver of Restrictions is required. (i.e., a waiver to export goods or services to a proscribed country.)
Temporary Import Violations
DDTC reminds companies conducting import/export activity to properly account for temporary imports. A temporary import requires either a DSP-61 (Temporary Import License) or an exemption under 22 CFR 123.4. An issue arises when a foreign end user returns a defective defense article without first coordinating with the U.S. Party. In most cases, a DSP-61 is not applied for and the proper notations required under 22 CFR 123.4 may not be met.
In the event that this type of incident occurs, DDTC advises filing a voluntary disclosure detailing the incident, followed by the filing of a DSP-5 (Permanent Export License) application. When filing the DSP-5, a transmittal letter must be submitted with the DSP-5 application explaining the situation, the parties involved, and any measures taken to prevent a reoccurrence of the situation.
Presumably, the DSP-5 filing would trigger a $250 application fee against the applicant’s ITAR registration and renewal fee for the following year.
A copy of the notice may be found online: www.pmddtc.state.gov/licensing/documents/WebNotice_TemporaryImportViolations.doc
Electronics Submission of TAA and MLA Now Permitted
Submission of Technical Assistance Agreements and Manufacturing Licensing Agreements may now be submitted online via the D-Trade system. Clients who have submitted TAAs and MLAs in the past will recall submission of seven complete applications to DDTC for review. With electronic submissions, the need to make multiple copies is eliminated. Mandatory submission of all agreements via electronic means is anticipated to occur sometime in 2010. Additional guidelines on preparing and submitting agreements electronically may be found online at: www.pmddtc.state.gov/licensing/documents/PreparingElectronciAgreements-Guidelines.pdf. (Caution – the file is 3MB in size)
Guidance Released Regarding Freight Forwarders
The Commerce Department, Bureau of Industry and Security released guidance on use of freight forwarders. Of note, the guidance lays out the expectations of each party involved in the transaction. Exporters are ALWAYS responsible for knowing the parties involved in the transaction, to include the freight forwarders being utilized. The guidance may be found online at: http://www.bis.doc.gov/complianceandenforcement/freightforwarderguidance.htm
22 Arrested at SHOT for alleged violations of the Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act was signed into law by President Jimmy Carter on December 19, 1977, and amended in 1998 by the International Anti-Bribery Act of 1998. The anti-bribery provisions of the FCPA make it unlawful for a U.S. person to make a payment to a foreign official for the purpose of obtaining (or retaining) business with any person. Since 1998, the law also applies to foreign firms and persons who act in furtherance of a corrupt payment while in the United States.
The 22 are alleged to have paid a commission to a fictitious foreign official in exchange for preferential treatment in approving the import of defense articles. The official DOJ Press release is located at: http://www.justice.gov/opa/pr/2010/January/10-crm-048.html
Defacto U.S. Embargo on Niger
The Directorate of Defense Trade Controls (DDTC) announced that “although there is no current U.S. or UN arms embargo on Niger, the final decision of license applications for the export of U.S. Munitions List (USML) items to Niger received from this date or currently in the review process may be delayed. License applications will continue to be reviewed on a case-by-case basis, but approval should not be assumed. We encourage exporters to take the current situation into account and if applying for a new license to export or re-export USML items to Niger, that the license application provide detailed information on the end-use and end-user of the USML items.”
The notice can be found online at: http://www.pmddtc.state.gov/licensing/documents/CI_Niger.pdf
DDTC Updates the Firearm and Ammunition Export Guidelines
Directorate of Defense Trade Controls announced that it had updated its “Guidelines for the Permanent Export, Temporary Export and Temporary Import of Firearms and Ammunitions.” Although DDTC did not identify or explain the changes in the guidelines, the changes appear to be restricted to one paragraph marked in red on page seven. The paragraph reads: “Where the exporter uses an in-transit point (or points) in a country other than that of the ultimate destination, an authorization issued by the foreign government of the transit country authorizing the transit of the specified items must also accompany each application to export. Where items are temporarily imported into the U.S. for the purposes of transit or transshipment to other OAS countries, an Import Authorization, comprised of either a permit or a certificate issued by the foreign government authorizing the import of specified items, must accompany each application to import.”
The change appears to be an effort to conform to the requirement of Article IX(2) of the OAS Firearms Convention.
The other requirement, that an export license application for firearms that transit another country prior to the ultimate destination must be accompanied by a transit permit from the transiting country, appears to be a concession to the requirement of Article 10(2)(b) of the U.N. Firearms Protocol, which hasn’t been signed or ratified by the United States.
Criminal Liability for Failing to Register as Broker with DDTC
Virginia-based Taipan Enterprises Ltd. pleaded guilty to, and paid a $15,000 fine based upon allegations that it illegally engaged in arms-brokering without registering with, and obtaining export licenses from, the U.S. State Department.
The President of Taipan Enterprises, Ioannis Papathanassiou, apparently told U.S. customs agents that he was in Brazil selling farm equipment. An inspection of his luggage revealed product brochures from Agrale for military vehicles, which Papathanassiou allegedly falsely stated were for farming purposes. Mr. Papathanassiou also allegedly engaged in subsequent transactions that involved the attempted sale of night vision goggles, machine pistols, M4 rifles and gas grenades.
Of note, there was no indication that any sales of defense articles ever occurred. Instead, in each instance, Papathanassiou is alleged to have “attempted” to sell the items. The legal problem with this situation is that Papathanassiou was charged with violating Section 129, the section that regulates brokering.
Under section 129.2(a), a “broker” is defined as “any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee, commission, or other consideration.” If Papathanassiou did not complete any sales, there is no basis for criminal charges under Section 129.