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Jeff Grody

April 2021 EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

After a Year, Census Bureau Data Suggests the New Export Regulations for Firearm Products Haven’t Increased Exports

No one promised that moving export control over non-military firearms and ammunition from the State Department to the Commerce Department would lead to increased exports.

A year into the new regime, the U.S. Government data we analyze suggests that, in fact, they haven’t.

But maybe there is a story that isn’t reflected in the published data. In this issue, which completes our first year of publishing EasyExport Insights, we will, for the first time, examine proprietary data from within the EasyExport system. We see signs that a different story is beginning to emerge.

Published Macro Data Shows No Signs of Growth

Table 1 is a condensed version of the first table we include in every issue of EasyExport Insights.

April firearm export insights 1

Table 1 presents a 36-month backward look at all 22 of the product categories we follow, condensed into eight groupings.

The only grouping in which exports have grown significantly in the last three years is Spring, Air and Gas Guns, products that were unaffected by the change in export jurisdiction in March 2020.

In every other grouping except handguns, exports have gone up and down. Or just down. Even in the handgun category, when compared to Table 1, Table 2 shows that almost all the increase in handgun exports since the new regulations took effect in 2020 can be ascribed to one-time purchases of pistols by the governmental end users in Thailand.

Published Data for Individual Countries Do Not Show Growth Either

Like the global data, data at the individual country level show no clear signs that the new U.S. export regulations have generated an increase in exports of U.S. firearm products. The only country where there appears to be a connection between the new regulations and increased exports is Brazil.

We first noticed a possible connection between the new regulations and increased exports to Brazil in our December 2020 EasyExport Insights. In that issue, which included full-year 2020 statistics, we observed evidence of regulatory-related growth in three product categories: pistols, bolt action rifles, and ammunition for rifles and pistols.

Table 3 shows a continuation of this growth through April 2021.

In the December issue, we noted that the Commerce Department had reported that Brazil was the leading destination country for firearm-related exports. We also observed that Brazil President Bolsonaro’s liberalization of his country’s firearms laws was a likely contributor to growth. The combination of these factors led us to conclude that there was likely a causal correlation between the new U.S. export regulations and growth in exports to Brazil.

Four months later, it is hard to avoid the conclusion that the new U.S. regulations are a contributing factor to rising exports to Brazil. The growth in exports to Brazil is both real and significant in three important product categories. During the year that preceded the change in U.S. export regulations, the three product categories shown in Table 3 accounted for just under $3 million in U.S. exports.

During the two years since the new U.S. export regulations took effect, the same three categories grew 292%, from $2.9 million to $8.66 million. That’s a $5.7 million increase. The three product categories in Table 3 accounted for a quarter of exports to Brazil in the year before the new regulations came into effect. Now they are three quarters.

In addition, Brazil has become the fifth largest export destination for U.S. pistols and the 12th largest destination for exports of bolt action rifles. (See pages 7 and 11 of the April 2021 EasyExport Insights.)

We’re willing to conclude that the growth we see in Table 3 would have been lower without the transition of export control jurisdiction over sporting firearms and ammunition from the State Department to the Commerce Department.

EasyExport Data Suggests a Correlation Between the New Regulations and Increased Exports

Our own proprietary data supports the conclusion that the new U.S. export regulations are contributing to an increase in U.S. exports.

EasyExport is an automated export processing service that began operating in July 2021, but, while waiting for our software engineers to complete their work, we began processing export transactions in March 2020 using a manual version of EasyExport.

During the 15-month period from late March 2020 through June 2021, we processed more than 1,500 export shipments, ranging in value from $4.99 to $50,000. This included slightly fewer than 100 licensable, mostly commercial, shipments, and more than 1,400 non-licensable shipments. Licensable shipments went to 13 countries and non-licensable shipments were exported to 27 countries.

Although our sample size is small and not statistically significant, we see clear signs of an increase in small shipments ($500 or less) to countries other than Canada. This is an important category of shipments. These shipments include products that are now classified as EAR99 or 0A501.y, as well as products that are now classified as 0A501.c, .d, or .x.

Prior to the change in export jurisdiction from the State Department to the Commerce Department, nearly all the shipments in this category with a value over $100 would have required an ITAR export license (DSP-5) from the State Department. With the filing cost of the license being $250, it is highly unlikely that small shipments between $100 and $500 in value would have occurred.

Now they can occur. Under the new regulations, small shipments do not require a license unless the value exceeds $500, and, when a license is required, there is now no filing fee. Accordingly, we believe it is hard not to attribute growth in non-Canadian small shipments to the change in regulatory jurisdiction that occurred in March 2020.

We look at exports to countries other than Canada, by the way, because the non-licensable value limitation for Canada has not changed. It was $500 under the ITAR and remains $500 under the new regulations. Every other country has increased from $100 to $500.

Next month we will dive into some more observations derived from our own data.

View: EasyExport Insights April 2021
Download: EasyExport Insights April 2021.pdf

 

By Jeff Grody and Max Harrison

March 2021 EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

Large Sales to Governmental End Users Can Distort Statistics for Individual Countries

Last month, we looked at the difficulty analysts of U.S. export data encounter when trying to identify military exports. As discussed, data in certain categories, such as pistols, do not differentiate between civilian and military exports, making it hard to identify the military component.

The same shortcoming in the way data is collected makes it hard to identify the civilian component of exports in the categories that include both military and civilian exports. But it is easier to miss what is going on if you are looking for trends in exports for civilian purposes. The reason is that analysts of military exports know to look for “lumpy” statistics in individual categories like pistols and ammunition for rifles and handguns – disproportionate bulges in one year relative to the preceding and subsequent year.

Unlike analysts of military exports, who know to look at individual product categories, a casual reader of export statistics is more likely to look at bottom-line numbers. We’re all trained to look at the summary lines in documents, after all, to take in key information quickly. But be careful. Don’t jump to conclusions.

Take a look at Thailand, for example. A quick glance at the bottom line in Table 1 suggests a booming market for American firearms and related products.

March 2021 EasyExport Insights™ Monthly Analysis 1

Analysis of the detail, however, leads to different conclusions.

March 2021 EasyExport Insights™ Monthly Analysis 1

Table 2 highlights seven cells with aberrational statistics that totally distort the bottom line. What appeared at first glance to be a very promising trend isn’t a trend at all. In fact, the distortion is so significant during all three years we cover that it isn’t possible to speculate what “normalized” civilian exports to Thailand are without analyzing a longer period of time.

So, this month’s message is a simple one – never form conclusions based only on the bottom-line numbers in our reports. Always look for outlier numbers in the detail. When you spot them, the chances are good that they will change the conclusions you draw from the bottom line.

View: EasyExport Insights March 2021
Download: EasyExport Insights March 2021.pdf

 

Let’s (Try to) Look at Military Exports – EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

Our Behind the Numbers analyses tend to focus on the civilian side of the international market for American firearms and related products.

This month we will look at exports to military end users.

What does the data tell us about military exports?

– Exports of military rifles and rifle parts are substantial

Table 1 shows that U.S. companies have exported an average of more than $142 million of military rifles and parts annually over the last 36 months. That constitutes about 15% of total exports for the 22 product categories we track.

 

Table 1

– It is difficult to track military exports of several types of products.

U.S. Schedule B numbers, which are the source of the data we report, do not distinguish between military and non-military exports of certain product categories, most notably pistols, optics, and ammunition. See Table 2.

Table 2 illustrates that the inability to distinguish between civilian and military exports in these four product categories is a significant analytical problem. Together, these categories account for more than half of annual U.S. exports of firearms and related products. Not only is it impossible to quantify military exports of these products, but we can’t see the civilian component of this data, either.

military exports

Table 2

Table 3 drills down into one of the four product categories – pistols – and shows exports over the last 36 months to the top 15 destination countries. The second column from the left shows total exports of pistols during the 36-month period. The three columns to the right break that total into three 12-month periods.

military exports

Table 3

For most of the top 15 destination countries in Table 3, there are wild fluctuations in exports from one year to the next. Years in which exports dramatically exceed exports in the preceding or subsequent year are the telltale sign of a significant military (or sometimes police) component to that year’s exports.

Look, for instance, at exports of pistols to Thailand during the 12 months that ended on February 28, 2021. Exports were more than five times the value of exports in the preceding 12-month period.

Our reports show every month that, even in purely civilian categories, like rimfire rifles, exports fluctuate quite a bit from year to year. But not that much.

Significant international purchases of military hardware from the U.S. tend to be “lumpy”. A buyer will place a large contract and will then expect the products to last a while. Those purchases show up in our reports as big blips in one period relative to the surrounding periods.

Table 3 reveals that, for most of the top 15 destination countries, foreign military procurements of pistols accounted for a high proportion of U.S. exports.

Police procurements, it is worth noting, are also lumpy, but there are many more law enforcement buyers, each buying smaller quantities at different times. As a result, it is generally much harder to spot exports to law enforcement agencies than to military end users.

– Imperfect data can still be useful

Good data enables U.S. exporters to make informed decisions where and how to deploy sales and marketing resources. How can imperfect data be turned into useful information?

One way to use the information in Table 3 is simply to recognize that if you currently export pistols to the international civilian market that are or could be attractive to military (and law enforcement) end users, you should consider broadening the focus of your international sales and marketing activities.

If, on the other hand, your primary focus is the military market, here is another way to use the information in Table 3. Among the 15 countries covered in Table 3, the countries that have big “lumps” in one or more years can be identified as markets that are willing and able to buy U.S. pistols for military (or possibly police) purposes. Select those countries first for further investigation of potential opportunities for military or law enforcement sales. Much more analysis needs to be done, but a case can be made for targeting countries that have a history of buying U.S. guns and related products. Countries that have made significant purchases of U.S. firearm-related products recently are likely to do so again.

Our monthly reports track the top 25 destination countries for each product category we cover, so a look at this month’s report (page 7 of the February 2021 issue of EasyExport Insights) will show you exports of pistols to the next 10 countries after the 15 shown in Table 3.

If you were to do your own data analysis (see page 43 of the February 2021 issue of EasyExport Insights for where we get our data; it is available to you, too), it would be useful to look at historical exports over the last 10 years as opposed to our three-year lookback. Doing so would help you identify additional countries that have purchased American pistols for military end use.

The same approach can be used with some of the other product categories in Table 2. It does not work with ammunition, which, as a consumable product, has different purchasing patterns from equipment.

So, even imperfect data can yield useful knowledge.

 View: EasyExport Insights February 2021
 Download: EasyExport Insights February 2021.pdf

 

 

 

Booming Domestic Firearms Market Crushes Exports – EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

If you want to see what happens to U.S. exports of firearms and related products when the American domestic market is hot, look no further than the table below:

Booming Firearm Exports

The table compares the 12-month period that ended January 31, 2021, with the two prior 12-month periods. So, for the most part, it compares 2020 with 2019 and 2018.

The five categories shaded in yellow are completely or heavily military and should be ignored for purposes of this analysis.

Of the remaining 17 categories, which primarily include exports to the commercial market:

  • Exports decreased in 15 of 17 product categories.
  • Exports increased in only two: Autoloading centerfire rifles and spring, air and gas guns.
  • In the 15 categories in which exports decreased, exports dropped from $887 million in the 12 months ending January 31, 2019 to $762 million in the corresponding period ending January 31, 2021, a decline of more than 14%.
  • In the 7 categories with the largest declines, (see table below) exports dropped by 33% overall, from $441 million to $294 million:

Booming Firearm Exports

  • As noted in the table, the largest decline occurred in ammunition for rifles and pistols, where exports decreased by $63 million, from $224 million in the first period to $161 million in the most recent 12 months.

–  What can we learn from the numbers?

What stories do these numbers tell us . . . other than the obvious one that exports of nearly all U.S. firearm products dropped by a lot – 14% — from the 12 months ending January 2019 to the same period two years later.

Why did exports fall?

Is the global market for U.S. non-military firearms, ammunition and related products shrinking? Happily, it isn’t. If one looks back 10 to 20 years, one sees the same phenomenon. U.S. exports go up and down. Today, we’re looking at a snapshot of a down cycle.

Things will turn around. The U.S. firearms market will cool down, product and management attention will be return to the international market and exports will increase again. It has always been that way.

Why is that good enough? Maybe exports shouldn’t shrink when domestic demand rises. Maybe international sales should keep growing, but at a slower pace, when there is heavy U.S. demand.

But why?. . . . Maybe exports should grow just as much as domestic sales in a hot market . . . . Or more . . . . Why is it a given that exports of firearms, ammunition and related products drop when U.S. demand increases? There is no rule that international sales must be down when U.S. sales are up. No requirement that the international sales manager must lose when their domestic sales counterparts are fighting for allocations of the same scarce inventory. No mandate that the international market must be treated as sub-market of the U.S. market.

–  Opportunity

At EasyExport Insights, we scan the numbers every month looking for opportunity for American exporters.

This is what opportunity looks like. There is no reason to think that exports decreased because demand decreased. Demand didn’t drop. Supply did. The products people wanted to buy weren’t on the shelves to be bought. Therefore, the numbers tell us that more than $100 million in international demand for U.S. products in 2020 went unmet.

It’s very easy to respond to the above by saying, “Same as in the U.S.” But it isn’t the same. The U.S. demand that couldn’t be met in 2020 represented growth from the past. Manufacturers couldn’t keep up with growth. In the global market, in contrast, U.S. suppliers couldn’t even keep up with the demand that was already there. That’s our point.

And there’s the opportunity. The numbers tell us all that it is when U.S. demand is highest that the best opportunities exist for strategic positioning in the global market. Can your company build a long-term international strategy to capitalize on that dynamic?

 

How to Instruct Non-U.S. Firearm and Ammunition Resellers to Conduct Screens for Designated Narcotics Traffickers

How to Instruct Non-U.S. Firearm and Ammunition Resellers to Conduct Screens for Designated Narcotics Traffickers

By Firearm Export Sales No Comments

Did you know that if you export non-military rifles, handguns, parts or ammunition for resale in another country, your customer is required to screen its customers against the U.S. Specially Designated Nationals list?

It’s true. It says so right there in the conditions included in your approved Commerce Department export licenses:

The items authorized for export by this license may not be transferred to individuals identified on the Department of Treasury, Office of Foreign Assets Controls (OFAC) Specially Designated Nationals (SDN) List with the bracketed suffixes [SDNT] or [SDNTK]. The SDN List is available at: https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/sdn_data.aspx.

As an exporter, how should you convey this requirement (we’ll call it the “SDN Condition”) to your international dealers? Do you need to do more than inform them of the requirement?

In this post, we explain the SDN Condition and offer three simple recommendations for fulfilling your obligations. We also include a link to a free video we have prepared for firearm dealers in other countries. You can share it with them. The video gives step-by-step instructions and can display subtitles in any language.

 

 

What Does Your Export License Require You to Do?

When you export rifles, handguns, parts or ammunition for resale under a Department of Commerce export license, you are required to take reasonable steps to ensure that your international customers comply with the SDN Condition. The SDN Condition is included in every export license issued for 0A501 or 0A505 items. That means your customers who resell or otherwise transfer the firearms and ammunition you export to them must screen their customers against the SDN list.

Failure to inform your international dealer customers of this condition of your export license is a violation of the license and can lead to enforcement action under Part 764 of the Export Administration Regulations (EAR).

The need for non-U.S. dealers to comply with the SDN Condition underscores the importance of conducting due diligence before exporting firearms, parts, or ammunition to dealers in other countries. Among other reasons for conducting due diligence, you want to have a basis for expecting your dealers to comply with the requirement to screen their customers.

How Should You Tell Your Foreign Dealers They Must Conduct SDN Screens?

The export license condition does not specify the means for communicating the requirement. What should you do?

Section 758.6 of the EAR says that required destination control statements should be incorporated “as an integral part of the commercial invoice.” Exporters probably could not be faulted if they were to communicate the SDN Condition in the same place, immediately following the destination control statement, using a statement along the lines of the following:

These items may not be sold or transferred to individuals identified on the Department of Treasury, Office of Foreign Assets Controls (OFAC) Specially Designated Nationals (SDN) List with the bracketed suffixes [SDNT] or [SDNTK]. The SDN List is available at: https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/sdn_data.aspx.

There is no limit to how many ways you are permitted to draw your customers’ attention to the importance of conducting SDN screens. Feel free to use multiple means, such as inserting the requirement in dealer contracts, quotes, bids, pro forma invoices, your website or any other appropriate communication.

The test to apply is, “How can I most effectively tell my customer that it must conduct SDN screens?”

Is Additional Action Required?EasyExport now connects U.S. exporters to 82 Countries.

To be on the safe side, it is prudent to view communicating the requirement to conduct SDN screens as fulfilling only part of your obligation as an exporter.

Consider what else you can do to ensure that your foreign customers conduct SDN screens when required.

When you can, providing compliance training and resources to international customers is always a good idea. To make this easy for EasyExport™ customers, we have posted a training video for the dealers they sell to in other countries. You are welcome to use it, too. Viewers can use the Closed Caption feature to display auto-translated subtitles in any language. EasyExport does not process ammunition exports, so ammunition is not referenced in the video, but the instructions are equally applicable to foreign resellers of U.S.-origin 0A505 ammunition.

Keep Records

Record-keeping is always important in the compliance field. Take steps to ensure that you can show the U.S. Government the actions you took to ensure compliance by your customers with this license requirement. Also tell your customers to keep records so they can prove they did what they were supposed to do.

Worried you won’t do things right? If you sell firearms, parts, accessories, or optics online and want a safe and cost-effective way to export them without making mistakes, EasyExport probably can help. Schedule a call to learn more.

SCHEDULE A CALL

December 2020 EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

Have the New Export Regulations Increased Exports?

The most interesting question for the year just ended is whether the implementation of new export regulations for non-military rifles, handguns and related ammunition on March 9, 2020, has led to an increase in exports.

One objective of moving export control of non-military firearms and ammunition from the more restrictive jurisdiction of the State Department to the more exporter-friendly Commerce Department was to help U.S. firearm and ammunition exporters do better in the global market.

Exporters now can obtain export licenses that will cover several years of anticipated purchases by foreign end users, enabling them to ship orders more quickly. Also, after a learning curve, Commerce Department export licenses are much easier to prepare than State Department licenses. In addition, an expensive annual registration is no longer required as a prerequisite to exporting and export licenses are free.

Have these changes produced an increase in exports?

At this point, it’s too soon to tell, probably way too soon, but it isn’t too soon to start looking at the data.

Here is what we have observed so far.

–     Affected Product Categories

Of the 22 product categories we track, the 11 listed in the table below were significantly affected by the March 9, 2020 change in regulations. The products in these categories moved from the State Department to the Commerce Department.

These are the products to study if you want to investigate whether the new regulations have led to more exports:

Firearm Exports December 2020

–     Have Global Exports Increased?

On a year-over-year basis, it isn’t possible to spot growth in the worldwide market during 2020 relative to the two previous years. For the 11 product categories affected by the new regulations, look at the table below:

Worldwide Firearm Exports December 2020

The numbers go up and down from one year to the next with no discernible pattern, as has been the case historically.

This isn’t surprising. There were so many other significant forces at work in 2020. Some of them would have had a greater effect than the new regulations on exports of firearms and related products. For example, the booming U.S. domestic market diverted product and manufacturers’ attention from international sales. Separately, the pandemic made it harder and more expensive to ship, negatively impacting export trade. Also, Canada banned ARs during 2020.

With so many other forces buffeting the global market in 2020, and most of them continuing to do so today, the ability to single out the impact of the new regulations won’t come anytime soon.

Representatives of the Commerce Department presented a slide at an NSSF-sponsored webinar in January 2021 that showed steady month-over-month growth in exports of firearms between March and September 2020. That is a positive sign, but, just like annual statistics, exports vary from month to month for many reasons.

–     Growth May be Detectable in Exports to Certain Countries

It may be possible, however, to discern the impact of the new regulations by looking at specific markets.

At the same January 2021 webinar mentioned above, the Commerce Department representatives listed the leading destination countries in the export licenses they had processed for firearm items between March 9, 2020 and September 30, 2020.

Few would guess that Brazil topped the list. So, we added Brazil to our recurring monthly reports starting with this issue and took a look.

Sure enough, you can spot possible signs that the new regulations are causing trade to grow. Let’s examine the table below.

Firearm Exports to Brazil 2020
Is this evidence that the new regulations helped stimulate trade? Could be. As noted above, Brazil also was the leading destination country, at least during the period measured, for Commerce Department export licenses. It should not be discounted either, that exports to Brazil show sign of growth when the global market as a whole does not.Exports of pistols in 2020 were up 130% from 2018. Bolt action rifles was up by over 600% in the same period. Exports of ammunition for rifles and pistols grew more than 650%.

On the other hand, exports to Brazil of parts for non-military rifles and handguns were down by two-thirds from 2018 to 2020. See the highlighted row in the table above. Is this an anomaly, or is it evidence that the growth in other categories was a fluke?

Another factor is Brazilian President Jair Bolsonaro. Bolsonaro, who took office on January 1, 2019, liberalized Brazilian firearm ownership laws twice in 2019.

The combination of previously unmet demand in Brazil for American firearms, liberalization of Brazilian firearm ownership laws and exporter-friendly changes in U.S. regulations clearly has been good for U.S. export business to that country.

What share, if any, of the growth can be ascribed to the new regulations is anyone’s guess for now. Our guess, for what it’s worth, is that the new regulations are making a difference in the growth of lawful exports of firearms to Brazil.

Export-Sound-Suppressors-from-the-United-States

5 Things to Know About Exporting Firearm Sound Suppressors to Civilian End Users

By Firearm Export Sales No Comments

The Department of State relaxed export controls on sound suppressors (aka silencers) in July 2020. The Directorate of Defense Trade Controls (DDTC) now authorizes exports of sound suppressors to non-governmental end users, ending a policy that had been in place since 2002.

DDTC’s requirements for DSP-5 licenses for exports of suppressors to civilians are stringent, however.

Here are 5 things you need to know if you want to export suppressors to civilian end users:

  • Exports of sound suppressors continue to be governed by the ITAR
  • Foreign dealers cannot import suppressors for stock; a separate DSP-5 license is required for each end user
  • A purchase order, import permit, DSP-83, and end user statement are required with every license application
  • Consider using a DSP-73 to supply dealers with samples
  • Limit the number of suppressors you export to any one end user

Exports of Sound Suppressors Continue to be Governed by the ITAR

Sound suppressors did not move to the Commerce Department in March 2020 along with other non-military firearms, parts and accessories. Suppressors remain on the United States Munitions List (USML) and continue to be classified for export purposes as Category I (e) defense articles. As such, suppressors remain subject to the International Traffic in Arms Regulations (ITAR).

This means that it is expensive to export suppressors. Exporters of suppressors are required to register with DDTC — $2,250 per year. (Manufacturers of suppressors are required to register even if they don’t export.) Exporters also must pay a fee of $250 per license if they obtain more than 10 ITAR licenses in a one-year period.

In addition, the more complex ITAR licensing requirements apply to licenses to export suppressors. DSP-5’s are required for permanent exports and DSP-73’s for temporary exports. Unlike Commerce Department licenses, ITAR licenses require that supporting documents be attached (more on this below).

Dealers Cannot Buy Suppressors for Stock; A Separate DSP-5 is Required for Each End User

In a major blow to the commercial potential for sound suppressors overseas, DDTC will not approve DSP-5 licenses for shipments to dealers or distributors who want to stock suppressors for resale.

Dealers in other countries are permitted to aggregate orders from their customers, but they must collect a lot of paperwork for each resale. Every ultimate end user needs to fuss with the supporting documents that are required for DSP-5 licenses. 

Here’s how it works if a dealer places an order for one or more end users.

  • The purchase order from the dealer to the U.S. exporter must not only identify the suppressors being purchased but also the customers to whom each suppressor will be resold. So, all the suppressors ordered by the dealer must be pre-sold.
  • The dealer collects the supporting documents (see below) for each ultimate end user and sends them to the exporter.
  • The exporter applies for a separate DSP-5 for each ultimate end user.
  • When all the licenses have been approved, the exporter can ship.
  • From a DSP-5 standpoint, the dealer is a foreign consignee identified in Block 16, not an end user in Block 14. The dealer’s customer is the Block 14 end user.

Obviously, with these rules, selling to distributors outside the U.S. for resale to dealers is out of the question.

A Purchase Order, Import Permit, DSP-83 and End User Statement Are Required with Every License Application

Required supporting documents for each DSP-5 license include the following:

  • A purchase order on the letterhead of the purchaser. If a dealer is making the purchase, the purchase order should be issued on the dealer’s letterhead or the dealer’s normal PO form if it includes the dealer’s name and address. In addition to listing the items being purchased, the purchase order must identify by names the ultimate end user of each suppressor.
  • An import permit issued by the appropriate authority in the destination country. If a dealer is purchasing for multiple end users, there should be a separate import permit for each end user because there will be a separate license for each end user.
  • A properly completed Form DSP-83 is required. If a dealer is aggregating orders, there should be a separate DSP-83 for each end user. The dealer should sign Block 6. The end user signs Block 7. The exporter signs Block 9 last. Exporters should remember that they are not permitted to change the DSP-83 after it has been signed by any other signatory.
  • Each end user (not the dealer) should sign an end user statement stating the intended use of the suppressor.

Licenses to Provide Dealers with Samples and Display Items

DDTC will approve DSP-5s to supply foreign dealers with display and demonstration suppressors but these items cannot be resold. They can be used only for display and demonstration purposes.

EasyExport now connects U.S. exporters to 82 Countries. The required supporting documents are the same as those described above with the following changes:

  • The purchase order will list the dealer itself as the end user. The PO should state the intended use of the suppressors as display and demonstration items and should describe with specificity how they will be safely stored when not in use.
  • The import permit should be for the dealer’s own use.
  • The dealer should sign the DSP-83 in Block 7. Leave Block 6 blank.

Although DDTC will approve a DSP-5 for display and demonstration suppressors, consider using a DSP-73 temporary export license instead. The problem with using a DSP-5 is how to deal with the disposition of the suppressors when they are no longer usable for display and demonstration purposes. The DSP-5 does not allow the dealer to transfer them and if a DSP-5 was used to send them out in the first place, it will be hard to ship them back to the U.S. or to authorize a transfer in the foreign country. The exporter remains responsible for the ultimate disposition under ITAR Section 127.1(c) even when a DSP-5 has been used to permanently export the suppressor. So, if the dealer sells the suppressors at the end of their useful life without DDTC authorization, that’s the exporter’s problem.

You may make it easier to close the loop properly if you use a DSP-73 temporary export license, instead of a DSP-5. In most cases, a term of two or three years will cover the useful display and demo life of a suppressor, but you can select a term as long as four years. Before the license expires, the dealer should ship the items back to the U.S., where they can re-enter under the authority of the DSP-73. You can obtain a new DSP-73 to ship current-model replacements to the dealer.

Supporting documentation for a DSP-73 is a little different from the documents required for a DSP-5. Here is a quick summary:

  • In lieu of a purchase order, prepare a letter for the dealer to put onto its letterhead, sign and send back. The letter should request the suppressors (identify them specifically in separate line items, as would be the case with a PO, with description, number of units, unit price and extended price). In the letter, the dealer should state that the items will be used only for display and demonstration, won’t leave the dealer’s possession and will be stored safely and securely when not in use. Describe how and where they will be stored. For your own benefit, the details of when and at whose expense the suppressors will be returned to the exporter should be stated.
  • An import permit is required, just as would be the case with a DSP-5. 
  • A DSP-83 should be obtained, completed the same way as it would for a DSP-5 for an export to the dealer as ultimate end user.
  • The letter that takes the place of a purchase order will substitute for an end user statement.

Limit the number of suppressors you export to any one end user

The process described above is so complex and expensive as to tempt foreign purchasers to buy suppressors not only for themselves but also to resell or gift some to others. As noted above, even legitimate dealers legally authorized to sell suppressors are not permitted to buy U.S. suppressors for resale. Individual end users who claim to be buying for their own end use certainly are not allowed to resell.

But the temptation will exist. How can you manage this risk?

When foreign dealers aggregate orders for their customers there is a certain amount of built-in control. Dealers should be reluctant to help their customers do what the dealers themselves can’t do. On the other hand, you’re here and they are over there, so it is hard to be certain that the foreign parties are behaving as they are supposed to.

This points to the importance of thorough due diligence of every commercial party to whom you export a sound suppressor — both dealers and ultimate end users. If all you do is run a restricted party screen through the BIS Consolidated Search Engine or through a commercial restricted party screening product, ask yourself whether a clean search gives you all the comfort you need.

Suppose an end user wants to buy 10 suppressors. That seems like a very nice order indeed from a single individual. But if the ten consist of four units of one model and six of another, is that the type of purchase people would make for their own use? Asking questions of the purchaser will give you answers, sometimes good ones, but that takes time. 

It may be a good idea to impose a strict per-order and annual limit on the number of suppressors any one end user can buy. Good due diligence combined with self-imposed limits can help manage the risk that end users you don’t know and can’t see will buy your suppressors for resale rather than for their own use.

DDTC has said it will limit the number of suppressors it will approve for export to a single end user, as it should in light of its overall posture toward suppressors, but you are the one on the front line. Imposing your own limit would be consistent with your obligations as an exporter under ITAR Section 127.1(c).

Does this all sound too hard? If you make or sell sound suppressors in the United States, EasyExport can enable you to sell them from your online store directly to end users in 15 countries, with more countries to come. Schedule a call to learn more.

SCHEDULE A CALL

New Canadian Data (Part 2) EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

We reported in our last issue that the Census Bureau has made some important changes to the way it reports exports to Canada in response to our questions and suggestions.

Analysts now have new visibility into four categories:

  • Exports of revolvers have been broken out from pistols and are reported separately.
  • Exports of autoloading centerfire rifles have been broken out from other centerfire rifles.
  • Exports of pump action shotguns have been broken out from other shotguns.
  • Exports of military rifles used to be reported as exports of military shotguns. Now they are reported correctly, as military rifles.

These changes not only allow us to track exports in four categories, but also increase the precision of the categories that previously contained this data.

In our September issue, we identified seven product categories for which exports to Canada were not being reported. So, where are the exports in the three remaining categories?

New Canadian Data Part 2

–     Centerfire – Bolt Action – Single-Shot Rifles

We believe that exports of single-shot bolt action rifles are included in the published data for Rifles – Centerfire – Bolt Action – Other. The Census Bureau does not disclose its exact methodology for converting Canadian import data into U.S. export data, so this is our best guess.

–     Parts for Military Rifles / Parts for Military Shotguns

We have determined that exports to Canada of parts for military rifles and shotguns are lumped together with exports of parts for large guns and armament in Schedule B category 9305.91.3030.

We have no way to segregate rifle and shotgun parts from parts for heavier weapons. Therefore, we have decided not to report on these two categories for Canada. The data just isn’t there.

­–     Concluding Thoughts on Canada

It is ironic and disappointing that the largest export market is the one for which the published data falls short. We have annotated our Canada report (page 27) to address the three categories for which no data exists.

 View: EasyExport Insights November 2020
 Download: EasyExport Insights November 2020.pdf

Step-by-Step-Instructions-for-Selling-Firearms-Internationally-from-Your-Gun-Store

12-Step Instructions for Selling Firearms Internationally from Your Gun Store

By Firearm Export Sales No Comments

Have you had to turn down a sale to a visitor to your store from another country who wants to buy a gun to take home? Or a potential online sale to someone from another country who wants you to ship the gun?

New U.S. export regulations took effect in March. Now you can sell and ship sporting rifles, pistols and shotguns to citizens of other countries. There are no registration or license fees, but it is important to follow each step of the process carefully.

Follow these 12 steps to export most handguns, rifles and shotguns legally:

  • Ship the gun; In-store transfers are not possible
  • Know your customer
  • Obtain a copy of the buyer’s import permit
  • Price for the international market
  • Determine whether an export license is required
  • Obtain an export license if required
  • Pack with the correct shipping documents
  • Submit an AES filing if required
  • Use a carrier that can deliver to the destination country
  • Let your customer deal with duties, import taxes and other import charges
  • Enter the export sale in your bound book
  • Keep records for five years

1. Ship the Gun; In-Store Transfers Are Not Possible

With few exceptions, ATF regulations do not permit FFLs to transfer firearms in their stores to visitors from other countries. The exceptions are outlined in the instructions for Question 26.d on Form 4473. They do not include sales to foreign visitors to the U.S. who simply want to buy a gun to take home.

If an FFL ships a firearm to another country, however, ATF regulations do not govern the sale. Export regulations do. Export regulations do allow FFLs to ship a gun to a foreign visitor’s home address, as long as you jump through the right hoops, discussed below.

2. Know Your Customer

There is no NICS check for export sales. Instead, you are required to make sure the person you are exporting to is not a sanctioned party prohibited from receiving exports. You also want to satisfy yourself that there are no “red flags.”

Here’s how to do this for an export sale.

First, obtain the person’s passport, check to make sure it looks genuine and hasn’t expired, and make a copy of the photo and personal information pages for your records.

Second, chat with the customer. Try to confirm that the customer is on the up-and-up and that the firearm is legal in the customer’s country. Look for anything that doesn’t seem right. There are many possible red flags that should, if you spot them, cause you to decline to make the sale. One would be an evasive customer who doesn’t want to provide any information. Another would be a customer who knows very little about firearms, especially if that customer wants to buy more than one. The U.S. Commerce Department has posted a long list of other possible red flags. If you are not comfortable that the buyer and the intended use of the gun are legitimate, don’t complete the sale.

Next, visit the export.gov Consolidated Screening List to screen the person’s name against lists of sanctioned persons. You can do this when you leave the room to photocopy the passport. Input the person’s name in the second block, turn “Fuzzy Name” on, leave the Address and Sources fields empty, and select the person’s country of residence and, if different, the country of citizenship (both countries of citizenship in the case of dual citizenship). Then click on Search. If you see “No result” to the left of the Search button, the name has been cleared. In the rare case where a name is returned after you click Search, you would be wise to decline the sale unless you can clearly determine that the name returned is not your customer.

Use the “print screen” feature on your computer to keep a copy of your search, both the completed search form and the “No result” that came back when you clicked Search. Keep the copy of the search with your copy of the person’s passport and the other records of the transaction (see below).

3. Obtain a Copy of the Buyer’s Import Permit

You should obtain a copy of the customer’s import permit for the gun before you ship it. If the customer is in your store, they most likely will need to return home, obtain the import permit and email a copy to you.

A dealer’s license or individual’s firearms permit in the home country is not an import permit. Import permits clearly state that they authorize imports of firearms and almost always specifically identify the firearm(s). If English is not an official language in the customer’s home country, request a translation together with a copy of the import permit in the original language.

Look at the import permit when you receive it. Does it look like an official government-issued document? Check the issuance and expiration dates to confirm that the permit is in effect. Confirm that the name of the importer on the permit corresponds with the name on the passport you copied. (If the customer is a dealer, ask the customer to provide a copy of the dealer’s license. The name on the dealer’s license should correspond with the name on the import permit.)

4. Price for the International Market

It is customary for exporters of firearms to be paid in full before they ship. Many take a 50% deposit with the order and collect the balance, plus shipping cost, before shipment, but after the export license and import permit have been obtained.

There are extra costs associated with exports. It is totally “market” to pass them along to the customer in the price or by adding them to the invoice. In addition to shipping, it is appropriate to add a service charge as compensation for the extra work, such as obtaining an export license. Anything in the range of $100 to $250, on top of shipping, would be in line with what other exporters charge.

That said, there is a silver lining when you export a firearm. FET is not collected on export sales so you can keep that portion of your price. You may decide to let the FET savings substitute for the service charge recommended above.

5. Determine Whether an Export License is Required

You will need to obtain an export license from the Department of Commerce, Bureau of Industry and Security (BIS) if the gun is a rifle, handgun or combination gun. Shotguns with barrel lengths of 18 inches or more can be shipped to 30 countries without a license. You can find a list of the 30 countries at the end of this blog post. Note that Canada is not one of the 30 countries; if you ship a firearm to Canada, will you need an export license.

You can use the following table to determine whether an export firearm license is required for the firearms specifically listed in the table. The table also includes information you will need for the export license (if required), AES filing and shipping labels (discussed below):

Type of Firearm*

Export Classification (ECCN)

Export License Required?

Schedule B No.

Handguns

 

 

 

       Pistols – Semi-auto

0A501.a

Yes

9302.00.0040

       Pistols – Other pistols

0A501.a

Yes

9302.00.0090

       Revolvers

0A501.a

Yes

9302.00.0020

Sporting Rifles

 

 

 

       Centerfire – Autoloading

0A501.a

Yes

9303.30.7010

       Centerfire – Bolt Action – Single-Shot

0A501.a

Yes

9303.30.7012

       Centerfire – Bolt Action – Other

0A501.a

Yes

9303.30.7017

       Centerfire – Other

0A501.a

Yes

9303.30.7025

       Rimfire

0A501.a

Yes

9303.30.7030

Sporting Shotguns (Barrel length ≥ 18”)

 

 

 

       Shotguns – Pump Action

0A502

All but 30 countries

9303.20.0030

       Shotguns — Other

0A502

All but 30 countries

9303.20.0035

       Combination Rifle-Shotguns

0A501.a

Yes

9303.20.0080

* List above does not include the items below. They all can be exported but the mechanics are outside the scope of this post:

  • Any type of firearm not specifically listed
  • Automatic firearms or firearms that shoot caseless ammunition
  • Firearms with caliber greater than .50
  • NFA firearms
  • Black powder or antique firearms
  • Magazines with over 50-round capacity
  • Blank-firing guns
  • Spare parts, scopes extra magazines not boxed with the firearms, sound suppressors
  • Ammunition

6. Obtain an Export License if Required

Export licenses authorize a specific transaction or group of transactions between one exporter and one purchaser. If you do multiple exports that require licenses, you will need separate licenses for each customer.

If the table above says an export license is required, this is how to go about obtaining one.

Start by registering with SNAP-R, the portal for submitting export license applications to BIS. Registration is free. Just follow the instructions here.

After your registration is complete, log in to your SNAP-R account. Login will take you to a screen that says “Welcome to SNAP-R.” In the menu on the left side, click on “Create Work Item.”

At the “Create Work Item” screen, make sure that the dropdown menu says, “Export License Application.” Then insert a reference number you want to use for this license (you can choose any reference number you want) and click Create. That takes you to the license application. Instructions are embedded in the form, but you might want to watch this excellent 7-minute BIS training video for guidance on completing and submitting your export license.

After submission, you will receive an email confirming receipt of the license application.

You will be notified of the approval of your export license by email. Allow up to 30 days from the time you submit the license, but it is unlikely to take that long. You can check on the status here.

If you have questions, you will probably find the answer at SNAP-R Online Help for Exporters. If you can’t find the answer, you will find a phone number for the SNAP-R Help Desk on that page. Additional BIS user resources are located at the BIS Home Page.

7. Pack with the Correct Shipping Documents

After the export license has been approved, or in the case of shotguns that do not require an export license, the next step is to pack the box.

When packing, be sure to pack the correct item. Do not include extra parts, magazines or optics.

You are required to include certain documents when shipping firearms internationally. You will find detailed instructions here.

EasyExport now connects U.S. exporters to 82 Countries. 8. Submit an AES Filing if Required

If you use USPS or another courier service to ship your gun (as opposed to a commercial freight forwarder), you will need to submit an AES filing prior to shipment. After you submit the AES filing, you will receive an Internal Transaction Number (ITN).

You will need to create a free ACE Exporter Account first. Do that here. After you obtain your account ID and password, click here and follow the instructions to obtain an ITN.

Additional information on submitting AES filings can be found here. A user guide with easy step-by-step instructions can be found here.

If you use a commercial freight forwarder to ship (see below), confirm that the freight forwarder will complete the AES filing on your behalf.

9. Use a Carrier that Can Deliver to the Destination Country

The United States Postal Service (USPS) will accept firearms for delivery to certain countries, including Canada. Click here to check on shipping restrictions that apply to shipments to your customer’s country.

If USPS will not accept your shipment, you can check with the big-name couriers. Historically, they were reluctant to carry firearms, but since the change in export regulations earlier this year, there have been reports that in some cases, past policies may be undergoing changes.

As a last resort, you can use a commercial freight forwarder to arrange the shipment for you. This will work but is considerably more expensive than USPS or private couriers.

Use the table above for the ECCN (export classification) and Schedule B number. If the shipping label asks for the “HS Code,” use the first six digits of the Schedule B number.

10. Let Your Customer Deal with Duties, Taxes and Other Import Charges

Duties, taxes and other import charges imposed by the destination country on the shipment are for your customer to address. They will be collected by the customer’s government after the goods arrive in the destination country.

11. Enter the Export Sale in Your Bound Book

Don’t forget to record the disposition of the firearm in your bound book. Record it as an export sale and enter the name and address of the customer. If you were required to obtain an export license, attach a copy to the record in your bound book.

12. Keep Records for Five Years

Keep a copy of every document or record mentioned or referred to in this article for at least five years from the date you ship. Also keep a copy of the delivery receipt and purchase order or sales order. Keep all the copies together in one folder (except for the bound book).

13. You’re an Exporter!

Congratulations! You’re an exporter.

It will be easier the second time.

Does this sound too hard? If you think you can sell 25 or more firearms or scopes a month from your website to customers outside the United States, EasyExport™ may be the right solution for you. Click here now to learn more and schedule a call.

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New Canadian Data (Part 1) EasyExport Insights™ Monthly Analysis

By EasyExport Insights™ No Comments

We are pleased to report that the Census Bureau has made some important changes to the way it reports exports to Canada in response to our questions and suggestions.

–     Revolvers

Exports of revolvers from the United States to Canada were reported for the first time in the October statistics. For the month of October, we see that exports of revolvers to Canada totaled $278,673, as compared with pistol exports of $130,724 (page 27). Looking at the leading export markets for revolvers (page 6), Canada was the leading export destination for U.S. revolvers in October. Our top-25 destination reports rank markets on the basis of 36-month statistics, so it will take a few months for Canada to rise to the top of that report.

We have not been able to confirm that revolvers were previously lumped into the stats for pistols, but that is likely the case. Therefore, those who track exports of pistols to Canada are likely to see what looks like a significant decline in pistol exports to Canada, but which is merely the result of more accurate data for revolvers.

–     Autoloading Centerfire Rifles

Autoloading centerfire rifles is another category for which data is newly available. This month’s report (page 27) shows exports of $348,703 to Canada in October versus zero in all previous months. Even though this amount exceeds the value exported to any other country in October, it is not quite enough to put Canada in the top 25 export destinations in our table on page 7, which ranks markets based on 36-month totals.

It appears that this category was previously reported as “Other Centerfire Rifles.”

–     Pump Action Shotguns

Exports of pump action shotguns to Canada totaled $380,600 in October, the first month for which statistics for this category have been available (page 27). This amount exceeds the total exported to the 24 other top-25 destinations (page 12) but it will take another month or two for Canada to rise to the top of that report.

­–     Remaining Questions

Behind the Numbers will look at Canada again in January. Several categories for which no data to Canada has been reported in the past are unchanged. These mostly include military products.

In addition, we want to take a final look at Canada in January, after the November stats have been published, to see what other insights can be gleaned that should affect the way you interpret the Canadian data in our reports.

 View: EasyExport Insights October 2020
 Download: EasyExport Insights October 2020.pdf

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