BIS Has Been Stalling New Firearm Export Licenses for Months

Applications for new export licenses to send certain firearms, components and ammunition to Peru, Ecuador and Guatemala have been placed on indefinite hold for about the last three months, industry officials and lawyers said in interviews, with no formal announcement from the agency’s Bureau of Industry and Security. And while former BIS officials said the agency frequently places holds on some license applications as a way to navigate difficult export policy decisions, at least one said they couldn't recall a similar instance where BIS appeared to impose an indefinite, blanket policy for just a few countries without explanation.

“Has any of this ever been done before for anything else on the Commerce Control List?” said Johanna Reeves, a trade lawyer who specializes in firearms regulations. “The answer is a very loud no. Never. Ever.”

The lack of public information about the indefinite hold on export licenses for just three countries further complicates the regulatory landscape for gun manufacturers, distributors and retailers, who are already coming to terms with the quiet announcement last month of a 90-day suspension of new licenses for dozens of other countries. And it could spark additional backlash against BIS, which is already facing criticism after that decision caught exporters and lawmakers off guard (see 2310300043).

A BIS spokesperson declined to comment.

In October, the agency announced it would halt new export licenses for certain firearms, components and ammunition for non-government end-users worldwide for 90 days as it determines whether to make a permanent change (see 2310270068). The news of the suspension -- which doesn't apply to Ukraine, Israel or any nation listed in Country Group A:1 of the Export Administration Regulations -- mostly spread through the industry only after a BIS licensing officer emailed certain exporters and the agency briefed some congressional staff.

But in August, the agency had already imposed a nearly identical indefinite suspension on Peru and Ecuador, Reeves said. Soon after, she said, the agency extended the policy to Guatemala.

The National Shooting Sports Foundation, which represents U.S. firearm manufacturers and distributors, was “aware” the U.S. hadn't been approving new licenses to those three countries but didn’t “receive any formal communication from BIS on this topic,” said Larry Keane, the foundation’s senior vice president for government and public affairs. The group has requested a meeting with BIS Undersecretary Alan Estevez, Keane said, and is working to “ascertain the economic impact” of the restrictions. He said the companies his foundation represents also were not warned before the broader October decision was made.

Reeves, who said she heard about the informal policy for Peru, Ecuador and Guatemala from a Commerce Department official last month, said there “was no publication of this anywhere,” even as exporters continued to submit applications to the agency. By implementing the new policy, she added, the agency has essentially issued a “policy of denial without ever getting to the point of issuing a denial.”

The Peruvian, Ecuadorian and Guatemalan embassies in Washington didn't respond to requests for comment.

Reeves also questioned whether BIS, without prior notice, would put in place a similar unannounced, blanket policy for multiple countries -- or even a 90-day suspension of new export licenses -- for other sensitive items with national security implications, such as semiconductors.

“Look at all the public notice and the fanfare surrounding controls for semiconductors,” Reeves said, referencing the Oct. 7, 2022, controls on chip exports to China and the updated restrictions released last month (see 2310170055). “But this is just totally quiet.”

BIS has taken similar steps for other types of exports, said Kevin Wolf, who was the agency’s assistant secretary for export administration before leaving in 2017. He noted that BIS has placed indefinite holds on new licenses to China’s Semiconductor Manufacturing International Corp. and Huawei.

“When we were trying to think through a difficult policy issue, we would just let things sit for a while,” said Wolf, now a trade lawyer with Akin Gump. “So that kind of hold without action is not unusual.”

Although a 1995 executive order set time limits under which BIS must adjudicate licenses, Wolf said that clock stops as long as BIS is “still gathering more information” about an export. “It's in the executive order, it’s in the regulations, but BIS has not abided by that obligation for years,” he said.

Even so, Wolf said he couldn’t recall a situation similar to the 90-day suspension BIS announced in October. “A pause in all licenses is indeed novel,” he said. “I am not aware of this technique ever being used in the past."

William Reinsch, who worked for BIS during the Bill Clinton administration, also said indefinite license holds “happened all the time,” especially if there was disagreement within the administration over a particular export decision. Reinsch, the Scholl Chair in International Business for the Center for Strategic and International Studies, said the agency used the tactic for more “sensitive” export issues where “nobody wanted to make a decision.”

“And so the answer was -- it’s not something to be proud of -- but the answer was not to make a decision,” he said.

Reinsch added that the particular strategy was only used “case by case,” and it wasn’t a “policy as much as it was sort of a management failure.”

“I can't think of a case where we had an informal, unannounced policy of denial for specific countries or to specific end users,” he said.

The formal October decision already has drawn the ire of several lawmakers on Capitol Hill, some of whom have called on BIS to reverse the policy. Some House Republicans, in a letter to Commerce and BIS this month, called the suspension “unprecedented,” adding that “broad mandates, no comment period, few details, and the massive caveat that BIS retains the authority to do virtually anything else it deems appropriate are not characteristics of a democratic republic.”

In a separate letter signed by all but three Republican senators, lawmakers said they have “significant concerns about the justifications for and ramifications of this pause,” adding that it puts American commercial and economic interests “at stake.” They said the National Shooting Sports Foundation expects the suspension to result in a “direct cost of at least $89 million” to the firearms industry “and at least $238 million annually should the pause become permanent.”

The lawmakers urged BIS to end the pause, saying it’s causing foreign buyers of U.S. guns, gun parts and ammunition to find other suppliers. “Refusing to issue these licenses will create a vacuum in the market,” they said, “one that may be filled by the very actors BIS is trying to thwart.”

Trade lawyer Reeves said she recently spoke to a Peruvian company that has struggled to secure the U.S. shipments it needs. But that company “can get firearms from other countries with no restrictions,” Reeves said.

“So what's going to happen?” she posited. “They're going to get firearms from other countries.”