The Trump administration is expected soon to enact a new regulation that could give the flagging U.S. gun industry an economic boost potentially worth millions of dollars, TYT has learned.
After years of sky-high sales—driven by fears that Barack Obama would impose drastic gun control measures—gun manufacturers have experienced declining domestic demand since the election of Donald Trump. The pending regulatory rule, which would transfer control of firearm exports from the State Department to the Commerce Department, could allow manufacturers to gain entry into foreign markets—a longstanding desire of the gun lobby. Trump has already loosened a range of domestic Obama-era restrictions on domestic gun transactions; this could be his administration’s first foray into international sales.
The switch could be worth tens of millions of dollars to the U.S. gun industry, one industry analyst told TYT, and could set the stage for manufacturers to provide weapons to foreign police forces.
Kevin Wolf, a former Commerce Department official who originally drafted the rule during the Obama Administration, told TYT he expects the rule to be enacted within the next two months. Wolf now works as a legal advisor for the National Shooting Sports Foundation (NSSF), a gun industry trade group which has advocated for the change. He acknowledged to TYT that the rule’s implementation could result in increased sales for the gun industry.
Wolf told TYT that the rule was originally set to go into effect during the last days of the Obama Administration. He said he delayed signing off on it after the Sandy Hook school shooting.
Trump Looks To Finish Obama-era Process
The rule change was originally part of an eight-year effort during the Obama Administration called the Export Control Reform initiative, to restructure the country’s arms export regimen. The Obama administration instituted a host of reforms granting the business-friendly Commerce Department a greater role in overseeing arms exports, with an eye toward creating new market opportunities for U.S. manufacturers. The State Department’s role was greatly diminished, and tens of thousands of export items were moved from the State Department’s jurisdiction to the Commerce Department.
The transfer of commercial guns, ammunition, and related accessories was supposed to have been the final phase of the reform initiative. The U.S. gun lobby had long championed the move. The NSSF, for instance, argued that State Department control of commercial firearms exports inhibited U.S. gun manufacturers’ ability to access foreign markets, and pointed to a $2,250 annual registration fee as “exorbitant.” (Manufacturers also must pay the State Department a $250 licensing fee for every product they export, while the Commerce Department is barred by statute from imposing licensing or registration fees.)
Members of Congress condemned the State Department for what Rep. Steve Scalise (R-La.) described as “a hostile stance toward gun owners and the Second Amendment.” In 2016, Scalise introduced a House bill that would transfer authority over gun exports to the Commerce Department, so that the gun industry could “be regulated like any other commercial business.” The State Department under Obama supported this transfer, and publicly committed to instituting it by the end of 2016.
But the implementation was delayed for years, according to Wolf. Wolf drafted the original language of the transfer during his tenure as Assistant Secretary of Commerce for Export Administration. Now a partner at Akin Gump, one of the most powerful lobbying firms in Washington, Wolf has been hired by the NSSF—the same group which pushed for the regulatory change—to provide legal advice.
In an interview with TYT, Wolf, an avowed liberal Democrat, staunchly defended the propriety of the regulatory shift. “As one of the fathers of this rule, I hope that it’s characterized correctly, and not caught up by the larger emotional wind,” he said. Wolf says that he has heard from people currently in government that the Trump administration’s rule is virtually identical to the one Wolf drafted, a copy of which he left behind during the transition period.
By Wolf’s telling, he had planned to formally sign off on the rule in December 2012—within mere days, it turned out, of the Sandy Hook school massacre. “And then when [the shooting] happened, I didn’t sign it,” Wolf said. “So it was that close.”
“It was sort of obvious,” he added, “now is not the right time to do or say something involving guns.”
Focused on completing other aspects of the Export Control Reform initiative, Wolf put the gun issue on the backburner after calculating that the political environment was inopportune. Members of Congress and sympathetic advocacy organizations such as the Heritage Foundation complained about the delay. Now, the Trump administration is poised to finish what Wolf started.
Bureaucratic Housekeeping Or An Economic Boost?
Wolf insists that streamlining the bureaucracy—not enriching gun manufacturers—was his motivation for championing the regulatory change. “The inefficiency that’s baked into the system—that’s taking away from the government’s ability to focus on other transactions of greater concern,” Wolf said of his thinking at the time. “It was all about the efficient operation of an export system, period. It had nothing to do with trying to take into account any other economic or other variables. That simply was not a factor in our consideration.”
But the economic incentives for the NSSF are abundant. For instance, the organization lobbied in favor of President Trump’s March 2017 nomination of Mira Ricardel to be Under Secretary of Commerce for Export Administration. After Ricardel was confirmed in August, NSSF vice president Larry Keane celebrated this as a win for the gun industry: “Our manufacturers will create jobs to fulfill large orders to our allies—benefitting communities across the United States,” Keane wrote.
Three weeks after Ricardel took office, Reuters reported that the Trump administration was preparing to transfer control of gun exports to the Commerce Department—at which point stock prices of top gun manufacturers spiked. (Ricardel was later named Deputy National Security Advisor by John Bolton in April 2018).
Congressional Backing
In May 2017, a group of 29 senators wrote a letter to then Secretary of State Rex Tillerson and Secretary of Commerce Wilbur Ross reaffirming their support for the completion of the final phase of the Export Reform Initiative, which includes commercial firearms and ammunitions. Democrats Jon Tester, Heidi Heitkamp, Amy Klobuchar, Joe Donnelly, Martin Heinrich, Angus King (I), and Joe Manchin signed the letter. Unlike its more well-known counterpart, the National Rifle Association, the National Shooting Sports Foundation has catered to Democrats in recent election cycles; its PAC contributed $2,000 to Tester in 2012 and honored him as a legislator of the year in 2011. Heitkamp participated in a friendly Q&A with the NSSF and received $5,000 from its PAC in 2014. Heinrich was the only Democrat to whom the NSSF made a contribution in the 2016 cycle—it has given again to him in 2018, with Heinrich up for re-election in New Mexico.
After the report that the Trump administration was preparing to enact the rule, three Democratic senators, Ben Cardin, Patrick Leahy, and Dianne Feinstein, sent a letter to the State Department raising concerns that placing commercial firearms exports under Commerce Department control could “effectively [eliminate] congressional oversight of exports of” weapons that are “uniquely lethal” and “the primary means of injury, death, and destruction in civil and military conflicts around the world.” There was no reply for over three months, until December 27, 2017, during a Congressional recess. A response letter addressed to Sen. Cardin from the State Department, which was obtained by TYT, omits any comment on the policy concerns raised by the senators, and shunts off questions to the Commerce Department.
“This pro forma response shows a relatively high level of disdain for concerns expressed by senators, a bad sign for those hoping for a well functioning government,” Jeff Abramson, a senior researcher at the Arms Control Association, said of the State Department letter.
There has been preliminary action taken in Congress to object to any potential rule change. A resolution introduced by Rep. Norma Torres (D-CA) would maintain the existing regulatory structure. “Now the NRA wants to weaken our firearms export regulations in order to sell more guns overseas, with no concern for the violence it will generate or the harm it will cause to our national security. It is disgraceful,” Torres told TYT. The NRA supported the bill introduced by Rep. Scalise that would have removed gun manufacturers from State Department oversight.
Gunmakers Look To Gain From Foreign Markets
Jurgen Brauer, an economist at Augusta University who studies the U.S. gun industry, estimates that the regulatory shift could enable manufacturers to increase their annual sales by 1 to 2 percent. Using its 2017 financial figures, this would enable Ruger—one of the largest U.S. gun manufacturers—to produce more than $10 million in additional yearly sales. (This marginal increase in sales likely would not be nearly enough to offset the manufacturers’ recent domestic losses, Brauer said, but “it will help the bottom line a little bit—it will extend the production runs, lower average costs, and so on.”) The change could increase annual revenue for the U.S. industry by up to $340 million.
“Surely given the decline we have seen last year after Trump was elected, the recent bankruptcy of Remington Outdoors, this increasing pressure—every little bit helps,” he added.
One of the arguments presented by Wolf, which has also been echoed by the NSSF and members of Congress, is that the State Department’s jurisdiction over gun exports unduly penalizes small gunsmiths. “It affects the smaller gun companies worse than the bigger companies that are able to work through those bureaucratic inefficiencies more easily,” Wolf said of the current regulatory regime.
Perhaps the most valuable asset for domestic manufacturers seeking to ramp up production in foreign markets is the brand identity of quintessential American firearms like Smith & Wesson and Ruger, which have been featured in American pop culture for decades. This is not something that mom-and-pop producers possess. “Undoubtedly there’s hope of sales to police forces around the world,” Brauer, the economist, said. The category of countries to which State Department regulations would no longer apply includes much of the European Union, Argentina, Australia, Japan, and South Korea, according to Wolf. Regulations governing exports to countries under embargo, such as Iran, Cuba, and Sudan, would be unchanged.
But it’s not clear that smaller gun makers are considering meaningful expansion into overseas sales. Jeremiah Blasi, the marketing director for Mid America Armament, a small firearms manufacturer based in Pryor, Oklahoma, said the prospect of exporting his products had never even occurred to him. “I couldn’t speak to the economic burden, simply because we’ve not explored that to find out what it would require,” he said. “We’ve had plenty of business success in the country, so export’s not something that we’ve even considered.”
Wolf emphasized that enhancing the commercial prospects of the U.S. gun industry was not a motivating factor when he drafted the rule; he was concerned only with rectifying bureaucratic inefficiency, and he insists that the mere fact of regulatory authority being transferred from State Department control to Commerce Department control doesn’t reflect any underlying policy change—it’s simply a matter of achieving maximum bureaucratic efficiency.
Which companies would benefit was “not something we studied; it’s not something we had any data about,” Wolf said. Asked why the NSSF would be interested in hiring him, he added: “They’ve hired me because I’m a very good lawyer and I know the rules. And I can tell them how this process works.” Wolf’s successor at the Commerce Department is Rich Ashooh, who was previously a lobbyist for BAE Systems, Inc., one of the largest ammunition manufacturers in the country, and has in the past lobbied for export reforms.
Wolf said, “This is just a good bit of good government housekeeping on the structure of controlling these very important items. . . . Because they shoot people, they kill people, they’re lethal, and they need to be regulated for export in as efficient and coherent a manner as possible.”
“I am obviously not shilling for the Trump administration,” he said.
The domestic U.S. gun industry has long been overwhelmingly inward-focused, with the U.S. being by far the largest market for commercial gun purchases. Only 3.7 percent of guns manufactured in the U.S. were exported in 2015, according to a Justice Department annual survey. But gun manufacturers could easily penetrate foreign markets if they decided to, according to Rommel Dionisio, managing director for Aegis Capital, a financial services firm.
Dionisio, who covers the U.S. gun industry, said establishing corporate infrastructure to enter foreign markets “can happen quickly, certainly, depending on the company,”
“It’s not the biggest hurdle in the world to hire some salespeople,” he said. “They can use independent distributors—this is something that can ramp up very quickly if some of these restrictions are lifted. These are very well known products.”
U.S. gun-control groups have avoided the firearms exports topic. Everytown, the anti-gun advocacy group founded by Michael Bloomberg, has been at the forefront of advocating for gun control measures in the aftermath of the Parkland school shooting in February, but does not take a position on the issue. Asked to respond to TYT’s report that the export change was coming, Stacey Radnor, public affairs director for Everytown, said, “Unfortunately, I don’t have anything for you on this topic.”
A spokesperson for the Brady Campaign, another leading gun control rights organization, also declined to comment and did not follow through on an offer to set up an interview with one of the organization’s senior staff.
Once the rule is published in the Federal Register, there is a mandated period of time allotted for public comment. (The comment period typically ranges from 30 to 60 days). Since the regulatory change would constitute a new regulation, it would run afoul of the presidential directive President Trump issued in January 2017 mandating that for every one new regulation created, two be discarded. The Commerce Department is likely seeking an exemption to this directive, according to individuals familiar with the process. Phone messages left for the Commerce Department’s public affairs office were not returned.
Michael Tracey is a staff reporter for TYT Investigates.
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