Use The New LVS Exception To Sell More Firearm Products Internationally

The LVS Exception in the new firearm export regulations is a powerful tool you can use to expand your company’s international footprint and revenues. In this post, we look at the following topics:

• What is the LVS Exception?
• Which items are covered by the LVS Exception?
• Shipping small parcels to international customers.
• Don’t overlook import regulations.
• How to handle product returns.
• Don’t forget these…

What is the LVS Exception?

LVS stands for “Shipments of Limited Value.”

The LVS exception under the Export Administration Regulations (EAR) allows exporters of firearms and parts to ship up to $500 of certain licensable items without a license. It replaces the ITAR Section 123.17(a) exemptions that previously authorized small shipments of most firearm parts without a license, with a limit of $500 for exports to Canada and $100 everywhere else.

The most significant change is that the upper limit for shipments that can go without a license is now $500 everywhere, except for a few restricted countries. This adds convenience for manufacturers, who can now ship small parcels of spare and replacement parts to international customers quickly without waiting for a license.

It’s a game-changer, however, for those who sell aftermarket parts. The $100 limit under the ITAR was low enough to rule out the export of most aftermarket parts. This new $500 limit is high enough to permit most of them.

So, everyone who sells firearms and parts should ask, “How can my company use this new authority to grow sales and please international customers?”

Which Items Are Covered by the LVS Exception

The LVS exception cannot be used for complete firearms, but it can be used for almost all pistol and rifle parts that are now subject to the EAR, everything except receivers, frames and complete breech mechanisms (defined in Part 772 of the EAR). LVS shipments to Canada can even include receivers, frames and complete breech mechanisms (ATF serialization and acquisition-disposition regulations continue to apply).

An added benefit of the EAR is that certain items can be shipped without any dollar limit and without being counted towards the LVS limit. These include bolts and pins used as fasteners (not those used in the action of a firearm) as well as other fasteners (e.g., screws, nuts, nut plates, studs, inserts, clips, rivets). Also included are washers, spacers, insulators, grommets, bushings, springs, wire and solder.

In addition, stocks, grips, scope mounts, accessory rails, iron sights, sling swivels, butt plates, recoil pads, and bayonets can be shipped to all but restricted countries without a license and without counting against the LVS limit.

For shotguns, a $500 LVS exception applies to complete trigger mechanisms, magazines and magazine extension tubes. Additionally, the LVS exception for shotgun parts can be used for complete breech mechanisms if the destination is Canada.

There is an LVS exception for lenses, other optical elements and adjustment mechanisms for controlled optics, but not for complete optical sights. (Note, however, that complete non-military grade sights can be shipped to 30 countries without an export license). Lastly, a $500 LVS exception applies to certain ammunition components.

Shipping Small Parcels to International Customers

Don’t take it for granted that you can ship the small parcels of gun parts our government now permits you to export without a license. Depending on where your customer is located, it may be harder than you think.

The United States Postal Service is your best option when shipping to countries to which USPS will carry firearm parts, including Canada, Australia and the United Kingdom, among many others. But you can’t use USPS to ship firearm parts to Germany, New Zealand or certain other countries due to regulations in those countries.

Can you use private courier services like FedEx, UPS and DHL to ship to countries where you can’t use USPS? They all say they won’t carry gun parts internationally, but many people in the industry can cite exceptions they have encountered. Present properly labeled packages and see whether they are accepted. Air waybills and Customs Declarations must include correct information, including export classifications and Schedule B numbers.

Don’t Overlook Import Regulations

Another obstacle to pay attention to is destination country import regulations. Experienced importers of U.S. firearm products know when they need import permits, but the new, higher LVS exception and other benefits of the new regulations will, we all hope, bring new international buyers into the picture.

Be sure that your customer is familiar with the import regulations of the destination country. Also, your terms of sale should clearly state that the customer is responsible for obtaining import permits.

Import permit requirements vary widely from one country to the next so make no assumptions regarding which items can be imported into Country B based on your experience with Country A. Be aware, also, that import requirements can change dramatically in a short period of time, as occurred in New Zealand in 2019.

Two areas of sensitivity in many countries are parts for ARs and magazines with round capacities over 10 rounds. But each country is different.

You may ask, “Isn’t this the buyer’s problem? Do I really care?” We think you should. Do you want to ship your products to countries that don’t let them in? Do you want to do business with customers who may not follow their country’s regulations? What other regulations may they not comply with? Also, in some countries, notably Germany, there are situations in which the U.S. exporter can be held legally responsible for violations of import regulations. We could go on.

How to Handle Product Returns

It is possible to return firearm products to the U.S. for repair or replacement or when the wrong product was shipped accidentally, but it isn’t easy and will rarely be practical for sales made using the LVS exception.

Most countries have export regulations that your customer must comply with when exporting firearm parts back to the U.S. and the U.S. has import requirements that apply, too. Bottom line is: it’s complicated for small sales.

Our recommendation is to be careful that your return, repair and replacement policies exclude international sales unless you have solutions in place that you know work. If you don’t, international sales should be final and extra precautions should be taken to ensure that the correct products are packed before you ship.

Don’t Forget These

There are a few more things about which you want to be careful when you use the LVS exception.

• Annual limit. The $500 LVS exceptions can be used for only $6,000 in total shipments per calendar year to a single international customer. Therefore, you must keep track of your LVS sales to each customer to ensure that they don’t exceed the limit. If this is too hard, consider limiting LVS sales to one per month. That will bring you to the right compliance outcome. Don’t forget that the regulations prohibit orders from being split to bring them under the $500 limit or to straddle two calendar years.
• Destination Control Statement. Part 758.6(a) of the EAR requires that the following Destination Control Statement be placed on the commercial invoice: “These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations.”
• AES filing. When you ship small packages of products to another country using the LVS exception, you are required to submit an AES filing and to mark the ITN on the first page of the bill of lading, air waybill, export shipping instructions or other commercial loading documents (See Section 30.7 of the Foreign Trade Regulations).
• Correct classification. The foundation on which your efforts to comply with export regulations rest is correct classification of the products you export, including their new Export Control Classification Number (ECCN) and their Schedule B number, which, fortunately, has not changed. Correct classification of your current products under the EAR must occur before you use the LVS exception and every exporter needs a system to ensure that new products are properly classified. For more information on classification, please download our Reference Guide for New Firearm Export Regulations.
• Record-Keeping. When you use the LVS exception, you are subject to the record-keeping requirements of Part 762 of the EAR.
• Data privacy. Data privacy is outside the scope of this post, but please give consideration to the European Union data privacy regulations (GDPR) if you use the LVS exception to increase small sales into the EU. Seek expert advice on your privacy policies, practices and data security requirements.

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