Gun makers to get sales boost with export reform on the way

U.S. gun makers stand to increase sales if the Trump administration revamps the federal government’s export rules, a move that’s reportedly coming this fall.

Under the current system, the State Department regulates the sale of commercial firearms and ammunition, similar to how it oversees deals involving fighter jets and other military equipment. The Obama administration began writing a new rulebook for non-military gun exports in 2009, but the effort went nowhere. Now President Donald Trump’s aides are putting the finishing touches on a plan to move oversight of international sales to the Commerce Department, according to a Reuters report.

Officials argue that treating gun exports as a matter of trade will further cut red tape for corporations and support U.S. manufacturing jobs. Looser export restrictions should allow iconic American brands like Smith & Wesson, Sturm Ruger (NYSE:RGR) and Colt to better compete with Glock and other large gun makers in foreign markets.

The National Shooting Sports Foundation, a trade group representing gun makers and retailers, believes the move could lift sales by 15% to 20%, Reuters noted.

“This initiative will improve our nation’s ability to compete in the global marketplace for commercial and sporting firearms and ammunition without impairing national security,” the NSSF said in a statement provided to FOX Business. “The proposal would reform an onerous export process that has caused U.S. manufacturers to lose the ability to compete for contracts, even as it has required non-exporting companies to nonetheless register as exporters and pay an exorbitant annual fee.”

Shares of U.S. firearm manufacturers spiked following the report, though they pared gains Wednesday. After rising 13.7% Tuesday, Ruger fell 4% to $52.10 in recent trading. American Outdoor Brands (NASDAQ:AOBC), the owner of Smith & Wesson, jumped 10% after the news but edged 4.7% lower to $14.96 a day later.

Gun stocks have fallen sharply since President Trump’s election victory, as investors braced for a slowdown in sales. Demand had soared during President Barack Obama’s tenure in the White House amid concerns among buyers that Congress would approve new restrictions on consumer sales. American Outdoor Brands said earlier this month a surge in demand during election season has hurt the company’s 2017 sales.

The NSSF said the Obama administration’s State and Commerce Departments were also in favor of export reform, but the effort was “held up for purely political reasons.”

“We salute the Trump administration for moving forward and urge that there be no further delay on these reforms that will improve America’s competitiveness and support manufacturing jobs,” it said.

The Trump administration is said to be nearing a final draft of the new rules, which will soon be reviewed by the White House budget office.

Critics of the move say fewer restrictions could make it easier for militant groups to obtain weapons like semi-automatic AR-15 rifles. However, the industry argues that the AR-15 design is already widely copied worldwide, and there are large numbers of fully automatic AK-style rifles available.