House and Senate conferees on the continuing budget resolution agreed on an unusual compromise yesterday that could allow a Northern Virginia company to complete a $13 million arms deal with South Korea.
The conferees approved a measure that, in effect, would reissue a previously revoked import permit obtained by the company, Blue Sky Productions Inc., to bring into the United States 200,000 M1 rifles owned by the Korean goverment.
A provision to the measure would give the administration 20 days to quash the permit by certifying that the legislation is contrary to administration policy, according to a spokesman for Rep. Bill Chappell (D-Fla.). Chappell, one of the House conferees, is chairman of the House Appropriations defense subcommittee, which initially passed the measure earlier this year.
Officials of the U.S. Bureau of Alcohol, Tobacco and Firearms (ATF) have said the deal would be the largest single importation of military rifles by a private group in the country's history.
Blue Sky is owned by James Stone, a former vice president of Interarms Inc. and the Smith & Wesson Co.; Robert Frulla, former president of the Freight Forwarders Institute, and Richard C. Whitner, a military sales consultant. In 1986, ATF granted Blue Sky a permit to import the rifles, but revoked the permit after the first shipment of 40,000 arrived.
Blue Sky has sued the Treasury Department, claiming that 1984 amendments to the Gun Control Act allowed the rifles to be imported. Attorneys for the federal government have maintained that the deal is barred by the Arms Export Control Act of 1976. Chappell, in an interview, said the measure approved by the conferees would "merely correct the law to conform to the intent we had in 1984."
At that time, Chappell said, Congress intended to make an exception in the general import ban to allow importers to bring in weapons for collectors that were considered to be "curios and relics." M1 rifles, which were used by U.S. and Allied forces in World War II and by United Nations forces in the Korean War, have been classified as relics by ATF.
Last week, Sen. Howard M. Metzenbaum (D-Ohio) vigorously attacked the measure in the Senate and tried to prevent Senate conferees from including it in the conference report. Metzenbaum said the measure was "designed to help one group of people make millions of dollars."
Myles Ambrose, an attorney for Blue Sky, rejecting Metzenbaum's criticism, said the measure was actually aimed at correcting "a massive bureaucratic screwup."
According to Ambrose, the men thought they could import the rifles legally because of the 1984 change in the Gun Control Act, under which ATF had issued an import license. The change allowed the importation of American-made weapons, provided they had been purchased from the United States and were not a part of a lend-lease type of grant.
However, the deal ran into trouble in September 1986, when the first shipments of M1s arrived in San Francisco and Seattle. U.S. Customs officials questioned the weapons' documentation, suspecting that the weapons had been given to the Koreans and not purchased by them, and suspended the import permit, according to documents filed in Blue Sky's suit.
Officials from ATF, Customs, the State and Defense departments and some members of Congress weighed in. Court records show letters in support of the shipment from Edward J. Derwinski, counselor for the State Department, and Lt. Gen. Philip Gast, who was then director of the Defense Security Assistance Agency.
Another letter, written on Chappell's stationery, was signed by 20 House members and sent to Treasury Secretary James A. Baker III. It said the arms deal was in the national interest because the Korean government intended to use the money to reequip its army, which the letter said had suffered from U.S. aid cutbacks.
Customs ultimately dropped its investigation of the documentation because it decided that another law, the Arms Export Control Act, prohibited the import of any U.S.-made weapons that were purchased by a foreign government.
Since then, the government has released the initial shipment of 40,000 rifles to Blue Sky, which sold them to a wholesaler.