A lot of Federal Firearms Licensees (FFLs) become confused with the different regulations for transferring post sample machine guns, especially when the FFL is going out of business. Post sample machine guns, sometimes referred to as post may machine guns, are those machine guns which were imported or manufactured post May 19, 1986. Pursuant to 27 CFR 479.105(d), for the Bureau of Alcohol, Tobacco, Firearms and Explosives to approve the transfer and registration of a post sample machine gun, the dealer, manufacturer or importer, that has paid his/her/its Special Occupation Tax (SOT), must provide:
[S]pecific information [that] the expected governmental customers … would require a demonstration of the weapon, information as to the availability of the machine gun to fill subsequent orders, and letters from governmental entities expressing a need for a particular model or interest in seeing a demonstration of a particular weapon.
These letters are commonly referred to in the industry as Police Department (PD) Love Letters.
However, there is an exception, which alleviates the PD Love Letter requirement, where a dealer is going out of business and the post sample machine guns are to be transferred to a current manufacturer or importer that has paid his/her/its SOT. Specifically, pursuant to 27 CFR 479.105(f),
[A]ny qualified manufacturer, importer, or dealer intending to discontinue business shall, prior to going out of business, transfer in compliance with the provisions of this part any machine gun manufactured or imported after May 19, 1986, to a Federal, State or local governmental entity, qualified manufacturer, qualified importer, or, subject to the provisions of paragraph (d) of this section, dealer qualified to possess such, machine gun.
What this means is that while a dealer would still have to acquire a PD Love Letter to obtain a post sample machine gun from the inventory of a licensee that is going out of business, a licensed manufacture or importer does not have to obtain the PD Love Letter. Thus, there are some benefits to being a licensed manufacturer or importer, but those benefits due come with detriments, such as annual licensing under the International Trafficking in Arms Regulations (ITAR).