ATF Issues First Ruling of the New Year – Is It The End Of 80% Lowers?

On only the second day of 2015, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has issued it’s first ruling of the year! ATF Ruling 2015-1 addresses putative Firearm Industry concerns regarding “whether Federal Firearms Licensees (FFL), or unlicensed machine shops, may engage in the business of completing, or assisting in the completion of, the manufacture of firearm frames or receivers for unlicensed individuals without being licensed as a manufacturer of firearms.”

Before we dive into this ruling, it is important to remember that ATF has consistently stated that it is lawful for an individual to manufacture his/her/its own firearm, without need to mark it, provided that he/she/it has no intent to sell or distribute it (seemingly at the time of manufacture; however, that is now drawn into question regarding ATF’s most recent position regarding the use of forearm braces – See AR Pistol Shooter’s FB post stating “[ATF is] reversing the earlier opinion and using established case law and precedent, stating a firearm may be classified based upon its use.” and my article Whoops We (ATF) Did It Again…Arbitrary Determinations Over the Sig Brace. If ATF’s position is that it is the intent when sold or distributed, ATF has opened up a series of constitutional issues, including takings arguments, since it would be contending that upon the death of the maker, the firearm could not be transferred to the heir(s) and would have to be forfeited).  In relation to manufacturing one’s own personal firearm, in August of 2010 ATF’s  then-Firearms Technology Branch (now Firearms Technology Industry Services Branch) declared

For your information, per the provisions of the GCA, an unlicensed individual may make a ‘firearm’ as defined in the GCA for his own personal use, but not for sale or distribution.”  FTB went on to declare “Also, based on the GCA, manufacturers’ marks of identification are not required on firearms that are produced by individuals for personal use.

Hence, it is completely lawful, as acknowledged by ATF, for one to manufacture his/her/its own firearm, provided there is no intent to sell or distribute it, but what about when that individual is incapable of turning a block of metal or 80% lower into a functioning firearm?

Because of putative “inquiries from the public,” ATF decided to issue a ruling – Ruling 2015-1. The six page ruling starts off by explaining that some individuals are purchasing “castings or machined/molded or other manufactured bodies (sometimes referred to as “blanks,” or “80% receivers”) that have not yet reached a stage of manufacture in which they are classified as ‘firearm frames or receivers’ under the Gun Control Act of 1968 (GCA).” This is no surprise, as a Google search for “80% lowers” returns over 9 million results, which include both FFL and non-FFL makers of 80% lowers and businesses that sell products, such as jigs, special drill bits and designs, to complete 80% lowers. There are also videos that one can watch on Youtube that depict how to modify an 80% receiver into a fully functional firearm.

The Ruling goes on to review the background that many of these individuals are unable to complete the manufacture of the firearm, especially the fire control cavity, and are proposing that either an FFL or unlicensed machine shop should be permitted to assist them in completing the firearm, using the company’s equipment. FTISB goes on to review the statutes and regulations involved and one case, from the 4th Circuit, which somewhat supports its position.

While it is not surprising that ATF found that an FFL/gunsmith could not complete the firearm, I am somewhat skeptical of its logic in relation to non-licensed machine shops. The Ruling states

An FFL or unlicensed machine shop may also desire to make available its machinery (e.g., a computer numeric control or “CNC” machine), tools, or equipment to individuals who bring in raw materials, blanks, unfinished frames or receivers and/or other firearm parts for the purpose of creating operable firearms. Under the instruction or supervision of the FFL or unlicensed machine shop, the customers would initiate and/or manipulate the machinery, tools, or equipment to complete the frame or receiver, or entire weapon. The FFL or unlicensed machine shop would typically charge a fee for such activity, or receive some other form of compensation or benefit. This activity may occur either at a fixed premises, such as a machine shop, or a temporary location, such as a gun show or event.

A business (including an association or society) may not avoid the manufacturing license, marking, and recordkeeping requirements under the GCA simply by allowing individuals to initiate or manipulate a CNC machine, or to use machinery, tools, or equipment under its dominion or control to perform manufacturing processes on blanks, unfinished frames or receivers, or incomplete weapons. In these cases, the business controls access to, and use of, its machinery, tools, and equipment. Following manufacture, the business “distributes” a firearm when it returns or otherwise disposes a finished frame or receiver, or complete weapon to its customer. Such individuals or entities are, therefore, “engaged in the business” of manufacturing firearms even though unlicensed individuals may have assisted them in the manufacturing process.

And the Rulings holdings are

Held, any person (including any corporation or other legal entity) engaged in the business of performing machining, molding, casting, forging, printing (additive manufacturing) or other manufacturing process to create a firearm frame or receiver, or to make a frame or receiver suitable for use as part of a “weapon … which will or is designed to or may readily be converted to expel a projectile by the action of an explosive,” i.e., a “firearm,” must be licensed as a manufacturer under the GCA; identify (mark) any such firearm; and maintain required manufacturer’s records.

Held further, a business (including an association or society) may not avoid the manufacturing license, marking, and recordkeeping requirements of the GCA by allowing persons to perform manufacturing processes on blanks or incomplete firearms (including frames or receivers) using machinery, tools, or equipment under its dominion and control where that business controls access to, and use of, such machinery, tools, or equipment.

Held further, this ruling is limited to an interpretation of the requirements imposed on persons under the GCA, and does not interpret the requirements of the National Firearms Act, 26 U.S.C. 5801 et. seq.

While I can understand the rationale behind the determination where the individual is under the “instruction or supervision ” of an unlicensed machine shop, as the machine shop or its employees would seemingly be causing the machine to perform the modifications to the 80% lower, I cannot understand or see any (legal) rationale, where the non-licensed machine shop only makes available the equipment and does not provide any instruction or supervision. If the machine shop merely offers individuals the opportunity to utilize its equipment for either a set fee or hourly rate, as a number of machine shops and vocation technical schools offer, the business or school is not involved in any distribution of the firearm nor is it engaged in the business of manufacturing firearms, as the individual retains absolute possession and control in the manufacture of the firearm. The ridiculousness of this determination and logical outgrowth suggests that any manufacturer of drills, drill presses, drill bits, CNC machines, 3d printers…etc is also involved in the distribution of firearms and engaged in the business of manufacturing firearms, even though they only sold a product that the end user elected to utilize in a particular way. If the machine shop only offers its equipment for rental, and does not provide any supervision or guidance, it is no different than the manufacturer of the equipment being utilized.

So, does this end an era of 80% lowers? No, but it will cause a substantial financial impact to the firearms and related industries and particularly to those making 80% lowers. Nothing in this Ruling suggests that an individual can no longer manufacture a personal firearm without needing to mark it but the individual must be able to complete the firearm with his/her/its own tools, which causes a plethora of concerns in such process. What if the individual borrows a tool from a neighbor? What if the equipment utilized is jointly owned (such as marital property)? Can a company offer membership, whereby any member is entitled to utilize the company equipment for free, and the member complete his/her/its firearm on the company equipment since the business would not be engage in the business? Do machine shops now need to inquire of the individual as to what he/she/it is going to be utilizing the machinery for?

Clearly, there is opportunity for anyone or entity aggrieved to challenge ATF’s Ruling but will anyone from the Industry step up to the plate? With a few recent exceptions, our Industry has generally declined to push-back against ATF’s overarching determinations. Many in the Firearms Industry believe that they can make a deal with the devil and not get burnt (ATF-41p anyone?) or that if they make any waves, they’ll be in the cross hairs of the out-of-control agency known as ATF. Unfortunately, both of those positions have led us to where we are today. We take it on the chin, time after time, and allow ATF to do as it wishes. Either, we need to start pushing back (as some are now doing) or there won’t be an Industry to fight for and our Industry isn’t just an industry, its the Second Amendment. But, I digress…

Footnote 2 of the Ruling does bear noting, as it declares “For purposes of this Ruling, activities associated with tapping and mounting a scope are considered neither ‘machining’ nor a ‘manufacturing process’.” While it is putatively limited to Ruling 2015-1, it seems to be a slight distancing from Ruling 2010-10, where FTB declared, “In contrast, a dealer-gunsmith may make or acquire his/her own firearms, and repair, modify, embellish, refurbish, or install parts in or on those firearms.  If the dealer-gunsmith then sells or distributes those firearms for livelihood and profit, the dealer-gunsmith is engaged in his/her own business of manufacturing firearms.” Are Type 1 FFLs now permitted to purchase a firearm from the manufacturer, add a scope or optic, forgo marking the firearm, and permitted to sell the package for resale? While ATF has consistently said that a gunsmith may add a scope to a firearm already belonging to the customer, it has also stated that a type 1 FFL may not add a scope to a firearm that it offers for resale, unless it obtain a type 7 manufacturer’s FFL. While this may seem inconsequential, there are serious issues as very few type 1 FFLs understand this dichotomy and in the absence of any direction from the Directorate of Defense Trade Control (DDTC) on what constitutes manufacturing under the International Trafficking in Arms (ITAR) regulations, it would seem that an entity acquiring an 07 manufacturing license, even if for purposes of only mounting a scope to a rifle and offering it for resale, would also have to register under the ITAR regulations, to the tune of $2,250 a year, just to register…

39 Comments

Filed under ATF, Firearms Law

39 responses to “ATF Issues First Ruling of the New Year – Is It The End Of 80% Lowers?

  1. Chris hall

    Im a type 7 FFL or was till November. If you want to be an attorney under this. Since my knowledge of firearms manufacturering isn’t tied solely to my business. I made a half dozen under my person using equipment my business owns for r-d off the company books.

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  2. Geoff

    IMO. Having finished 3 80% lowers myself, 2 polymer and 1 aluminum, if one is really serious about build your own unserialized AR, then you probably have the money for the rest of the firearm, upper, BCG, barrel, stock, LPK, furniture, etc., so buy the darn tools also. Polymer can be very easily machined with a good bench drill press and a good cross slide vise. Maybe $300 for both. That’s what I used. Aluminum not so easy. I did it, but not again. Buy a bench milling machine, Grizzly comes to mind, about $500 or so. With the jigs and online videos and instruction, finishing a lower is a no brainer for almost everyone except an idiot.

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  3. Randy B

    Buy your own jig and tools use a 12″ craftsman drill press or one from harbor freight . All in al together it’s bout $400. And ya learn something in the process.

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  4. CJ

    So the ruling is not about ending 80% lowers, but about ending “under the table” manufacturing of unlicensed lowers. If you can’t afford the tools, or don’t have the knowledge, don’t ruin it for the rest of us, who do.

    Like

    • Christopher Hall

      You sound like an under the table manufacturer. Cause the government is going to ask how many lowers with no markings do you need? Just like with the sig brace it all comes to intent.

      This ruling pretty much makes claim that the BATFE owns all machining equipment owned by commercial businesses. Do you have an llc or business? Then you are manufacturing.

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  5. Ben

    Thanks for staying on top of this stuff and explaining it clearly. Much appreciated.

    Like

  6. Pingback: ATF Issues First Ruling of the New Year | Is It The End Of 80% Lowers? - Tactical Sh*t

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  8. The Commerce Clause does NOT permit the Feds – or their agents – from doing anything not strictly related to “inspections” of interstate commerce products. There is NO clause allowing “limitations” or other tyrannical behavior by agents. Despite what the Progs and courts may “believe” (belief, BTW, is religious, not scientific, nor legally binding on anyone according to the First Amendment).

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  9. Don Holmes

    In Washington State you can build your own gun however you want without BATFE interfering as long as it stays in the state and is marked “made in Washington State”. And any law enforcement official that tries to infringe on this act will be charged a felon and with a min jail term of 365 days and maxim of 5 years and a $10,000.00 fine. Idaho just signed into law that the feds have no jurisdiction there either. This is in the fire arms RCWs, and WACs.

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    • bob r

      Care to provide a link to these RCWs and WACs?

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      • bob r

        bob r: “Care to provide a link to these RCWs and WACs?”
        Joshua Prince, Esq.: “What do you mean?”

        That was directed at Don Holmes claim (above my comment):
        “In Washington State you can build your own gun however you want without BATFE interfering as long as it stays in the state and is marked “made in Washington State”. … This is in the fire arms RCWs, and WACs.”
        I pretty sure there aren’t any to be linked.

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  10. Rob

    As the owner of a machine shop, can I no longer build my own guns with the machines I own?

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    • Chris

      No, you just can’t rent or let others use your equipment to complete their lowers.

      Like

      • Joe Puffufna

        Meh. I’d just “forget” to lock the door to my shop, and refuse to charge anyone using it with trespass. Way too much stepping on the 2A – EVERYONE should own at least 1 unserialized, unmarked, unregistered so-called “assault rifle”, preferably with slide-fire capability.

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  12. Barry Smith

    This entire episode by the ATF is ludicrous. Think about this for a second. First, it is okay to purchase yourself a CNC milling machine and complete a billet piece of aluminum or an 80% lower (Expensive and you need to understand G-code and CAD/CAM). Second, you can buy a milling machine (manual) and mill a solid block of aluminum or and 80% lower (Less expensive and a lot easier than 1). Third you can buy a jig and an 80% lower and “mill” it out with a drill press (a lot easier an even less expensive). Fourth, you can buy a jig and use a router and battery powered drill to “mill” out the 80% lower (getting really cheap and easy now; alum or polymer). BUT you cannot buy an 80% lower that has the “pocket” identified with a different color polymer because that is TOO EASY to mill out. REALLY! That’s it? Anyone who is reading ANY gun forum and can take down a gun for cleaning can mill a lower receiver. It is going to get even easier. You can right now purchase a 3-D digitizer from “Makerbot” (available from Home Depot) for $799.00. You can then digitize a complete lower which produces the G-Code and all you have to do is put into a CNC machine (you can build your own CNC Mill for about 3 grand (remember this is all 1st generation. It WILL get cheaper). Not only that, but very soon 3-D printers will soon be using plastics which will be strong enough to handle the recoil and it will get really cheap. None of these silly rules are about protecting me from you or you from me. They are ALL ABOUT POWER AND CONTROL.

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  19. Rrr1

    I hope I don’t get in trouble for letting my son borrow my drill to complete his lower.

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  20. Joshua Prince; okay, I sat down with my ATF agent last year to try to clarify this.
    I am a 07 FFL and gunsmith, I manufacture our own lower receivers fro billet and sell complete custom rifles.
    My question was; if someone comes in with a 80% lower that they have started by drilling into the fire control pocket, can I, as a gunsmith finish out that pocket to the required dimensions, basically cleaning out what they started.
    The agents reply was, yes you can modify, repair the receiver as it is already a firearm, however if you keep it overnight then you must mark it and enter it into your record book. She also added “you can stretch the rules as far as you like, just don’t break them”.
    So, does this now stop me from doing that?

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  21. Lance

    What about NFA Form 1 like suppressors, can we NOT make them now at our local machine shop or employer. The NFA hand book Section 6.4, say’s if you don’t have the skill, ability, and/or equipment to manufacture, you can have Form 1 created at an other premises. Is that now illegal?

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  22. J

    What if the machine shop sold me the equipment for $100, with a signed purchase agreement stipulating that I must sell it back to to them for $1 after I am done using it? ($99 depreciation, tool wear restocking fee) I owned the equipment while I used it, and as such the machine shop no longer had any control over what it was used for. As the owner of the equipment, it would not be illegal for me to use it to finish the receiver, and the equipment could not be considered a criminal tool.

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  25. So… would ‘renting’ a drill press to complete an 80% lower put the renting company in the Firearms Manufacturing business? Give me a break…. correct me if i’m wrong, but i believe they allow companies to build distilleries, lease/rent the equipment/space to a brewer, and the owner of the equipment is not required to have a license to produce alcohol – because their business is to lease equipment, not produce alcohol… Same should apply, considering its the same regulatory ageny… at least you would think.

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  26. Isn’t the ATF actions of creating it’s own regulations (laws), breaching Article I, Sec. 1 of the Constitution? Constitutionally congress IS the only institution that can legally legislate, not a bureaucracy. This makes any regs. that the ATF arbitrarily make null and void of law. Furthermore, being that the Second Amendment which guarantees the right to keep and bear firearms, which IS a secured right that precedes the passage of the NFA (both ’34 & 68), render the NFA null and void of law? So says Marbury V. Madison: 5 US 137 (1803).

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  27. jay

    ATF has no jurisdition on items not effected by interstate commerce which in that, was unlawfull to take jurisdition.

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  28. There are non profit hacker groups that are full machine shop, wood working, and fabrication capable. In Madison, Wisconsin we have Sector 67 ,which you can become a member and use the equipment freely.

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  29. What if the machine shop leases their machines from the mfr, as many do?

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  30. Pingback: Gun Control, Modern Manufacturing, and Arbitrary Laws | IsaacBotkin.com

  31. Mike

    So I own a Bridgeport and all the tooling to machine the lower I ant to buy. Can I machine lowers for my use with no intention to sell them? It is not going anywhere out of my control. Please advise

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  32. A Texan

    Situation #1: If I own a CNC machine myself, I can clearly take an 80% receiver and machine it into a 100% recover (i.e. a firearm) for my own use, with no federal regulatory requirements to put on a serial number or to get a manufacturer’s license. No one, not even ATF, disputes this.

    Situation#2: same facts, but a friend and I individually (not in an LLC or partnership or corporation) co-own the CNC machine. I can see no reason why each of us can’t make our own individual 100% receiver from our own individually owned 80% receiver, with our jointly-owned machine. It is not a for-profit business, merely a cost-sharing arrangement.

    Situation#3: if Situation Number 2 is OK with the ATF (and it should be), then simply substituting 20 people for two should present no problems. Again, this is not a for-profit business, it is merely a cost-sharing arrangement. Each of the individuals in question owns a piece of the CNC machine, and is thus doing the manufacturing operation with their own equipment.

    I would REALLY welcome any comments.

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