Tag Archives: “federal firearms licensee”

ATF releases 2018 Report on Firearm Commerce in the United States (Numbers, Bar Graphs, and Pie Charts!)

ATF has released its annual Firearms Commerce in the United States Statistical Update for 2018. As my one friend put it, “Let the nerdery begin.” To be fair, you have to be pretty nerdy to enjoy this stuff, hence me writing about it.

The Annual Firearms Manufacturing and Exportation Report (AFMER) is only current through 2016. This is because AFMER data is not published until one year after the close of a calendar reporting year because the information provided by those whole filed a report is protected from immediate disclosure by the Trade Secrets Act. Which is why you see a two year lag (2016 data reporting in the beginning of 2017 and a year delay between its reporting and publication).

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In 2016, there were a total of 11,497,441 firearms manufactured. This was up from 2015’s number of 9,358,661 by about 20%. The number of exports was up from the previous year by about 9%, from 343,456 in 2015 to 376,818 in 2016.

The total number of imports fell from 5,137,771 in 2016 to 4,492,256 in 2017 (imports are not included not the AFMER report which is why the numbers are more current). Once again, the number of handguns imported accounts for over half the total number of firearms imported.

For those of you NFA junkies, in 2017, there was $6,371,000 in occupational taxes paid (SOTs). This is up again from the year prior and slightly under double that of 2012. Taxes paid were $22,972,00 for 2017, about a third of what was paid in 2016 ($62,596,000). Interestingly, there were 6,749 record checks, which means that ATF searched the National Firearms Registration and Transfer Record (NFRTR) that many times to determine if a firearm was possessed lawfully or if the transfer was performed lawfully. That number is up 202 times from 2016.

In 2017, there were 40,444 Form 1s and 184,312 Form 4s filed. These numbers were different from the year prior, but not by a significant margin for the Form 1s (Form 1s were down by about 9,000 but Form 4s were up about 51,000). The total number of forms processed by the NFA Branch was down about a million from the year prior. 2017 number look similar to that of 2014 and 2015.

As far as NFA firearms registered by state, Texas still leads with 637,612. Florida follows with 377,2017. California (thanks Hollywood), Virginia and Pennsylvania round out the top 5. Florida leads the charge with registered machine guns, sitting at 44,484. Texas has an astonishing 265,597 registered silencers. Florida is the next closest with 98,972 registered silencers.

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There are currently 55,588 licensed collectors of curios or relics, making it the most popular license type. It is followed closely by dealer in firearms, of which there are 56,638 active licenses. ATF reports 136,081 total active licenses (across the spectrum). Texas holds 10,920 of those licenses, making it the state with the most.

In 2017, 17 license applications were denied. This number is up exactly one from the year prior. As for compliance inspections, ATF performed 11,009 last year. This equates to 8.09% of all licensees in 2017 being inspected.

As always, the annual report helps give some insight as to ongoings within the firearms industry.

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As an FFL, Can You Sell an NFA Firearm Through the Mail?

Often times, Federal Firearms Licensees (FFLs) inquire as to whether they can sell a National Firearms Act (NFA) firearm through the mail, without the buyer needing to be present. To the surprise of most FFLs, you actually can sell NFA firearms through the mail, provided the purchaser is not otherwise prohibited and is a resident in the same state as the FFL.

27 C.F.R. § 478.96 states that where the firearm is being provided to resident of the same state as the FFL and who is not prohibited, the FFL may sell a firearm that is not subject to the provisions of 27 C.F.R. § 478.102(a) to a non-licensee who does not appear in person. Section 478.102(a) requires a National Instant Check System (NICS) background check on most transactions; however, there is an exception, pursuant to subsection (d)(2), if  “The firearm is subject to the provisions of the National Firearms Act and has been approved for transfer under 27 CFR part 479.” Thus, Section 478.96 would apply and allow the FFL to transfer the firearm to the purchaser, who is a resident of the same state, without the purchaser having to be present.

However, pursuant to Section 478.96, the FFL has certain additional requirements to perform this type of transaction. Specifically, the purchaser must provide to the FFL an executed Form 4473, as provided for by 27 C.F.R. § 478.124, and attach “a true copy of any permit or other information required pursuant to any statute of the State and published ordinance applicable to the locality in which he resides.”

Furthermore, the FFL MUST “prior to shipment or delivery of the firearm, forward by registered or certified mail (return receipt requested) a copy of the record, Form 4473, to the chief law enforcement officer named on such record, and delay shipment or delivery of the firearm for a period of at least 7 days following receipt by the licensee of the return receipt evidencing delivery of the copy of the record to such chief law enforcement officer, or the return of the copy of the record to him due to the refusal of such chief law enforcement officer to accept same in accordance with U.S. Postal Service regulations.”

Lastly, the original Form 4473, and evidence of receipt or rejection of delivery of the copy of the Form 4473 sent to the chief law enforcement officer must be retained by the licensee as a part of his/her/its required records. After completing this step, the FFL can now send the NFA firearm to the purchaser, provided that there are no separate state law requirements. Some states, such as Pennsylvania, require additional state forms to be completed, depending on the type of NFA firearm (e.g. if it constitutes a “firearm” under Pennsylvania law, then a Record/Application of Sale form would have to be completed).

Accordingly, while an NFA transfer can occur without the instate purchaser being present, there are additional obligations placed upon the FFL and the purchaser may not be happy with the additional information being provided to his/her CLEO. Thus, it is a best practice for an FFL to only conduct in-person transfers, unless you are familiar with the requirements and have put in place procedural safeguards to ensure that none of the additional requirements are overlooked.

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DDTC Issues Guidance on ITAR Registration

DDTC

On Friday July 22, 2016, the Directorate of Defense Trade Controls (“DDTC”) released a letter issuing guidance on the requirement of firearm manufacturers and gunsmiths to register with DDTC under the International Traffic in Arms Regulations (“ITAR”).

There has been constant discussion on the internet regarding whether an individual who has obtained a federal firearms license (“FFL”) is required to register for ITAR. Some of the Industry Operations Inspectors (“IOIs”) have taken it upon themselves to inform Type 07 FFLs that they must register for ITAR without any guidance from DDTC. There are certain instances where an FFL does not need to register for ITAR.

22 C.F.R. § 122.1 discusses the registration requirements for ITAR.

(a) Any person who engages in the United States in the business of manufacturing or exporting or temporarily importing defense articles, or furnishing defense services, is required to register with the Directorate of Defense Trade Controls under § 122.2. For the purpose of this subchapter, engaging in such a business requires only one occasion of manufacturing or exporting or temporarily importing a defense article or furnishing a defense service. A manufacturer who does not engage in exporting must nevertheless register.

The crux of the registration for ITAR (for most FFLs) lies within the definition of manufacturing. DDTC has not promulgated a definition for manufacturing which is the source of a lot of confusion and misinformation.

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DDTC’s letter states that individuals who “do not actually manufacture ITAR-controlled firearms (including by engaging in the activities described below, which DDTC has found in specific cases to constitute manufacturing) need not register with DDTC – even if they have an FFL from ATF.” This is because the requirements for obtaining an FFL are separate and distinct of the requirements for registering under ITAR.

As DDTC does not have a definition for the term “manufacturing”, it relies on “the ordinary, contemporary, common meaning of the term.”

DDTC’s guidance is only in relation to “domestic (U.S.) activities involving firearms (as defined in Category I(j)(1) of the United States Munitions List (USML) (22 CFR § 121.1)) and related ammunition that are .50 caliber (12.7 mm) or smaller – i.e., firearms in Category I, paragraphs (a) and (b), related items in paragraphs (e)-(h), and ammunition in Category III(a) for those firearms. Activities involving items elsewhere on the USML, including Category I, paragraphs (c) and (d), are not included in the scope of this guidance.”

DDTC has found that the following instances do not require registration.

a)  Occasional assembly of firearm parts and kits that do not require cutting, drilling, or machining;

b)  Firearm repairs involving one-for-one drop-in replacement parts that do not require any cutting, drilling, or machining for installation;

c)  Repairs involving replacement parts that do not improve the accuracy, caliber, or other aspects of firearm operation;

d)  Hydrographic paint or Cerakote application or bluing treatments for a firearm;

e)  Attachment of accessories to a completed firearm without drilling, cutting, or machining—such as attaching a scope, sling, or light to existing mounts or hooks, or attaching a flash suppressor, sound suppressor, muzzle brake, or similar item to a pre- threaded muzzle;

f)  Cosmetic additions and alterations (including engraving) that do not improve the accuracy, caliber, or other aspects of firearm operation beyond its original capabilities;

g)  Machining new dovetails or drilling and tapping new holes for the installation of sights which do not improve the accuracy or operation of the firearm beyond its original capabilities; and

h)  Manual loading or reloading of ammunition of .50 caliber or smaller.

The guidance goes on to clarify that “[a]ctivities limited to the domestic sale or resale of firearms, the occasional assembly of firearms without drilling, cutting, or machining, and/or specific gunsmithing activities that do not improve the accuracy, caliber, or operations of the firearm beyond its original capabilities (as described above) are not manufacturing within the context of the ITAR. If you are not manufacturing, exporting, temporarily importing or brokering defense articles or services, you are not required to register with DDTC.”

Which then begs the question, what does DDTC require the registration under ITAR for?

DDTC states that if you are engaged in any of the following you are required to register for under ITAR.

a)  Use of any special tooling or equipment upgrading in order to improve the capability of assembled or repaired firearms;

b)  Modifications to a firearm that change round capacity;

c)  The production of firearm parts (including, but not limited to, barrels, stocks, cylinders, breech mechanisms, triggers, silencers, or suppressors);

d)  The systemized production of ammunition, including the automated loading or reloading of ammunition;

e)  The machining or cutting of firearms, e.g., threading of muzzles or muzzle brake installation requiring machining, that results in an enhanced capability;

f)  Rechambering firearms through machining, cutting, or drilling;

g)  Chambering, cutting, or threading barrel blanks; and

h)  Blueprinting firearms by machining the barrel.

Of particular interest is the guidance that now offering barrel threading services will result in an FFL being required to register for ITAR. This will certainly put a financial burden on the smaller gunsmiths who are threading barrels as registration for ITAR is $2,250 a year.

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Additionally, the penalties for violating ITAR are significant and able to be applied retroactively. Penalties for each violation of ITAR can result in up to $1,000,000 in fines and 20 years imprisonment. 22 U.S.C. § 2778(c)

DDTC does allow for voluntary disclosures of violations.

“The Department may consider a voluntary disclosure as a mitigating factor in determining the administrative penalties, if any, that should be imposed. Failure to report a violation may result in circumstances detrimental to U.S. national security and foreign policy interests, and will be an adverse factor in determining the appropriate disposition of such violations.” 22 C.F.R. § 127.12.

Lastly, DDTC does have a mechanism for an individual or company to inquire whether the activity they are engaging in requires registration under ITAR. This is an area that myself and Attorney Joshua Prince have experience in. It is certainly advised that a determination from DDTC is sought prior to engaging in the activity (if it is unknown or questionable whether it would require registration under ITAR) in order to mitigate any potential penalties.

 

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ATF Determination – FFLs Can Rent Handguns AND Ammunition to Individuals 18 and Older

As our readers are aware, Trop Gun Shop, LTD has been at the forefront of defending the rights of those in the Firearms Industry, including individuals, FFLs and Gun Clubs/Ranges. Recently, Trop obtained a determination from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) that benefits the entire Firearms Industry.

In March of 2013, the ATF issued its FFL Newsletter that, inter alia, addressed whether an FFL could rent a handgun to an individual under the age of 21 for on-premises use. ATF declared, “A licensee may rent a handgun to a person less than 21 years of age, or a long gun to a person less than 18 years of age for use at an on-premises shooting range.” However, ATF did not address, or even mention, whether the FFL could provide ammunition for the handgun to an individual between the ages of 18 and 21 given the prohibition on the sale or delivery of handgun ammunition to those under 21, pursuant to 18 U.S.C. 922(b)(1).

As a result and due to Trop’s dedication to protecting the Firearms Industry, Trop requested that I submit a determination request on its behalf to ATF arguing that an FFL is lawfully able to provide ammunition that can be used in either a rifle or handgun to someone who is between 18 and 21 years of age, when the person is renting a handgun from an FFL for on-premises use, in which the ammunition can be utilized. That request was submitted on August 16, 2014.

On May 6, 2015, the Firearms Industry Program Branch (FIPB) responded:

The longstanding position of ATF has been that the temporary use of a handgun and the “using up” of ammunition onsite does not constitute a delivery and the prohibition to the sale or delivery of handguns or ammunition to a person under 21 years of age according to 18 U.S.C. 922(b)(1) would not apply. This is provided that the ammunition is to be expended and used-up on the licensed premises in conjunction with the onsite rental of a firearm and is included as part of the overall fee for the usage of the facility. In addition, the spent cartridges and any unused ammunition must be returned to the facility.

A copy of the determination can be found here.

Accordingly, as I originally contended in my determination request, an FFL may lawfully provide (NOT SELL) ammunition that can be used in either a rifle or handgun to someone who is between 18 and 21 years of age, when the person is renting a handgun from that FFL for on-premises use, in which the ammunition can be utilized. However, it is imperative that the FFL ensure that either all ammunition is expended or any unused ammunition is returned.

If you are in the Firearms Industry and require a determination from ATF, contact us today to discuss how we can assist you in obtaining the determination that you desire and which further protects our Industry.

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The Thin Blue Label…A Tale of Confidential Information and a Glock Representative Demanding a Pennsylvania FFL Violate the Crimes Code

Trop Gun made a big splash on social media and forums on Thursday for their refusal to show Glock employees their 4473s for customers who had purchased guns through the Blue Label Program. In response to Trop’s refusal to show the Glock representative the 4473s, Glock terminated Trop from the Blue Label Program. You can read Trop’s response to having their Blue Label Program participation revoked here. For those who are unfamiliar, the Blue Label Program allows law enforcement, military, Glock Shooting Sports Foundation (GSSF) members and several other select individuals to purchase Glock pistols at a reduced price.

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The Blue Label Program imposes certain requirements on dealers when selling “blue label” guns. Those requirements include collecting a copy of the individuals credentials (photocopy of their ID), filling out a form that certifies the sales representative saw the credential if a photocopy cannot be made or collecting the GSSF coupon that GSSF members bring. Glock requires that these be attached to the 4473.

According to Trop, when the Glock representative came to do an audit of the “blue label” firearms that were sold, the representative demanded access to view records relating to “blue label” sales including access to the 4473s. Trop Gun wisely refused the representative’s request. After attempting to find a solution that would allow the Glock representative to be satisfied that the “blue label” sales were only made to qualified individuals and arriving at nothing that would satisfy the demands of the Glock representative, Trop Gun was terminated from the Blue Label Program.

While Trop Gun refused the Glock representative access to the 4473s based on their position of protecting their customer’s privacy, there appears to be a more pertinent reason to deny the Glock representative access. It’s a violation of the Pennsylvania Crimes Code for a Pennsylvania FFL to disclose information provided by the transferee in relation to the purchase of a firearm.

18 Pa.C.S. § 6111(i) of the Pennsylvania Crimes Code reads:

Confidentiality.–All information provided by the potential purchaser, transferee or applicant, including, but not limited to, the potential purchaser, transferee or applicant’s name or identity, furnished by a potential purchaser or transferee under this sectionshall be confidential and not subject to public disclosure. In addition to any other sanction or penalty imposed by this chapter, any person, licensed dealer, State or local governmental agency or department that violates this subsection shall be liable in civil damages in the amount of $1,000 per occurrence or three times the actual damages incurred as a result of the violation, whichever is greater, as well as reasonable attorney fees.

As Section 6111 pertains to the sale or transfer of firearms, the information provided by the transferee is confidential and not subject to public disclosure. This prohibition of disclosure would surely include the Glock representative who arrives at a Pennsylvania FFL to conduct an audit of “blue label” sales. Furthermore, any FFL who did provide the 4473s and/or Pennsylvania Record of Sale to a Glock representative would be in violation of Section 6111(i) and subject to civil penalties in the amount of $1,000 per occurrence or three times the actual damages incurred as a result of the violation, as well as reasonable attorney fees!

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Ostensibly, as the credentials Glock requires individuals to provide in order to purchase a “blue label” gun are being provided for the purchase of a firearm, there may be an argument that the disclosure of those credentials are in violation of Section 6111.

All FFLs in Pennsylvania who are Blue Label Program members should be aware of this issue. If a Glock representative requests information pertaining to an audit for “blue label” guns and the PA FFL provides them with any information furnished by the transferee, that FFL could be civilly liable under the Pennsylvania Crimes Code. Perhaps the next Pennsylvania FFL who is ordered to disclose their 4473s for a Glock “blue label” audit would be better suited in pointing out the request is asking them to violate the Pennsylvania Crimes Code. Maybe after reviewing this matter more closely, Glock will reconsider their termination of Trop’s Blue Label Program participation, as they were asking Trop Gun to potentially open themselves up to civil liability.

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Has ATF Directed FFLs to Abuse the NICS System?

It’s no secret that ATF told at least one FFL they need to run a NICS check on trustees picking up NFA firearms on behalf of a trust. In a letter addressed to Dakota Silencer, ATF explained:

The term “person” is defined by the GCA at 18 U.S.C. § 921(a)(1), to include “any individual, corporation, company, association, firm, partnership, society, or joint stock company.”

ATF has interpreted the GCA exception in sections 922(t)(3)(B) and 478.102(d)(2) to mean that firearms transfers are exempt from a NICS check when they have been approved under the NFA to the person receiving the firearm. Unlike individuals, corporations, partnerships, and associations; unincorporated trusts do not fall within the definition of “person” in the GCA.

Because unincorporated trusts are not “persons” under the GCA, a Federal firearms licensee (FFL) cannot transfer firearms to them without complying with the GCA. Thus, when an FFL transfers an NFA firearm to a trustee or other person acting on behalf of a trust, the transfer is made to this person as an individual (i.e., not as a trust). As the trustee or other person acting on behalf of the trust is not the approved transferee under the NFA, 18 U.S.C. 5812, the trustee or other person acting on behalf of a trust must undergo a NICS check. The individual must also be a resident of the same State as the FFL when receiving the firearm.

This interpretation is what spawned the blog post “Did ATF’s Determination on NICS Checks Open the Door for Manufacture of New Machineguns for Trusts”  by Chief Counsel Joshua Prince. And as we all know, the NFA Examiners issued a number of approved Form 1s before they had to recall them due to an “error”.

Since this letter was published, a number of FFLs either on their own accord or through advice of counsel have begun to perform background checks when transferring NFA Firearms to trustees. But is this actually required?

A person under the National Firearms Act is defined in 26 U.S.C.A. § 7701:

The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.

As defined in the National Firearms Act of 1934, the term firearm means:

 (1) a shotgun having a barrel or barrels of less than 18 inches in length; (2) a weapon made from a shotgun if such weapon as modified has an overall length of less than 26 inches or a barrel or barrels of less than 18 inches in length; (3) a rifle having a barrel or barrels of less than 16 inches in length; (4) a weapon made from a rifle if such weapon as modified has an overall length of less than 26 inches or a barrel or barrels of less than 16 inches in length; (5) any other weapon, as defined in subsection (e); (6) a machinegun; (7) any silencer (as defined in section 921 of Title 18, United States Code); and (8) a destructive device. 26 U.S.C.S § 5845(a)

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As defined in the Gun Control Act of 1968, the term firearm means:

(A) any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; (B) the frame or receiver of any such weapon; (C) any firearm muffler or firearm silencer; or (D) any destructive device. Such term does not include an antique firearm. 18 U.S.C. § 921(a)(3)

So what’s the big deal you ask? There are a few different issues that need to be addressed.

First, does the GCA of 1968 even APPLY to trusts? As Section 921(a)(1) does not define the term “person” to include an unincorporated trust, there is nothing in the GCA to indicate a trust falls under its purview! As Chief Counsel Joshua Prince pointed out to me in our discussions on this topic, ATF has said that a trust cannot hold an FFL because trusts, by definition, are not a person under the GCA and thus do not fall into the purview of 18 U.S.C. § 923. Yet, in the same breath, ATF is stating that trustees need to have a background check performed when they pick up a NFA item! How is it that ATF can refuse an FFL to a trust, because it is not a person under the GCA and refuse to pierce through the trust to an actual person, while requiring an FFL to, in essence, pierce through the trust to perform a background check for an NFA item?

It would seem that ATF is directing at least one FFL to perform a background check that I can find no legal requirement to perform. To my knowledge there has not been an industry wide newsletter or open letter directing that FFLs perform such a check. And even if there were, there is nothing I can find in the law to suggest that it is actually required.

ATF in a 2011 newsletter to FFLs, addressed the licensing of trusts under federal firearms law. ATF stated that only a person under the GCA could obtain a FFL. ATF went on to say that under Section 921:

“The term ‘person’ does not include trusts.”

In a 2008 newsletter to FFLs, ATF addressed the transfer of a National Firearms Act firearm to a corporation or other legal entity.

Procedure after approval
Approved NFA transfers are exempt from the NICS background check. So, when the FFL arranges for the disposition of the NFA firearm to a representative of the corporation or other entity, only the ATF
Form 4473, Firearms Transaction Record, must be completed by the representative of the corporation or other entity.

Furthermore, the NICS system isn’t even run by ATF. FBI is responsible for NICS and for what purposes it can be used. 28 C.F.R. § 25.6 provides:

(a) FFLs may initiate a NICS background check only in connection with a proposed firearm transfer as required by the Brady Act. FFLs are strictly prohibited from initiating a NICS background check for any other purpose.

The Brady Act amended § 922 along with a few other sections of Chapter 44.

Looking at 18 U.S.C. § 922(t)(1), it provides:

Beginning on the date that is 30 days after the Attorney General notifies licensees under section 103(d) of the Brady Handgun Violence Prevention Act that the national instant criminal background check system is established, a … licensed dealer shall not transfer a firearm to any other person who is not licensed under this chapter, unless—
(A) before the completion of the transfer, the licensee contacts the national instant criminal background check system established under section 103 of that Act;

Section 922(t)(3) provides:

Paragraph (1) shall not apply to a firearm transfer between a licensee and another person if–…

(B) the Attorney General has approved the transfer under section 5812 of the Internal Revenue Code of 1986;…

If the Attorney General approved the transfer under Section 5812 of the Internal Revenue Code then no NICS check is required. But the devil is in the details. We are talking about a transfer from a licensee to a person and a trust is not a person as defined in 18 U.S.C. § 921. Since the licensed dealer isn’t transferring the firearm to a person, how could the GCA apply at all? Furthermore, why does it matter that the trustee or person acting on behalf of the trust is not the approved transferee under 26 U.S.C. § 5812? What makes them so special that they need a NICS check performed? A person who comes in to pick up a NFA firearm on behalf of a corporation or a LLC isn’t the approved transferee. Yet, ATF doesn’t seem to have any qualms about that individual picking up a NFA firearm without a NICS check under the 18 U.S.C. § 922(t)(3)(B) exemption.

Moreover, 28 C.F.R. § 25.6 prohibits FFLS from utilizing the NICS system for any other purpose than required by the Brady Act. Ostensibly, FFLs cannot comply with what ATF purportedly wants them to do; access NICS to perform a background check on a Trustee picking up a NFA firearm.

Utilizing the NICS system for purposes other than allowed by Subpart A of the National Instant Criminal Background Check System as defined by 28 C.F.R. §§ 25.1-25.11 shall result in a fine not to exceed $10,000 and the possible cancellation of NICS inquiry privileges. Which can more or less be read as the loss of ability to conduct business as a FFL, if it is canceled.

Even if the NICS query would not be illegal to perform, there is another issue under Pennsylvania law!

Pennsylvania defines firearm very differently. In 18 Pa.C.S. § 6102 a firearm is defined as:

Any pistol or revolver with a barrel length less than 15 inches, any shotgun with a barrel length less than 18 inches or any rifle with a barrel length less than 16 inches, or any pistol, revolver, rifle or shotgun with an overall length of less than 26 inches. The barrel length of a firearm shall be determined by measuring from the muzzle of the barrel to the face of the closed action, bolt or cylinder, whichever is applicable.

As you are probably aware, the Pennsylvania State Police act as a point of contact for the NICS system. However, Pennsylvania law only allows for limited uses of the PICS system. These uses are defined in 18 Pa.C.S. § 6111.

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Section 6111(b) requires that:

No … licensed dealer shall sell or deliver any firearm to another person … until the conditions of subsection (a) have been satisfied and until he has:

(1) For purposes of a firearm as defined insection 6102 (relating to definitions), obtained a completed application/record of sale from the potential buyer or transferee…

(2) Inspected photoidentification of the potential purchaser or transferee…

(3) Requested by means of a telephone call that the Pennsylvania State Police conduct a criminal history, juvenile delinquency history and a mental health record check.

(4) Received a unique approval number for that inquiry from the Pennsylvania State Police and recorded the date and the number on the application/record of sale form.

(5) Issued a receipt containing the information from paragraph (4), including the unique approval number of the purchaser….

Section 6111(f)(1) provides:

For the purposes of this section only … “firearm” shall mean any weapon which is designed to or may readily be converted to expel any projectile by the action of an explosive or the frame or receiver of any such weapon.

Even with the expanded definition of firearm for the purposes of this section, a silencer does not fit into the criteria spelled out by the General Assembly!

So what does all of this mean?

Section 6111(g)(3) states:

Any … licensed dealer … who knowingly and intentionally requests a criminal history, juvenile delinquency or mental health record check or other confidential information from the Pennsylvania State Police under this chapter for any purpose other than compliance with this chapter … commits a felony of the third degree.

Even if FFLs could contact NICS to perform a background check on a trustee when delivering a NFA Firearm without abusing the system, a Pennsylvania FFL will be committing a felony of the third degree under state law!

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FFLs who are conducting background checks on trustees due to their interpretation of the Dakota Silencer letter or legal advice they received may wish to inquire with their counsel as to whether or not they actually need to perform one. There does not appear to be any basis in the law for such a requirement. Section 921 does not include an unincorporated trust in the definition of a “person” and the Attorney General would have approved the transfer under 26 U.S.C.A. § 5812 to the trust!

 

UPDATE:

As there have been some emails and comments on this post, it is appropriate to update it so there is no confusion. In PA and from what I understand, several other states, the definition of a firearm does not include a silencer. However, in PA SBRs, SBSs, Machine Guns and AOWs would require a FFL to conduct a PICS check as the definition of firearm would include those items. I apologize if anyone was misled. This was strictly in the context of a silencer. As always, consult with your legal counsel before making any decisions.

 

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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…

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