Federal Firearms Licensees engaged in retail firearms sales or that have a gunsmith onsite should become familiar with U.S. gun manufacturing laws. The Gun Control Act (GCA) requires that persons who engage in firearms manufacturing be properly licensed. The gun manufacturers license (Type 07) is required when persons engage in certain activities codified in the law, and subsequently clarified by Treasury Rulings and later by ATF Rulings. Determining if one is engaged in gun “manufacturing” is at times a difficult assessment to make. Although ATF has attempted to clarify the issue, understanding firearms manufacturing will likely become more difficult, and require further clarification by ATF as advances in technology and the popularity of modular “boutique” type firearms increases.
As you’ll see below, it’s also an issue of semantics and subjectivity. As a licensee, your policy should always be to err on the side of caution when it comes to compliance. In other words, even if there’s a hint you may be engaging in manufacturing firearms, you should get the proper license. If you believe that you may be manufacturing firearms, it’s likely ATF will have the same view. Don’t wait to resolve the issue when ATF inspects you; by then it may become an administrative nightmare to resolve, not to mention possible violations, back taxes and other troublesome issues.
Is the activity I will be engaged in considered firearms manufacturing?
This is somewhat of a complex issue to explain, but it is essential you have an understanding of it as someone who will be applying for federal firearms license. It’s complex because the language in the law, the pertinent rulings and the history of the application of the law still leave room for subjective interpretation as to whether a person is engaged in manufacturing firearms. We are not addressing criminal issues here; this article deals with the proper licensing for the activity to be conducted as a federal firearms licensee.
Should I Get A Firearms Manufacturing License?
Obviously, if you are grinding metal, milling, molding, or otherwise engaged in classic manufacturing, it’s pretty plain to the average person that a license to manufacture firearms is required. However, ATF has determined that certain types of “assembling” of firearms, depending on the frequency and nature of the activity is also considered manufacturing, and will require proper licensing. This may become more relevant as the ability to mix and match firearms parts and create “boutique” type firearms becomes more prevalent.
Therefore, it’s important for you as an applicant clearly determine if your business will cross the line in the manufacturing area, so you can be properly licensed, and more importantly, avoid unnecessary disputes or entanglements with regulatory authorities.
What is the ATF criteria for determination of firearms manufacturing?
ATF has established certain criteria for the determination of whether someone is engaged in manufacturing firearms. ATF has long held the position that certain types of activity constitute firearms manufacturing. This position is generally based on Revenue Ruling 55 – 342 (CB 1955 – 1, 562), under the Federal Firearms Act; a precursor to the Gun Control Act; as well as the pertinent definitions and other language in the GCA, NFA, Internal Revenue Code, etc. ATF has determined that firearms dealers can assemble firearms on an individual basis, but not in large “lots for purposes of sale or distribution without a manufacturer’s license”.
ATF Ruling 2010-10
“ATF’s long-standing position is that any activities that result in the making of firearms for sale or distribution, to include installing parts in or on firearms frames and receivers, and processes that primarily enhance a firearms, durability, constitute firearms manufacturing that may require manufacturers license”.
Examining the language of the above excerpt from the ruling, one can see there still seems to be some wiggle room with respect to what actually constitutes manufacturing. As you can see at the end of the quote, the use of the phrase “may require a manufacturer’s license”, doesn’t really help.
ATF has ruled that certain “cosmetic” enhancements to firearms will not be considered manufacturing. ATF ruling 2009 – 1 addresses cosmetic processes, camouflaging an engraving. This ruling indicates these processes add changes to the appearance of a firearm, and therefore do not constitute manufacturing.
How do I know if the activity of engaged in is manufacturing.
ATF ruling 2010 – 10 gives guidance with respect to assisting licensee in determining whether they are actually “manufacturing” firearms per the definition and relevant rulings. The ruling lists 5 things an FFL should do in order to facilitate ATF’s determination of whether or not someone is manufacturing firearms. However, complying with the requirements of this list, maybe a little cumbersome for some business owners.
As a matter of practicality and in the interest of saving time and energy in order to comply with the additional requirements of ATF ruling 2010 – 10, perspective FFLs who believe that they may engage in the manufacture and firearms by definition should probably go ahead and apply for the Type 07 manufacturer’s license. In essence, the process to secure the Type 07 license will not be significantly different. In general the issue will be with complying with local and state law with respect to manufacturing. Also, there are additional cost to consider: Special Occupational Tax (S.O.T.), possible need to register with DDTC, and excise tax.
As an applicant for a FFL, you must however be clear on the issue, and apply for the proper license to engage in the proposed firearms business. What you don’t want to happen is that ATF discovers that you have been “assembling” firearms to the point that is considered manufacturing and are not properly licensed. At that point it becomes pressing issue that may cost you your business.
Communicating with local authorities.
Persons contemplating manufacturing should be very clear in communicating with local authorities what their actual intent is. In other words, if the type of manufacturing you will engage in does not require the use of chemicals, heavy machinery, or elaborate ventilation systems, it may be easier for the municipality to approve you as a manufacturer; and “approval” is what ATF requires. Different municipalities have different standards and procedures with respect to approving a type of business or a particular location to conduct such a business. So, it’s up to the applicant to be clear and not give the impression that a major manufacturing operation will take place, if you are only assembling firearms from parts.
It’s your responsibility to communicate effectively with the people in charge in order to clearly convey to them what type of business you wish to conduct. Under ATF’s authority to investigate, applicants for federal firearms license, they will verify that you are in compliance, or will be in compliance with state and local law. This is a critical element of ATF’s qualification protocol.