When does it become "manufacturing"?

Discussion in 'NFA/Class 3 & FFL Discussion' started by flyingtexan, Mar 19, 2012.

  1. flyingtexan

    flyingtexan New Member

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    I'm a 01 dealer. I'd like to purchase built AR15 Uppers and Lowers, push the pin, and join them together, then sell them as a complete rifle.

    Have I just manufactured a rifle? Or can I sell them legal as the day is long?

    Any advice will be appreciated.
     
  2. jordan89

    jordan89 New Member

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    To me that is just assembly. I would think manufacturing would be making those components from scratch.

    Just my interpretation. Not legal advice.
     

  3. Axxe55

    Axxe55 The Apocalypse Is Coming.....

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    i agree with Jordan. but i would refer to an ATF branch for legal clarification on it to be safe and legal. as they would have final say. the lowers are the part that has the serial number and are regulated, the uppers can be bought by anyone and even mailordered to your home. i could go to my LGS and and buy five lowers and have five uppers mailed to my house and assemble five complet rifles. but as a dealer, there may be different rules that apply. so it might be something to check with them about.
     
  4. wjnfirearms

    wjnfirearms New Member

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    I don't believe that what you want to do would be considered manufacturing. I sell a line of polymer complete lowers myself and offer an upper to compliment it with a complete unit price. Since the two halves are designed to snap together, I do believe that you should be all right on that.

    I looked up the term, "manufacturer" in my copy of the NFA. It states, "The term "manufacturer" means any person engaged in the business of manufacturing firearms or ammunition for the purposes of sale or distribution." You're not manufacturing, just assembling components.
     
  5. rachilders

    rachilders New Member

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    The key words here are buying the per-manufactured uppers/lowers, then simply putting the two halves together. Once those parts are assembled, you will have a working firearm. If you plan on selling a working firearm, it needs to be registered with the BATF. As axxe55 said, if you have already registered the lowers, there should be no problem since that's the "firearm" part of an AR. If the lowers haven't been registered, you sell the gun(s) and the ATF finds out, the feds will arrest you and take you away for many years.
     
  6. blucoondawg

    blucoondawg New Member

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    Why would he have to register anything with the atf, wouldn't he just have to do the proper paperwork and keep it on record as required for the transfer?
     
  7. danf_fl

    danf_fl Retired Supporter

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    Some of the ATF consider swapping out parts to be manufacturing.

    Go to the source (BATF) and ask them.
     
  8. rachilders

    rachilders New Member

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    Maybe a better choice of words would be this. Whenever someone buys a firearm from a retailer/wholesaler/FFL holder/etc, that firearm will have a serial number. Unless it is a "private" sale between two individuals, the buyer & seller must complete the proper ATF form (which includes that serial number) before transfer of the weapon from the seller to the buyer. That's what I meant when I said you must register a gun with the ATF. The BATF can ask the FFL holder/seller to see that paperwork at any time and if you don't have those records, it will cause a lot of problems for both the seller and the person who purchased that gun. In the case of an AR lower, that is the "firearm" as per the BATF and has the serial number. If you purchased complete lowers from a company, they should already have serial numbers and when you add the upper, it's the same as putting a new slide or barrel on a handgun. TC owners do it all the time.
     
    Last edited: Mar 20, 2012
  9. robocop10mm

    robocop10mm Lifetime Supporting Member Lifetime Supporter

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    A firearm is "registered" with the ATF and an excise tax paid. It must be declared as a long gun or handgun at that time. If it has a serial number, it is already "registered" and adding parts is not manufacturing unless you are adding full auto parts or a sub 16" barrel to a rifle lower.
     
  10. wjnfirearms

    wjnfirearms New Member

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    As to recording the acquisition pre sale of the lowers, if you just list them on your acquisition & disposition log as you're supposed to before you either sell them as is or mate them with an upper to sell as a complete unit, you should be covered as to having them at as part of your inventory in the first place. As each one sells either by themselves or mated, you just record the buyer on the disposition side of each, as you're supposed to, and that's it.

    Robo is pretty much on the money, also.

    I know some people have been concerned that they sell lowers and they may be made into an SBR. I looked into this since I've sold quite a few of the polymer lowers all over the US. Every lower is serialed, so paperwork has to be done on each acquisition and sale which every FFL has to keep on file. It is what it is. Now, if someone buys a lower either by itself, it matters not is if it's complete or stripped, or mated with a legal upper, the dealer is covered as long as the required 4473 is done and the A&D log is complete. Now, if the buyer decided to make his own SBR after the fact, there are no ramifications to the dealer that sold the lower in the first place. Your log and 4473 shows that it wasn't an SBR at the time of sale, so you're golden. It falls 100% on the owner of the weapon if he doesn't have the stamp in his posession. Conversely, if someone comes to buy a lower from you and states that it is for an SBR, according to my contacts at ATF, you are supposed to demand the stamp be shown to you or you aren't supposed to turn over the lower to the buyer. By the end user admitting intent and you knowing full well the use that the lower is intended for, you could be complicit if you don't demand to see the stamp or turn over the lower if none is presented to you. Again, that's what I've been told.
     
  11. sniper762

    sniper762 New Member

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    i just got busted by atf. nothing wrong with "assembling" them for personal use or for someone else that has their own parts. but assembling them (to sell) requires a manufactorer's license.

    stupid, i agree but those are atf's words
     
  12. Cattledog

    Cattledog New Member

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    When I first got my license I informed my inspector that I wanted to build custom 10/22's. I was informed that I could only purchase complete rifles and change the parts. Buying only 10/22 receivers and then building a rifle would count as manufacturing. I believe this to be true with AR lowers as well. This is why so many dealers sells kits along side built out lower receivers, but not as complete rifles.
     
  13. fsted2a

    fsted2a Active Member

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    In my interview for my FFL, I was told by the ATF agents that if you so much as put handguards on the firearm, that is considered manufacturing. How a court would interpret it is something I never want to find out, so I changed my application to a class 7 manufacturer for a few bucks more to save myself some heartburn.
     
  14. rudy

    rudy New Member

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    As stated by cattle and sniper per my interview with BATF for my 07 if you buy a complete lower and then add an upper you are manufacturing. If the lower has a S/N you either add your information to the lower or you write a letter to the BATF and ask for permission to use the existing manufacturers information as yours and record that in your log book for manufacturing. Anything added to an existing firearm is considered manufacturing and must be recorded as such.
     
  15. rudy

    rudy New Member

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    Just for informational purposes an 01 is $250.00 and an 07 is only $150.00. Makes more sense to go with the 07 which is less expensive and allows you to do so much more. There is a little more paperwork and added fees when you start to manufacture but it allows you to make a little more money.
     
  16. rocketman7

    rocketman7 New Member

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    There is one item that was left out. If you are an 07, you MUST register with Department of State (per ATF Guidebook - Importation & Verification of Firearms, Ammunition, and Implements of War).
    "Generally, persons holding a manufacturer's FFL (Types 06, 07, and 10) must register as a manufacturer with the Department of State unless specifically exempted by an International Traffic in Arms Regulation (ITAR)."
    This is $2250 per year.
    I have also heard that the DOS is starting to strictly enforce this requirement.
     
  17. fsted2a

    fsted2a Active Member

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    In correspondence with the Agent who was handling my FFL, she advised me not to worry about it unless I was engaged in transactions with foreign nationals. (I kept my email traffic in the event an issue came up.)
     
  18. rct

    rct New Member

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    That information is wrong! The DDTC does not care if you export or deal with any government entity. If you are an 07 you must comply.
    An email from a lowly ATF IOI will not protect you. In fact, they do not work for the DDTC and cannot legally comment on their processes. You might contact her and request she stop doing that.

    You better worry about it. You HAVE to get an official exception in writing from the office of the DDTC. If not, they can require you to pay for every year you are licensed and did not pay or get an exception. Simple as that. They take ITAR compliance very seriously.

    Exceptions are VERY difficult to obtain. I was able to get one but it took months and countless hours of drafting and submitting documents. Most people fail and just pay the tax.

    The DDTC has started requesting the updated list of 07 FFL holders. So you bet they know how to find you.

    Either pay or get the exception. Only option you have.

    Also, If you noticed the news lately the DDTC is updating the ITAR which will make compliance even more important for 07 FFL holders.

    Sorry to be so serious but this is a very serious situation.

    Let me know if you have any questions.
     
  19. fsted2a

    fsted2a Active Member

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    Looks like I am just gonna have to let the customer put his own guns together until I get some clarification from an attorney. Been meaning to get a good 2A experienced attorney on other issues anyway. Next thing you know the Dept of Agriculture will get involved with firearms issues. :(
     
  20. rct

    rct New Member

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    I feel your pain.

    You simply do not need to waste money on an attorney. Unless. of course, you want to take on the ATF and the Department of Defense. If you feel you must waste your money, have him/her read the two letters referenced below.

    After countless hours working on this before I even became a licensee I was able to determine that the ATF considers building an AR-15, for example, by attaching an already built upper to an already built and serialized lower and then selling it, manufacturing. Simple as that.

    Please read this BATFE letter 2010-10. Pay special attention to the two sections 'Manufacturing and 'Gunsmithing':

    https://www.atf.gov/file/82791/download


    They later further claified that ruling with this letter which also included details on the so called 80% AR lowers:

    https://www.atf.gov/file/11711/download



    According to the ATF letters referenced above. Assembling ar-15s from lowers and uppers is manufacturing as long as you do it before the sale (This has been their opinion for a LONG time). Any competent ATF IOI should know this and tell you this. However, most will agree that it simply does not make any sense. If the assembly is post sale and the items are not shop inventory, it is gunsmithing.

    It appears that the way you get around this is you simply sell and deliver to your customer the two parts separately. Then have your customer hand them back to you for assembly. Now you are providing gunsmithing services. Though it would certainly be a gray area. Especially, if you are advertising the gun as a completed item.

    The easy way around this was to simply become a licensed manufacturer and, barring any local restrictions, this was not an issue. That was, until the DDTC and ITAR. Now if you are a licensed manufacturer you must register and pay ITAR or get an exception.

    As I mentioned in an earlier posting in this thread, recently the DDTC realized that most 07 licensed FFLs were not registering with them as required and now request updated lists of 07 licensees. Some have already received letters from the DDTC.

    Unfortunately, not registering with the DDTC is a serious issue with serious fines and ramifications. They simply do not care about any excuses or what you read online or what some ATF employee told you. This is the Department of Defense we are talking about here. Do you really think they have a sense of humor?:)

    You can read a nice little article about all this here authored by a gun law attorney:

    http://blog.princelaw.com/2012/08/10/department-of-state-is-stepping-up-enforcement-of-itar-related-to-manufacturers/

    I hope this helps.