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…