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Industry News: ATF Guidance on When a Manufacturer’s License is Neede
By Robert M. Hausman

ATF has provided guidance in the form of examples of operations that would or would not be considered manufacturing under the Gun Control Act. Generally, a person should obtain a license as a manufacturer of firearms if the person: 1) is performing operations that create firearms or alter firearms (in the case of alterations, the work is not being performed at the request of customers, rather the person who is altering the firearms is purchasing them, making the changes, and then resells them); 2) is performing the operations as a regular course of business or trade; and 3) is performing the operations for the purpose of sale or distribution of the firearms.

The information is presented using a variety of scenarios and case-by-case answers:

Scenario 1. A company produces a quantity of firearm frames or receivers for sale to customers who will assemble firearms.

A. The company is engaged in the business of manufacturing firearms and should be licensed as a manufacturer of firearms.

Scenario 2. A company produces frames or receivers for another company that assembles and sells the firearms.

A. Both companies are engaged in the business of manufacturing firearms, and each should be licensed as a manufacturer of firearms.

Scenario 3. A company provides frames to a subcontractor company that performs machining operations on the frames and returns the frames to the original company that assembles and sells the completed firearms.

A. Both companies are engaged in the business of manufacturing firearms and should be licensed as manufacturers of firearms.

Scenario 4. A company produces barrels for firearms and sells the barrels to another company that assembles and sells complete firearms.

A. Since barrels are not firearms, the company that manufactures the barrels is not a manufacturer of firearms. The company that assembles and sells the firearms should be licensed as a manufacturer of firearms.

Scenario 5. A company receives firearm frames from individual customers, attaches stocks and barrels, and returns the firearm to the customers for the customers’ personal use. The operations performed on the firearms were not for the purpose of sale or distribution.

A. The company should be licensed as a dealer or gunsmith, not as a manufacturer of firearms.

Scenario 6. A company acquires one receiver, assembles one firearm, and sells the firearm.

A. The company is not manufacturing firearms as a regular course of trade or business and is not engaged in the business of manufacturing firearms. This company does not need to be licensed as a manufacturer.

Scenario 7. An individual acquires frames or receivers and assembles firearms for his or her personal use, not for sale or distribution.

A. The individual is not manufacturing firearms for sale or distribution and is not required to be a licensed manufacturer.

Scenario 8. A gunsmith regularly buys military-type firearms, Mausers, etc., and “sporterizes” them for resale.

A. The gunsmith is in the business of manufacturing firearms and should be licensed as a manufacturer.

Scenario 9. A gunsmith buys semiautomatic pistols and modifies the slides to accept a new style of sights. The sights are not usually sold with these firearms and do not attach to the existing mounting openings. The gunsmith offers these firearms for sale.

A. This would be considered the manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.

Scenario 10. A gunsmith buys government model pistols and installs “drop-in” precision trigger parts or other “drop-in” parts for the purpose of resale.

A. This would be considered the manufacturing of firearms, as the gunsmith is purchasing the firearms, modifying the firearms, and selling them. The gunsmith should be licensed as a manufacturer.

Scenario 11. A gunsmith buys surplus military rifles, bends the bolts to accept a scope, and then drills the receivers for a scope base. The gunsmith offers these firearms for sale.

A. This would be considered the manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.

Scenario 12. A gunsmith buys surplus military rifles or pistols and removes the stocks, adds new stocks or pistol grips, cleans the firearms and then sends the firearms to a separate contractor for bluing. These firearms are then sold to the public.

A. This would be considered manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.

Scenario 13. A company purchases surplus firearms, cleans the firearms, then offers them for sale to the public.

A. The company does not need to be licensed as a manufacturer.

Scenario 14. A company produces firearms or firearm receivers and sends the firearm/receivers out for coloring (bluing, camouflaging, phosphating, or plating) and/or heat treating. Do the companies performing the colorization and/or heat treating need to be licensed as manufacturers, and are the companies required to place their markings on the firearm?

A. ATF has determined that both colorization and heat treating of firearms are manufacturing processes. The companies performing the processes are required to be licensed as manufacturers. If the companies providing colorization and/or heat treating have not received variances to adopt the original manufacturer’s markings, they would be required to place their own markings on any firearm on which they perform the manufacturing process of colorization and/or heat treating.

ATK’s Second Quarter Sales Rose by a Third

First fiscal quarter sales in the Alliant Techsystems’ Armament Systems group rose 32% to $442 million, compared to $336 million in the prior-year quarter. The ATK division produces commercial and military ammunition and gun systems, propellants and advanced energetics. ATK’s overall first-quarter earnings rose 9% when compared to the same period the previous year, with sales for the quarter surpassing $1.1 billion.

Winchester Ammunition Has Record 2nd Quarter

The Olin Corporation’s Winchester Ammunition Division second quarter pretax earnings of $9.5 million represent a record second quarter for the business. Winchester’s results reflect the combination of improved volumes and pricing.

Winchester second quarter 2008 sales were $116.1 million, compared with $99.8 million in the second quarter of 2007. The combination of higher selling prices and higher sales volumes were responsible for the increase. Winchester segment income for the second quarter was $9.5 million, compared to $5.6 million in the second quarter of 2007.

The favorable impact of higher volumes and increased selling prices was partially offset by the continued increase in the cost of raw materials, including copper, lead, zinc, steel, and resins.

Firearms/Ammo Sales Rose in 2008’s First Quarter

Sales by firearm and ammunition manufacturers were up 9.7% in the first quarter of 2008, led by a 17.3% increase in ammunition sales, a 5% rise in handgun sales and a 6.7% increase in long gun sales, according to extrapolated figures based on the latest Pittman-Robertson federal excise tax collection report.

Excise taxes are calculated as a percentage of wholesale receipts, paid quarterly by firearm and ammunition manufacturers, and earmarked for state wildlife conservation and habitat restoration programs. These statistics are based solely on U.S. civilian sales and do not include sales to military, police, etc.

During the quarter, $76.8 million was generated for conservation through excise tax collections, compared to $70.1 million in the same period in 2007. From January through March, $19.9 million was collected for pistols and revolvers, $30.3 million for long guns and $26.4 million for ammunition. The latest tax collections suggest overall sales of $716.4 million, not including retail markup or final retail sales.

Sturm, Ruger’s Second Quarter Results Off

Reflecting a general downturn in sales for sporting firearms experienced as of late, Sturm, Ruger & Co., one of the largest American firearms producers reported its 2008 second calendar quarter sales declined as compared to the second quarter of last year. Sales during the first half of 2008 were also off in comparison to the first half of 2007.

Net firearms sales were $36,839,000 in 2008’s second quarter, versus $39,567,000 in the corresponding quarter of 2007.

The company’s castings sales continued a declining trend over the past several years. Net castings sales were $1,825,000 in the latest quarter, as compared to $2,540,000 in the second quarter a year ago.

Sturm, Ruger’s total net sales were $38,664,000 in the second quarter of 2008, versus $42,107,000 in the second quarter of 2007.

After deducting the cost of products sold, Ruger’s gross profit during 2008’s second quarter was $8,495,000 versus $13,128,000 during 2007’s second quarter. For the first six months, gross profit was $19,150,000 in 2008 versus $28,692,000 in the first half of 2007. Management issued no comment on the results.

Sturm, Ruger Shipping Retrofitted SR9s

Retrofitted SR9 pistols (which had been recalled due to an ability to sometimes fire when dropped) have begun shipping from Sturm, Ruger. Several parts have been changed in the new design, including:

  • The Trigger Assembly - Several parts in the trigger assembly were changed with the most notable being the trigger itself. The original trigger lever was comprised of an inner and outer ‘shoe’, with the inner shoe being not visible. The new design has a visible inner trigger similar in shape to that of Glock handguns. The redesign reduces trigger overtravel and when the inner trigger blade is depressed, the length-of-pull is reduced.

  • Magazine Latches - The magazine latches have been redesigned to allow them to work with any SR9 magazine variation.

  • Magazine Disconnect & Magazine Disconnect Spring, Striker Block & Striker Block Spring - These parts have been replaced with different units.

Remington Wins U.S. Army Rifle Contract

A $12 million contract from the U.S. Army-TACOM (Tank-Automotive and Armament Command) for the M24 Sniper Weapon Systems has been awarded to Remington Arms Co. 2008 marks the twentieth year that the M24 rifle and its variants have been used by the U.S. Army and Air Force. The rifle system is based on the Model 700 bolt action platform.

Colt’s Army Contract Up For Renewal in 2009

Colt’s contract for 5.56mm carbines with the U.S. Army reportedly comes up for renewal in 2009. The last time an Army solicitation for competitive procurement of 5.56mm carbines was issued (in 2006) it reportedly was withdrawn once the primary manufacturer (Colt) dropped its prices.

Iraqi Army Seeks American Arms

Iraq is reported as moving to switch its forces to the American 5.56mm M16/M4, as replacements for the Kalashnikov-derivative assault rifles. In 2006, Iraq is reported as purchasing/receiving 50,750 M16A2 rifles and 50,750 M4A1 carbines. In 2007, some 123,544 M16A4 Rifles and 12,035 M4 Carbines were sent to Iraq. The goal is reportedly to outfit the entire Iraqi army. The latest request for Iraq reportedly involves 100,000 M16A4 assault rifles, 140,000 M16A4 magazines, 100,000 M4 weapons, 4,000 AN/PVS-7D night vision devices, 1,100 40mm grenade launchers and 3,300 9mm pistols with holsters.

New Hybrid Vest from American Body Armor

American Body Armor, a subsidiary of BAE Systems Products Group, has announced the availability of XTREME Force Body Armor, an update of their XTREME Armor line. Using new Spectra Shield II along with Twaron - a bullet resistant fabric, the two materials have been combined into a hybrid vest that’s said to be both stronger and more flexible than previous vests.

NRA Foundation Receives Top Grade

For the sixth consecutive year, the NRA Foundation has received a four-star rating from Charity Navigator, America’s largest independent evaluator of charities. Rated for efficiency and effectiveness, four stars is Charity Navigator’s highest rating.

The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. He may be reached at: FirearmsB@aol.com.

The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. Visit www.FirearmsGroup.com. He may be reached at: FirearmsB@aol.com.

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