Industry News: June 2000

By Robert M. Hausman

ATF Proposing New Dealer Regulations

Major changes in the regulation of firearms dealers are being proposed by the Treasury Department’s Bureau of Alcohol, Tobacco & Firearms (ATF). Measures affecting recordkeeping by dealers of used guns, new procedures for the renewal of dealer licenses, and other actions are expected.

The new regulations are part of the agency’s response to the release of a report in early February that points out a small number of firearms dealers account for a majority of crime guns traced back to active dealers.The 85-page report, Commerce in Firearms in the United States, is believed to be ATF’s first comprehensive report on the firearms industry and the agency’s regulatory enforcement programs.

ATF has long known that a small number of dealers account for a majority of crime guns traced, as this author has personally witnessed ATF agents reporting this information several years ago at one of the meetings of the American Shooting Sports Council, a now-defunct industry lobbying organization. At the time, ATF officials said that while these small numbers of dealers may have sold an inordinate amount of guns later traced to crimes, this in itself was not necessarily indicative of wrongdoing on the dealers’ part. They added the neighborhoods in which the retailers were located, as well as other factors, could be contributing to the large number of trace requests.

However, the agency is now looking at this data in a new light, particularly after President Clinton publicly commented about it and called for new dealer regulations.

“This report provides new analysis leading us to new measures in our continuing efforts to decrease firearms violence and to keep guns out of the hands of criminals and youth,” Treasury Secretary Lawrence H. Summers said. “Most important, ATF will conduct intensive inspections of the 1% of dealers that account for well over half of all crime guns traced last year. If violations of law are found, we will take actions against these dealers.”

Some of the key findings in the Commerce in Firearms report include:

– 1.2% of current dealers (1,020 dealers) account for 57% of crime gun traces to active dealers. Each of these dealers had 10 or more crime guns traced to them. Just 0.2% of dealers (132 dealers) had 50 or more crime guns traced to them, accounting for 27% of crime gun traces.

– A small number of retail gun dealers fail to cooperate with ATF requests to trace crime guns, obstructing criminal investigations in these cases. In 1999, about 50 retail gun dealers either failed entirely to respond to a trace request, did not respond within the required 24 hours three or more times, or wrongly denied having information that they in fact had. While dealers are required to respond to trace requests by law, the ATF report makes no mention of charges or disciplinary action taken by the agency against the 50 dealers mentioned.

– In 1998 and 1999, firearms dealers voluntarily reported about 1,900 interstate thefts, involving over 3,700 firearms.

– While ATF has long requested common carriers, such as UPS, etc. to report firearms thefts, the firms are not required to do so by law and only a few companies regularly file reports.

Among retailers, including pawnbrokers, responding to an ATF survey, over half had reported a gun stolen at some time during conduction of their businesses. Among those that had sold 50 or more firearms the previous year, 10% of pawnbrokers and 16% of retailers had reported a theft since starting in business.

New Measures

In response to the report’s findings, ATF will begin conducting intensive inspections of over 1,000 retail dealers and pawnbrokers who had 10 or more crime guns traced to them in 1999. About 450 dealers will be required to provide ATF with certain information (serial number, manufacturer, importer, model) on secondhand firearms they acquire. These dealers sold a significant number of new crime guns that were recovered by police and traced within three years of leaving the gun shop. An estimated two million secondhand guns are sold in the U.S. each year. The initiative is believed to help enable ATF to trace used guns sold by dealers associated with high numbers of crime guns.

Dealers who fail to cooperate with trace requests will be required to send all their firearms records to ATF so the firearms they sell can be traced if they are used in crime. ATF will also take regulatory enforcement actions with respect to these dealers, “as appropriate.”

Firearms manufacturers and importers, upon request, will be provided by ATF with a list by serial number of the firearms they sold that were traced as crime guns during the previous year. This measure is thought to enable the manufacturers and importers to police the distribution of the firearms they sell.

ATF will shortly publish a Notice of Proposed Rulemaking requiring all licensed dealers to conduct regular inventories and report discrepancies to ATF. This move will enable dealers to fulfill their statutory obligation to maintain accurate records of the acquisition and disposition of firearms and report the loss or theft of firearms to ATF. The report indicates the agency’s inspections had corrected over 15,000 inventory errors among some 21,000 guns initially identified as missing from inventory during 1999. The Federal firearms License application form will be amended to require dealers renewing their licenses to certify how many firearms they acquired and disposed of during the preceding three years. This will provide evidence to enable ATF to deny renewal applications of dealers who are not actively engaged in the business. No definite number of how many firearms a dealer has to sell to be considered “active” has apparently been set, however.

Congressional reforms enacted in 1993 and 1994 have resulted in a substantial drop in the number of firearms licensees, from about 284,000 in 1992 to 104,000 today. The breakdown includes 71,270 retail dealers, 10,035 pawnbrokers, 17,763 collectors of curios and relics, 968 importers and others, 1,639 manufacturers, and 2,247 ammunition manufacturers.

Repair of NFA Firearms

In other regulatory news, ATF reports it does not consider the temporary conveyance of an National Firearms Act-regulated firearm to a gunsmith for repair to be a “transfer” under the terms of the NFA. Thus, an ATF Form 5 application is not required. (SAR cautions that there has not been any change in the law in this regard, and that ATF simply stating that a transfer is not required, may not change the legal requirement for one. We caution that our readers seek adequate legal counsel before they complete any transfers of the possession of NFA registered firearms without the Form 5 for repair- Dan)

Other dispositions, such as demonstration or sale, are transfers as defined in the NFA and must be covered by an approved application to transfer and register. Transfers without approval are violations of federal law. Any firearm involved is subject to seizure and forfeiture and the parties to the transfer are subject to criminal penalties of up to 10 years imprisonment.

However, in order to avoid any appearance that a transfer has taken place, ATF strongly recommends that a Form 5 application be submitted for approval prior to conveying the firearm for repair. ATF believes this will provide protection to the parties involved as it will document the repair of the firearm and help ensure that a “transfer” did not take place. In addition, an approved Form 5 will assist federal firearms licensees in establishing that their possession of the firearm is lawful.

Accordingly, Item 15 in the “Questions and Answers” section of ATF Publication 5300.4, Federal Firearms Regulations Reference Guide 2000, suggests that the owner obtain permission for the “transfer” of the NFA firearm by submitting a Form 5 application and that the gunsmith do the same for the return of the firearm. Federal Firearms Licensees must record the acquisition and disposition of the firearm as required by Part 179, Title 27, Code of Federal Regulations.

ATF’s NFA branch has recently received questions about the “law letter” requirement for the transfer of “post-1986” machineguns. Apparently, information has spread through the firearms industry that the “law letter” is not required. That information is not correct.
Machineguns manufactured or imported on or after May 19, 1986, are subject to the provisions of Title 18, United States Code, section 922(o) and are commonly referred to as “post-1986” machineguns. The transfer of a “post-1986” machinegun requires certain documentation, usually referred to as a “law letter.”

Title 27, Code of Federal Regulations, section 179.105 requires that applications to transfer and register “post-1986” machineguns will be approved if it is established by specific information the expected governmental customers require a demonstration of the firearm, information as to the availability of the machineguns to fill subsequent orders, and letters from governmental entities expressing a need for a particular model or interest in seeing a demonstration of a particular machinegun. The regulations further require applications to transfer more than one machinegun must also establish the dealer’s need for the quantity of samples sought to be transferred.

Thus, an application to transfer a “post-1986” machinegun to the federal firearms licensee and special (occupational) taxpayer must be submitted with a “law letter” evidencing a government agency’s interest in a particular machinegun. The NFA Branch will look for the following information in the letter:

– Written on agency letterhead and signed by the agency head or by someone with delegated authority to sign for the agency head.
– Dated within one year of the date of the receipt of the application.
– Identification of the particular machinegun being transferred (for example M16A2 or an M16-type).
– Identification of the agency’s interest in the machinegun (for example, purchase, demonstration, or training)
– Documentation of the need for more than one machinegun of a particular model. Finally, ATF says parties involved in NFA transactions have been calling the ATF Hotline for the status of NFA applications and for NFA questions. The ATF Hotline is to be used only by firearms and explosives licensees and permittees to report stolen firearms and explosives. NFA status inquiries or other questions for the NFA Branch should be made by calling (202) 927-8330.

SIG Arms For Sale

A company-wide strategic restructuring and market refocusing is under way at SIG Arms, and the arms maker has been put up for sale.
The Swiss Industrial Co. Holding LTD of Nuehausen/Rhine Falls, Switzerland, the parent company of SIG Arms, Inc., of Exeter, New Hampshire, has announced the move. As a result of the restructuring, SIG Arms will be reorganized into three business units: hunting and target shooting; pistols; and, special arms and barrels.

The decision is hoped to bring closer customer relationships as a buyer is sought for the SIG Arms division.

SIG officials were quick to assure U.S. dealers and consumers that the restructuring effort and possible sale of the division will not hamper manufacturing, supply and customer support programs. The complete line of SIG pistols, rifles and shotguns will continue to be manufactured, shipped and serviced without interruption.

Clinton Attacks NRA (Again)

In one of his most blatant attacks on firearms ownership in America, President Clinton layed the blame for criminal activity squarely at the feet of the National Rifle Association, during a televised interview.

As part of the President’s response to a question speculating what the NRA’s concerns would be over so-called “smart” guns, during an interview with Katie Couric on the March 2, 2000 edition of NBC’s Today show, Clinton said, “They’re (NRA) basically against anything that requires anybody to do anything as a member of society that helps to make it safer.”

Clinton later stated in the interview, “We have a higher percentage of people in jail than all the other advanced countries, and they have a lower gun death rate. Why is that? That’s because they don’t have an NRA in their country…” Clinton then listed his latest gun control schemes-gun owner licensing, mandatory storage requirements, requiring all handguns sold to be equipped with so-called “smart” or user recognition technology, and outlawing gun shows.

Meanwhile Georgia Governor Roy Barnes (D) has proposed that felons be prosecuted if they attempt to buy a gun, closing what he called a “huge loop-hole” in gun sale laws. Pro-gun organizations have been pushing the U.S. Justice Department to step up enforcement of prosecution of known felons attempting to violate federal laws which prohibit them from even trying to acquire a gun.

Maryland’s Governor Parris N. Glendening, whose anti-gun exploits have upset the state’s gunowners, has now advanced a proposal to provide tax breaks to residents who take gun safety measures. A Glendening bill before Maryland’s General Assembly would provide tax breaks to those who purchase gun safes or safety locks for handguns. If enacted, residents would be able to claim a credit for half of the cost of the safety devices, up to a maximum of $500 on their state tax returns.