Large-Capacity Magazines

Federal Court Rules California Ban Violates Second Amendment

The so-called “high-capacity magazines” (or “clips” as some politicians and advocates insist on calling them) are low hanging fruit for the anti-gun lobbyists, and have been for quite some time. Remember the federal assault weapons ban that sunset in 2004? A key provision of that statute was the criminalization of transfers and possession of “large-capacity ammunition feeding devices” (LCAFD) after September 13, 1994. What constituted an LCAFD? Any magazine or similar device that could accept more than 10 rounds of ammunition. That law sunset in 2004, but the agenda against high-capacity magazines, or whatever name chosen, has not abated. Indeed, magazine capacity is guaranteed to be a talking point after any act of mass violence involving a firearm.

In 2016, California set its sights on so-called “large-capacity magazines” (LCMs), those magazines with the ability to accept more than 10 rounds, when it included on the November ballot a proposition to criminalize ownership of LCMs. The ballot passed, and on July 1, 2017, the new law, California Penal Code section 32310 (“Section 32310”), was to take effect. However, some concerned and affected citizens filed a lawsuit challenging the new law on constitutional grounds. After 3 years and multiple hearings and appeals, a panel of Ninth Circuit Court of Appeals judges decided that the law indeed violates the Constitution. In a 2–1 decision, the panel confirmed the key findings of the district court made 1 year earlier in a March 2019 decision, including: (1) firearm magazines are protected arms under the Second Amendment; (2) large-capacity magazines are not “unusual arms” that would fall outside the scope of Second Amendment protection; and (3) prohibitions against large-capacity magazines do not enjoy a presumption of lawfulness. Given the historical importance of this decision, we will examine this case in depth and the implications.

The timing is perfect, really. Not only does this follow my recent article on why we have the Second Amendment (Small Arms Review, Vol. 24, No. 8 (August/September 2020)), but it also comes at a time when in the midst of widespread social upheaval and unrest, local governments are exercising some of the most oppressive measures in the name of public safety that we have seen in recent history.

Proposition 63

Section 32310 in its current form stems from a ballot proposition that passed on the November 8, 2016 election. The measure, titled, “Proposition 63,” included several gun control measures besides the ban on LCMs, including a background check requirement for ammunition purchases, a fine for failing to report stolen or lost guns, and requiring the California Department of Justice participate in the National Instant Criminal Background Check System (NICS). The measure had widespread support and easily passed with 63.08% of the votes (a total of 8,663,159 out of 13,733,931). Notably, there was a very large turnout for this vote, with more than 75% of voters showing up.

Before Proposition 63, Section 32310 was not nearly as broad and did not ban possession of LCMs. The section was first enacted in 2000 to prohibit the manufacture, importation (into California) and sale of LCMs (the California Penal Code defines “large-capacity magazine” in Section 16740 as any ammunition-feeding device with the capacity to accept more than 10 rounds, with certain exceptions). In 2013, the state extended the law to prohibit purchase and receipt of LCMs, but it permitted residents to keep LCMs lawfully acquired before the enactment. These measures were reflected in paragraphs (a) and (b) of the statute (see full text of Section 32310 below).

Proposition 63, however, expanded the proscriptions by adding new paragraphs (c) and (d), which criminalized possession of all LCMs, including those lawfully purchased before the statute was enacted. Specifically, the new law made it a misdemeanor, as of July 1, 2017, to possess any LCM, regardless of when the LCM was purchased, punishable by a fine not to exceed $100 per magazine, by imprisonment not to exceed 1 year, or both. The amended law also required owners to remove the magazines from the state, sell them to a firearms dealer, surrender them to law enforcement for destruction, or permanently modify the magazine to only accept 10 or fewer rounds, thus removing the magazine from the definition of LCM.

What follows is the full text of Section 32310, as revised by Proposition 63:

32310.

(a) Except as provided in Article 2 (commencing with Section 32400) of this chapter and in Chapter 1 (commencing with Section 17700) of Division 2 of Title 2, any person in this state who manufactures or causes to be manufactured, imports into the state, keeps for sale, or offers or exposes for sale, or who gives, lends, buys, or receives any large-capacity magazine is punishable by imprisonment in a county jail not exceeding one year or imprisonment pursuant to subdivision (h) of Section 1170.

(b) For purposes of this section, ‘manufacturing’ includes both fabricating a magazine and assembling a magazine from a combination of parts, including, but not limited to, the body, spring, follower, and floor plate or end plate, to be a fully functioning large-capacity magazine.

(c) Except as provided in Article 2 (commencing with Section 32400) of this chapter and in Chapter 1 (commencing with Section 17700) of Division 2 of Title 2, commencing July 1, 2017, any person in this state who possesses any large-capacity magazine, regardless of the date the magazine was acquired, is guilty of an infraction punishable by a fine not to exceed one hundred dollars ($100) per large-capacity magazine, or is guilty of a misdemeanor punishable by a fine not to exceed one hundred dollars ($100) per large-capacity magazine, by imprisonment in a county jail not to exceed one year, or by both that fine and imprisonment.

(d) Any person who may not lawfully possess a large-capacity magazine commencing July 1, 2017 shall, prior to July 1, 2017:

(1) Remove the large-capacity magazine from the state;

(2) Sell the large-capacity magazine to a licensed firearms dealer; or

(3) Surrender the large-capacity magazine to a law enforcement agency for destruction.

There were limited exceptions to the ban, such as for active or retired law enforcement, armored vehicle security forces, or for holders of special weapons permits. The code also allowed manufacture for government use and use as props in film production. Regardless, for all intents and purposes, the law had a very broad reach. “On July 1, 2017, any previously law-abiding person in California who still possesses a firearm magazine capable of holding more than 10 rounds will begin their new life of crime.” Duncan v. Becerra, 265 F.Supp.3d 1106 (S.D. Cal. 2017) (granting a preliminary injunction against the law).

Procedural History

After Proposition 63 passed, but before the new law was to take effect, plaintiffs Virginia Duncan, Richard Lewis, Patrick Lovette, David Marguglio, Christopher Waddell and the California Rifle and Pistol Association, Inc., filed suit in federal court against the attorney general of California, Xavier Becerra, challenging the law on grounds that it violated the Second Amendment and the Fifth Amendment Takings Clause. Two days before the ban was to go into effect, the district court in Duncan v. Becerra, 265 F.Supp.3d 1106 (S.D. Cal. 2017) (“Duncan I”) issued an order granting plaintiffs’ motion for a preliminary injunction. “If this injunction does not issue, hundreds of thousands, if not millions, of otherwise law-abiding citizens will have an untenable choice: become an outlaw or dispossess one’s self of lawfully acquired property. That is a choice they should not have to make.” Duncan I at 1139.

Attorney General Becerra appealed the injunction in Duncan I to the Ninth Circuit and in the meantime, filed a motion with the district court to suspend all proceedings pending the appeal. The court denied the motion, allowing the underlying constitutional challenge to continue. Plaintiffs then filed a motion for summary judgment with the district court, and in 2019, the court ruled in favor of the plaintiffs and held Section 32310 to be unconstitutional in its entirety. Duncan v. Becerra, 366 F.Supp.3d 1131, 1186 (S.D. Cal. 2019) (“Duncan II”). The court’s order prohibited the attorney general, his officers, agents, employees and attorneys, as well as state and federal law enforcement from enforcing Section 32310.

As would be expected, Attorney General Becerra appealed the Duncan II decision to the Ninth Circuit and requested the district court suspend its judgment while that appeal was pending. The district court granted a partial stay pending final resolution of the appeal. See Duncan v. Becerra, 2019 WL 1510340 (S.D. Cal. Apr. 4, 2019).

Which brings us to the present decision. The panel of three judges from the Ninth Circuit heard arguments on April 2, 2020, and on August 14, 2020, affirmed the district court’s summary judgment, holding that the Section 32310 ban on LCMs violates the Second Amendment because “it severely burdens the core of the constitutional right of law-abiding citizens to keep and bear arms.” —F.3d—, 2020 WL 4730668 at 4 (9th Cir. 2020) (“Duncan III”).

Firearm Magazines Are Protected Arms Under the Second Amendment

In determining that Section 32310 burdens constitutionally protected conduct, the court found magazines enjoy Second Amendment protection because “[w]ithout a magazine, many weapons would be useless, including ‘quintessential’ self-defense weapons like the handgun. … Put simply, a regulation cannot permissibly ban a protected firearm’s components critical to its operation.” Duncan III at 7 (citing to District of Columbia v. Heller, 554 U.S. 579, 629 and 630(2008)).

Regarding LCMs in particular, the court held that they are not “unusual” arms and therefore fall within the scope of the Second Amendment. Looking again at the precedent set under Heller, the court acknowledged that some arms may not fall under constitutional protection if they are dangerous and unusual. LCMs, however, are not unusual, enjoying a long history of use and availability in the United States, dating back more than 200 years. “Arms are not unusual if commonly owned and typically used by law-abiding citizens for lawful purposes.” The court did not opine on the dangerousness of LCMs, reaffirming the Supreme Court standard that “[a] weapon may not be banned unless it is both dangerous and unusual” (citing Caetano v. Massachusetts, 136 S.Ct. 1027, 1031 (2016) (Alito, J., concurring). However, it did note that statistics show criminal use of LCMs to be relatively low in comparison to their market saturation. Duncan III at 9, n. 8.

“The Second Amendment Is Not a Second-Class Right”

Finding that Section 32310 burdened constitutionally protected conduct, the court held the statute was subject to strict scrutiny, the highest and most stringent judicial test of a law. The reason was that “32310 strikes at the core right of law-abiding citizens to defend hearth and home, and the burden imposed on the core right is substantial.” Duncan III at 12. The court also rejects those decisions in which other courts have applied the lesser standard of intermediate scrutiny in contradiction to Heller. “[T]he Second Amendment is not a second-class right. … Nor is self-defense a dispensation granted at the state’s mercy.” Duncan III at 15 (citing McDonald v. City of Chicago, 561 U.S. 742, 780-81 (2010)).

The state argued the law does not impose a substantial burden on the Second Amendment because citizens can still defend themselves with guns equipped with non-LCMs. But the court rejects this notion.

The state essentially invites us to engage in a policy decision that weighs the pros and cons of an LCM ban to determine ‘substantial burden.’… But the Supreme Court in Heller took any such policy-balancing notion off the table: ‘The very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon. A constitutional guarantee subject to future judges’ assessments of its usefulness is no constitutional guarantee at all.’

Duncan III at 16, citing Heller at 634-35. The court went on to make a very shrewd observation.

The state speculates that a complete prohibition is necessary to avoid legally owned LCMs from falling into the wrong hands. But the flaws of that argument are obvious. The state could ban virtually anything if the test is merely whether something causes social ills when someone other than its lawful owner misuses it. Adopting such a radical position would give the government carte blanche to restrict the people’s liberties under the guise of protecting them.

Duncan III at 26 (emphasis added).

It is precisely the government’s ability to restrict our liberties under the pretext of protecting us where we are most vulnerable. History is rich with tragic examples of governments chipping away at the rights of its citizens. Stripping the power of self-defense is a very effective means to a desired end of ensuring the people are dependent on the government.

Attorney General Becerra’s office is currently reviewing the decision, and in a statement said, “Until further court proceedings, the stay on the injunction issued by the district court remains in place. The Attorney General remains committed to using every tool possible to defend California’s gun safety laws and keep our communities safe.”

This brings me to the end of this article, but clearly this is not the end of the story. I will keep you posted on developments as they unfold.

***

The information contained in this article is for general informational and educational purposes only and is not intended to be construed or used as legal advice or as legal opinion. You should not rely or act on any information contained in this article without first seeking the advice of an attorney. Receipt of this article does not establish an attorney-client relationship.

About the author –

Johanna Reeves is the founding partner of the law firm Reeves & Dola, LLP in Washington, DC (www.reevesdola.com). For more than 17 years she has dedicated her practice to advising and representing U.S. companies on compliance matters arising under the federal firearms laws and U.S. export controls. Since 2011, Johanna has served as Executive Director for the Firearms and Ammunition Import/Export Roundtable (F.A.I.R.) Trade Group (http://fairtradegroup.org). She has also served as a member of the Defense Trade Advisory Group (DTAG) since 2016. Johanna can be reached at jreeves@reevesdola.com or 202-715-9941.

By Teresa G. Ficaretta, Esq. & Johanna Reeves, Esq.

Legal News from the Nation’s Capital

ATF Ruling 2014-1 Impacts Manufacture and Import of Machine guns

On September 4, 2014, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) released Ruling 2014-1, addressing the transfer and possession of machine guns by qualified manufacturers and importers. The ruling reviews the restrictions of Section 922(o) of the Gun Control Act (GCA) (Title 18 United States Code, § 922(o)), and sets forth rules for qualified manufacturers and importers to lawfully transfer machine guns for further manufacturing or for repair. The complete text of the ruling can be found on ATF’s website at http://www.atf.gov/sites/default/files/assets/Library/Rulings/Firearms/atf_ruling_2014_-_manufacturing-inventory_of_machine guns_for_le_and_military_2.pdf.

Background

Section 922(o) of the GCA makes it unlawful for any person to transfer or possess a machine gun. The only exemption to this prohibition is a transfer to or by, or possession by or under the authority of a Federal, State, or local government agency. ATF regulations implementing Section 922(o) provide that qualified manufacturers may manufacture machine guns for sale or distribution to a Federal, State, or local government agency so long as they are registered in the National Firearms Registration and Transfer Record, and their transfer is restricted to the distribution for official use of Federal, State, or local government agencies. The regulations also authorize the manufacture of machine guns for purposes of exportation in compliance with regulations of the Department of State issued under the Arms Export Control Act.

ATF has consistently interpreted Section 922(o) to allow qualified manufacturers to stockpile machine guns they manufacture for sale to Federal, State, and local government agencies or for export. These positions are outlined in ATF’s National Firearms Act Handbook (the “NFA Handbook”), E-Publication 5320.8, Section 7.5, also available on ATF’s website.

Prior to issuance of Rul. 2014-1, ATF allowed qualified manufacturers and importers to transfer machine guns to other qualified licensees for purposes of further manufacture, repair, alteration, or integration into another defense article. In fact, Section 7.6.1 of the NFA Handbook states that qualified NFA manufacturers may contract with other qualified manufacturers to produce machine guns for sale to Federal, State, or local government agencies or for dealer sales samples. This section of the NFA Handbook goes on to state that a variance is required for these types of transfers, as the regulations in 27 C.F.R. 479.105 limit the number of machine guns that may be transferred. Accordingly, section 7.6.1 indicates that both manufacturers who participate in the production of the machine guns must obtain a variance authorizing the transfer from one manufacturer to the other pursuant to 27 C.F.R. 479.26.

Historically, a number of manufacturers have received variances from ATF authorizing the transfer of unlimited quantities of machine guns between licensed manufacturers during the manufacturing process pursuant to the provisions outlined in the NFA Handbook. However, beginning in 2012, ATF officials made statements at industry trade shows concerning the legality of such transfers under Section 922(o). At the Sporting, Hunting, and Outdoor Trade Show (SHOT Show) held in Las Vegas, Nevada, in January, 2012, ATF officials announced the agency’s position that allowing licensed manufacturers to transfer machine guns to a second qualified manufacturer for additional manufacturing processes is inconsistent with the plain meaning of Section 922(o). These officials announced that the agency would be providing written clarification at some point in the future. ATF Rul. 2014-1 appears to be this clarification.

Holdings of ATF Rul. 2014-1

The ruling has three separate holdings, outlined below:

1. Stockpiling of machine guns for future sale. The first holding states that licensed manufacturers who are properly qualified under the National Firearms Act (NFA) may manufacture and stockpile machine guns for future sale to Federal, State, or local government agencies without first obtaining a specific contract or order from such government agency, provided the machine guns are properly registered under the NFA and are only distributed for the official use of such government agencies.

2. Delivery of machine guns to a second manufacturer-maintaining constructive possession. The ruling states that qualified manufacturers may deliver machine guns (including frames or receivers) to another qualified manufacturer but may not transfer such firearms to the second manufacturer without violating Section 922(o). However, the ruling states that the delivery to a second manufacturer will not violate Section 922(o) if the first manufacturer maintains continuous dominion or control over the machine guns.

3. Transfers of machine guns between manufacturers when the second manufacturer has a government contract or “official written request” from a government agency. The last holding in ATF Rul. 2014-1 states that a manufacturer may transfer machine guns it has manufactured to another qualified manufacturer if the first manufacturer has a government contract or official written request that meets the following requirements:

• The document is from a Federal, State, or local government agency and is on official letterhead; The document states that the first manufacturer is an agent of the government agency authorizing the transfer of the machine guns to the second manufacturer;
• The document is signed and dated by an authorized government official and includes the official’s title and position;
• The document states that the firearms to be transferred are machine guns as defined by Federal law. The document states that the machine guns to be transferred are particularly suitable for official use by the requesting Federal, State, or local government agency; and
• The document includes a statement that the Federal, State, or local government agency requests and authorizes the manufacturer to transfer the machine guns to and/or from other licensed manufacturers for assembly, repair, development, testing, other manufacturing processes, or storage, as the case may be, for that government agency.

The ruling states that manufacturers who wish to transfer machine guns under the third holding, as outlined above, must attach a copy of the government contract or other official written request to the transfer application submitted to ATF’s NFA Branch.

CAUTION! ATF Rul. 2014-1 Modifies ATF Rul. 2004-2

The last paragraph of ATF Rul. 2014-1 states that ATF Rul. 2004-2 is “clarified” with respect to the documentation required under the GCA for qualified importers to transfer an imported machine gun to another qualified licensee for inspection, testing, calibration, repair, reconditioning, further manufacture, or incorporation into another defense article. This “clarification” will significantly affect the ability of U.S. companies to service the repair needs of their foreign customers.

In Rul. 2004-2, ATF used its variance authority under the GCA and NFA to establish a procedure for qualified importers to bring exported machine guns and other NFA firearms into the U.S. temporarily for purposes of inspection, testing, calibration, repair, or incorporation into another defense article. The ruling recognized the fact that many manufacturers have a legitimate need to import machine guns they exported to foreign law enforcement agencies for purposes of repairs under warranty, recalibration, or incorporation into another defense article, and that such importations are necessary for national defense. The ruling further indicated ATF was aware most of these temporary importations take place pursuant to the Department of State’s International Traffic in Arms Regulations at 22 C.F.R. Part 120-130. However, ATF expressed concern in the ruling that importers utilizing such regulations were not complying with the registration provisions of the NFA, which help ensure the security and accountability of the firearms while within the U.S. Accordingly, ATF Rul. 2004-2 required importers temporarily importing NFA firearms under State Department requirements to also register the firearms on ATF Form 2.

ATF Rul. 2004-2 also addressed transfers of machine guns following their temporary importation. The ruling stated that conveyance of temporarily imported NFA firearms does not amount to a “transfer” as that term is used in the NFA. Accordingly, the ruling stated that no transfer application must be submitted to ATF to lawfully accomplish such conveyances. The ruling did not specifically address the requirements of Section 922(o). However, the ruling clearly authorized the conveyance of imported machine guns to a properly qualified manufacturer for repair, remanufacture, or any of the other purposes outlined in the ruling.

It is important to highlight that the “clarification” of ATF Rul. 2004-2 by ATF Rul. 2014-1 effectively OVERRULES the transfer/conveyance language in the 2004 ruling. According to the 2014 ruling, ATF considers a qualified importer’s delivery of an imported machine gun to another FFL to be a transfer that violates Section 922(o), absent a government contract or other document specifically authorizing the transfer of the imported machine gun to a manufacturer. Because the machine guns will be the property of foreign governments, obtaining a written authorization from a Federal, State, or local government agency may be difficult. Accordingly, it will be challenging for importers to utilize the procedure authorized in ATF Rul. 2014-1 to lawfully transfer temporarily imported machine guns to another manufacturer.

CAUTION! Prior Inconsistent Rulings Modified

ATF Rul. 2014-1 also modifies any prior letter rulings or marking variances that are inconsistent with the positions outlined in the ruling. Consequently, businesses that operate under privately issued variances that authorize machine gun transfers between qualified manufacturers may no longer rely upon such variances.

Impact of ATF Rul. 2014-1 on Federal Firearms Licensees

The practical impact of ATF Rul. 2014-1 on the operations of Federal firearms licensees is summarized below.

1. Manufacture and stockpiling of machine guns. Qualified manufacturers may continue to manufacture and stockpile machine guns for future sale to Federal, State, and local government agencies.

2. Transfers of machine guns to a second manufacturer. ATF marking variances or private letter rulings specifically authorizing the transfer of machine guns from one qualified manufacturer to another qualified manufacturer are no longer valid. Licensees who utilize the services of another qualified manufacturer to manufacture machine guns must have an employee accompany the registered machine guns to the premises of the second manufacturer and maintain continuous dominion and control over the machine guns while the manufacturing operations are conducted. Alternatively, the first manufacturer may obtain a government contract or other document specifically authorizing the transfer to the second manufacturer. Such a document must meet all requirements of ATF Rul. 2014-1 as set forth above and must be submitted to the ATF National Firearms Act Branch with the Form 3 transfer application.

In the case of machine guns manufactured for export, transfers to another qualified manufacturer must meet all the requirements outlined above. It may be difficult to obtain a contract or other written authorization from a Federal, State, or local government agency specifically authorizing the transfer to a second manufacturer when the machine guns are being made for export to a foreign customer. The only alternative to this requirement is for the first manufacturer to maintain continuous dominion and control over the machine guns while they are on the premises of the second manufacturer.

3. Transfers of machine guns temporarily imported under Department of State requirements. Importers who are properly qualified under the GCA and NFA may continue to temporarily import machine guns exported to foreign governments for purposes of repair, recalibration, and incorporation into another defense article. These temporary imports must comply with ITAR regulations in 22 C.F.R. Parts 120-130 and be registered on ATF Form 2 within 15 days of release from Customs custody. However, these machine guns may not be transferred to another qualified manufacturer absent a contract with a Federal, State, or local government agency specifically authorizing the transfer to the qualified manufacturer OR a written authorization that meets all the requirements set forth in ATF Rul. 2014-1. As with transfers of machine guns manufactured for export to foreign customers, it may be difficult to obtain such an authorization from a domestic government agency when the machine guns are owned by a foreign customer. Alternatively, manufacturers or importers who have a need for another qualified manufacturer to perform repair or manufacturing operations on temporarily imported machine guns must maintain continuous dominion and control over the weapons while on the premises of the qualified manufacturer to avoid both licensees violating Section 922(o).

4. Impact of ATF Rul. 2014-1 on Repair of Machine Guns. ATF’s National Firearms Act Handbook, section 9.5.1, “Repair of Firearms,” states that ATF does not consider the temporary conveyance of an NFA firearm to an FFL for repair to be a “transfer” under the NFA. Accordingly, this section states that a transfer application is not required to convey the firearm for repair or to return the repaired firearm to its owner/possessor. The issuance of ATF Rul. 2014-1 raises questions as to the continued application of this position as to machine guns subject to control under Section 922(o). ATF advises that the ruling changes ATF’s position on repairs of machine guns in certain situations. These situations are outlined below.

Temporary Imports. As stated above, machine guns temporarily imported under State Department regulations may not be delivered to another FFL for repair absent a written authorization from a Federal, State, or local government agency expressly authorizing the transfer to the second FFL. ATF views such deliveries as a “transfer” as that term is used in Section 922(o) and the NFA, and they must be accomplished with a Form 3 transfer application with the written authorization attached. Given the difficulties in obtaining such an authorization, the best option for facilitating repair of temporarily imported machine guns will be for an employee of the importer to retain continuous dominion and control over the weapons while on the premises of the repairing FFL to avoid violating the law.

Manufacturers Discontinuing Business. The ruling will affect the repair of machine guns acquired by a qualified FFL pursuant to the provisions of 27 C.F.R. 479.105(f). This section of the regulations requires a qualified manufacturer, importer, or dealer, prior to discontinuing licensed business, to transfer, in accordance with the NFA, machine guns to a Federal, State, or local government agency or to another qualified manufacturer or importer. Alternatively, the FFL going out of business may transfer the registered machine guns (in limited quantities) to a qualified dealer as sales samples pursuant to 27 C.F.R. 479.105(d). Machine guns acquired by a qualified FFL pursuant to section 479.105(f) will not be transferred pursuant to a contract or letter from a Federal, State, or local government agency authorizing possession by the acquiring FFL. Accordingly, the delivery of such machine guns to another licensee for repair would be a transfer that would violate Section 922(o). The only option for facilitating repair in this situation will be for the registrant to maintain continuous custody and control over the machine guns during the repair process.

Machine guns Acquired as Sales Samples. Machine guns may be lawfully acquired as dealer sales samples pursuant to regulations in 27 C.F.R. 479.105(d). This regulation requires FFLs to obtain a letter from a Federal, State, or local government agency expressing a need for a particular model or interest in seeing a demonstration of a particular weapon (a “law letter”). ATF advises that the law letter authorizes the FFL-registrant to deliver the machine gun to another qualified FFL for repair and that such delivery is a “conveyance” rather than a “transfer.” As noted in the NFA Handbook, section 9.5.1, a transfer application is not required to convey a machine gun for repair or to return the repaired machine gun to the registrant. However, in order to avoid any appearance that a transfer has taken place, ATF recommends that a Form 5 application be submitted for approval prior to conveying the machine gun for repair. It is also recommended that the FFL making repairs obtain an approved Form 5 to return a repaired machine gun. If Form 5’s are not used, the parties should maintain documentation showing that the conveyance was for the purpose of repair. For dealer sales samples requiring repair, ATF Rul. 2014-1 did not change this procedure.

Delivery of Machine Guns for Repair by One FFL to a Second FFL. Assuming the delivery of machine guns to a qualified manufacturer for repair is lawful, the next question is whether the manufacturer may lawfully deliver the machine guns to a second manufacturer. It may be necessary, for example, for the first manufacturer to obtain the services of a second manufacturer for purposes of refinishing or heat treating the machine gun. ATF advises that such deliveries amount to “transfers” and are lawful only if there is a specific contract or other written authorization from a Federal, State, or local government agency that authorize the delivery to the secondary manufacturer. Such transfers must be accomplished on ATF Form 3 with the written authorization attached. For repair of dealer sales samples, ATF advises that a delivery/conveyance to the first qualified FFL for repair is permissible, but the FFL may not convey the machine guns to a second qualified FFL without violating Section 922(o). ATF further advises that machine guns in the hands of law enforcement agencies that require repair may continue to be conveyed to a qualified FFL for repair without a transfer occurring, but delivery to a second FFL would amount to a “transfer” that also requires a transfer application supported by a specific written authorization.

Conclusion

ATF Rul. 2014-1 significantly changes the way importers and manufacturers of machine guns should conduct business, both as to machine guns distributed domestically and those that are exported. As violations of the GCA and NFA may result in significant civil and criminal penalties, licensees should take care to avoid unintentional violations of the law.

(The information in this article is for informational purposes only and is not intended to be construed or used as legal advice).

Our office has recently received informal information regarding some Federal firearms licensees (FFL), special occupational taxpayers (SOT) who may have been misinformed regarding the transfer requirements imposed on machine guns that were manufactured or imported on or after May 19, 1986, which are sometimes known in the industry as “Post May” or “Post Sample” machine guns. In summary, it seems that the rumored advice is basically that a manufacturer or importer FFL/SOT may transfer any number of Post Sample machine guns to another manufacturer or importer FFL/SOT as if ATF Rul. 2002-5 (with its inclusion and application of the evidentiary requirements as imposed by 27 C.F.R. § 479.105(d) in support of a transfer of Post Sample machine guns) did not apply to such transfers.

27 C.F.R. § 479.105(d) as you may recall, is the regulation that implements the transfer requirements for Post Sample machine guns to dealer FFL/SOTs and it provides:

• Dealer sales samples. Subject to compliance with the provisions of this part, applications to transfer and register a machine gun manufactured or imported on or after May 19, 1986, to dealers qualified under this part will be approved if it is established by specific information the expected governmental customers who would require a demonstration of the weapon, information as to the availability of the machine gun 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 weapon. Applications to transfer more than one machine gun of a particular model to a dealer must also establish the dealer’s need for the quantity of samples sought to be transferred.

In applying 27 C.F.R. § 479.105(d), ATF Rul. 2002-5 holds that “…applications to transfer two (2) machine guns of a particular model to a Federal firearms licensee as sales samples will be approved if the dealer provides documentation that the dealer needs to demonstrate the machine gun to all the officers of a police department or the department’s SWAT team or special operations team. An FFL who offers other bona fide reasons for their need for two (2) or more machine guns may get more than two (2) with specific documentation.” Accordingly, ATF will approve the transfer of a Post Sample machine gun between FFL/SOTs if the required supporting documentation, executed by the law enforcement entity at issue, is provided in support of the transfer.

Although ATF Rul. 2002-5 specifically refers to “dealers” of machine guns in its analysis, ATF Rul. 2002-5 also advised that, “The dealer sales sample regulation in section 179.105(d) (editor’s note: now known as Section 479.105(d)) is a narrow exemption to the general prohibition on possession of post-1986 machine guns imposed by section 922(o).” Accordingly, as described above, ATF requires that the transfer of Post Sample machine guns between FFL/SOTs, including between manufacturer and/or importer FFL/SOTs, be supported by the same law enforcement demonstration (“LE Demo”) letter requirements as for dealer FFL/SOTs seeking such transfers. There has been no “loosening” of the rules for such transfers.

Perhaps, the recent confusion arises from a mistaken interpretation or unwarranted extension of the scope of 27 C.F.R. § 479.105(f) which governs the disposal of Post Sample machine guns by FFL/SOTs who are discontinuing their business operations. 27 C.F.R. § 479.105(f) provides:

• Discontinuance of business. Since section 922(o), Title 18, U.S.C., makes it unlawful to transfer or possess a machine gun except as provided in the law, any qualified manufacturer, importer, or dealer intending to discontinue business shall, prior to going out of business, transfer in compliance with the provisions of this part any machine gun manufactured or imported after May 19, 1986, to a Federal, State or local governmental entity, qualified manufacturer, qualified importer, or, subject to the provisions of paragraph (d) of this section, dealer qualified to possess such, machine gun.

Thus in “going out of business” situations, 27 C.F.R. § 479.105(f) dispenses with the LE Demo letter requirements imposed by 27 C.F.R. § 479.105(d) with regard to the transfer of Post Sample machine guns to a manufacturer or importer FFL/SOT but not to a dealer FFL/SOT which must at all times, still comply with the LE Demo letter requirements when seeking to be the transferee of a Post Sample machine gun.

In summary then, it is important to remember that 26 U.S.C. § 922(o) imposes a general and broad prohibition of the possession of Post Sample machine guns, and that the 27 C.F.R. § 479.105(d) dealer sale sample regulation is a very narrow exception to this general prohibition. As a result, it is important to keep in mind that the transfers of Post Sample machine guns between manufacturer and/or importer FFL/SOTs are still subject to this narrow dealer sales sample regulation and the associated LE Demo letter requirements, except that is, in the case of the even narrower sub-exception of 27 C.F.R. § 479.105(f) whereby a manufacturer or importer FFL/SOT may, without resort to the LE Demo letter process, receive the Post Sample machine gun inventory from any FFL/SOT that is going out of business (i.e. ceasing all firearms operations, or at least ceasing all SOT related operations). We trust that going forward, this clarification may serve to alleviate the aforementioned regulatory confusion that may or may not be, circulating in some sectors of the industry.