AR Sponsor
Posted: 11/29/2016 12:14:37 PM EDT
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So I searched but because I am no longer a team member, my search is limited to 30 days and no results came up... so apologies if I am beating a dead horse but I need to get the hive's input.
I am looking into an FFL type 7 license as I wanted to start a small local company where I can do transfers and assemble parts into rifles and sell them whole. I would be sticking with the AR15/AR10 platforms and had considered also getting into CNCing aluminum for some lowers, lathes for suppressors etc but the ITAR portion of the registration is confusing to me. I understand the bulk of it but the part where it has an exception is my grey area. It lists an exemption to "persons whos pertinent business activity is confined to the production of non classified technical data" and my understanding is that the AR platforms are not classified and are public domain knowledge which lends itself to being exempt (so long as I dont come up with a new design or modification). Am I completely off base with this thought? $2250 seems a bit out of reach per year for a fee considering the amount I am looking to make (and spend in materials) as I will not be a large manufacturer and am wanting to do this mainly for my own hobby and a small side business. My nephew actually kicked this idea up to me as he was going to be doing the assembly of parts into a complete rifle to sell and I warned him about not being licensed. Then looking into it further got me to this point in my research so I figured you all would have good input. |
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That fee is an additional "registration" fee to State Department, in addition to the approximately $800 per year you will pay to ATF for the Type 7 and the Class2 SOT, combined. Even though you don't plan to export your products, any NFA manufacturer is required to pay that licensing fee to the agency that regulates the export. There is no grey area. If you are manufacturing NFA articles, you are required to register with DOS, as well. Just another way the government has extrapolated the commerce clauses to discourage you from doing business - because at some point, your product might get exported, or by producing it, you are in some way influencing the export market.
ATF Handbook explains:
Registration by firearms manufacturers with the U.S. Department of State. The State Department has the responsibility of enforcing the provisions of the Arms Export Control Act (AECA) relating to the export of firearms and other defense articles on the U.S. Munitions List. Nevertheless, any person engaged in the U.S. in the business of manufacturing or exporting firearms or other defense articles is required to register with the State Department’s Directorate of Defense Trade Controls (DDTC). The regulations expressly state that “Manufacturers who do not engage in exporting must nevertheless register.” Form DSP-9 (Registration Statement) and a transmittal letter must be submitted to DDTC by the registrant with a check or money order payable to the State Department of one of the fees prescribed by State Department regulations. The only exemption is for manufacturing articles for "research and development". Welcome to bureaucracy and the reality that, when it comes to NFA, there is no such thing as a "small side business". |
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Quoted:
That fee is an additional "registration" fee to State Department, in addition to the approximately $800 per year you will pay to ATF for the Type 7 and the Class2 SOT, combined. Even though you don't plan to export your products, any NFA manufacturer is required to pay that licensing fee to the agency that regulates the export. There is no grey area. If you are manufacturing NFA articles, you are required to register with DOS, as well. Just another way the government has extrapolated the commerce clauses to discourage you from doing business - because at some point, your product might get exported, or by producing it, you are in some way influencing the export market. The only exemption is for manufacturing articles for "research and development". Welcome to bureaucracy and the reality that, when it comes to NFA, there is no such thing as a "small side business". Quoted:
That fee is an additional "registration" fee to State Department, in addition to the approximately $800 per year you will pay to ATF for the Type 7 and the Class2 SOT, combined. Even though you don't plan to export your products, any NFA manufacturer is required to pay that licensing fee to the agency that regulates the export. There is no grey area. If you are manufacturing NFA articles, you are required to register with DOS, as well. Just another way the government has extrapolated the commerce clauses to discourage you from doing business - because at some point, your product might get exported, or by producing it, you are in some way influencing the export market. ATF Handbook explains:
Registration by firearms manufacturers with the U.S. Department of State. The State Department has the responsibility of enforcing the provisions of the Arms Export Control Act (AECA) relating to the export of firearms and other defense articles on the U.S. Munitions List. Nevertheless, any person engaged in the U.S. in the business of manufacturing or exporting firearms or other defense articles is required to register with the State Department’s Directorate of Defense Trade Controls (DDTC). The regulations expressly state that “Manufacturers who do not engage in exporting must nevertheless register.” Form DSP-9 (Registration Statement) and a transmittal letter must be submitted to DDTC by the registrant with a check or money order payable to the State Department of one of the fees prescribed by State Department regulations. The only exemption is for manufacturing articles for "research and development". Welcome to bureaucracy and the reality that, when it comes to NFA, there is no such thing as a "small side business". You mention NFA articles which I understand the suppressors would fall into that category but if I removed that and left it to just assembling an AR15 for example from assorted parts, wouldnt that be considered part of the exemption "(2) Persons whose pertinent business activity is confined to the production of unclassified technical data only"? Or am I misreading that as it actually only covers the creation of the unclassified technical data (documents) and not the actual assembly of the item produced by the unclassified technical data? Again I really appreciate all of your insight and I am not trying to disregard. I just like to make sure I understand completely before making decisions and if I dont ask the questions, then I am left wondering for the rest of time. 
I can justify <$1000 if I can put together rifles and sell them but cannot if it means tacking on the additional registration with ITAR. At that point you are 100% correct in there being no such thing as a small side business when it comes to this stuff. The market is too full it seems for anyone to make enough cash to support the fees on a small scale, at least so it seems. |
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As a former Type 07 FFL I would say - WAIT and collect as much start up capitol and machines and tooling as you can.
There is a push to take ITAR from the State Dept and move it to the Commerce Dept and the whole fee platform could go away entirely. DO NOT do gun work for anyone* at this time - because the ITAR fee can be assessed with only a single instance which falls under ITAR control. *This means even yourself if it appears you are prepared to do this as a business. Honestly - the time to get into this market has come and gone. With Trump as Prez elect the future would seem a larger, more open market for guns which means prices fall, profit margins on the AR type platform probably wouldn't be enough to cover your liability insurance, let alone leave you with any pocket-able profits. With the min-wage going up in CO you would make more money at Taco Bell, than doing AR's because the gun Biz is going to take a good 72hrs a week of your time. Not saying you can't make good money in the gun biz, but your going to need a really good in house pistol smith and a good bank roll that allows you to jump on good deals instantly - and often these deals are cash transactions. Location, Zoning, toxic waste disposal, insurance, there is a huge amount of prep work to go through before you first turn on that OPEN sign, and that whole journey will be costing cash while not offering any cash-flow return until everything is in order. |
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Thats a really good point of view, thank you. Ive already gotten involved with the "Silence the noise" movement and I will look into the ITAR stuff. CO has definitely gone to the liberal entitled idiots, but they will have to fall flat on their faces soon. Hoping the election sparked enough folks with my own mindset to start making changes and it seems hopeful but it will take time.
Again, thanks for everyone's input. I will be holding off for now. |
| Not to be discouraging, but consider a Type 1 / Class 3. No manufacturing log, no excise tax, no ITAR. Try to do as much "gunsmithing" as possible, and create passive income via FFL/NFA transfers. You can file for your FFL as a sole proprietor so no corp. is needed. Stay away from sales tax if you can. Get in tight with a local PD and see if you can get a few demo letters to satisfy the full-auto bug. I’d try this for maybe a year or two, and if you really like it, go all the way with it. Just my 2 cents. |
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Just a side note. Pretty much everything AR related falls under one or more ITAR regulations. Export or not. Registered or not. You still can not export without license from DOS. Depending on the extent of your manufacturing is where they will most likely make a determination. if you are actively engaged in manufacturing any firearms parts that can be or are intended to be used on a munitions list controlled item it falls under DTC in one fashion or another. By what was posted in the OP. Yes you will have to register.
A couple different things going on at the same time. One is oversight of Munitions List items by way of DTC. Then There is a Taxation component also... Excise Tax is due on certain firearms manufacturied products. In most cases if you did not manufacture the component that requires an Excise Tax to be paid...then you would not normaly be required to register with DTC, DOS. However as I stated above the extent of manufacturing or assembly could possibly force a registration. For instance they view a certain amount of assembly into a new product as manufacturing..? Like using lowers to manufacture a Specfic product. Lowers are serializd uppers are not..? Here is how complicated it can get if you do not understand it.. A taper pin for a gas block. Just a very small tapered steal pin..right ! Nope. How was it sold ? Sold as: "Generic" taper pin. Or AR-15 Gas Block Taper Pin ! One is a common over the counter taper or roll pin that has a 1k uses. The other one is Specfic for replacement/repair of a Mutinous List controlled item. From a purely technical view you could not "knowingly" sell the second one for export without license from DTC, DOS. That is the mind set you are dealing with. That same mind set drives the interpretation of ITAR. In my day we would have told them to pound sand as to registration for the assembly of "Tax Paid" components with no intended export. This is where you see the disclaimers " not for export..etc". |
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Quoted:
Not to be discouraging, but consider a Type 1 / Class 3. No manufacturing log, no excise tax, no ITAR. Try to do as much "gunsmithing" as possible, and create passive income via FFL/NFA transfers. You can file for your FFL as a sole proprietor so no corp. is needed. Stay away from sales tax if you can. Get in tight with a local PD and see if you can get a few demo letters to satisfy the full-auto bug. I’d try this for maybe a year or two, and if you really like it, go all the way with it. Just my 2 cents. There is tremendous amount of FAIL in this... First of all, if you are assembling AR's for sale you MUST pay ITAR AND pay Federal Excise Tax (FET) Being an S.O.T. has NOTHING to do with it (unless you are a Class II Manufacturer and THEN all of the above applies) Obtaining an S.O.T. solely for the purpose of having Title II weapons is a Federal Offense. What REALLY annoyed N.F.A. Branch is a couple of times I wrote "Demo Request Letters" For myself. 
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Quoted:
There is tremendous amount of FAIL in this... First of all, if you are assembling AR's for sale you MUST pay ITAR AND pay Federal Excise Tax (FET) Being an S.O.T. has NOTHING to do with it (unless you are a Class II Manufacturer and THEN all of the above applies) Obtaining an S.O.T. solely for the purpose of having Title II weapons is a Federal Offense. What REALLY annoyed N.F.A. Branch is a couple of times I wrote "Demo Request Letters" For myself. Obviously. I'm merely making the suggestion that he goes this route (type 1) at first instead of going all the way with it (type 7) just to avoid the headaches/costs associated with it. If I recall correctly, you can gunsmith/build up a customers receiver into a firearm and it's not manufacturing. Or did that change recently maybe
Of course, if you build a firearm from your own parts, you're manufacturing, which requires type 7, itar, etc. The SOT is just a suggestion to create additional income with transfers and what not. He obviously doesn't need it. He wants to get into this biz, so it's obviously not for his personal use. But anyway, yea, if you get a Type 7, you need to register with ITAR. |
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Quoted:
Obviously. I'm merely making the suggestion that he goes this route (type 1) at first instead of going all the way with it (type 7) just to avoid the headaches/costs associated with it. If I recall correctly, you can gunsmith/build up a customers receiver into a firearm and it's not manufacturing. Or did that change recently maybe
Of course, if you build a firearm from your own parts, you're manufacturing, which requires type 7, itar, etc. The SOT is just a suggestion to create additional income with transfers and what not. He obviously doesn't need it. He wants to get into this biz, so it's obviously not for his personal use. But anyway, yea, if you get a Type 7, you need to register with ITAR. Thats 100% how I saw it too. Gunsmithing is taking parts from a customer and assembling them, doesnt require ITAR. If you use your own parts... well then type 7 with ITAR etc. However selling parts and assembly from what I have found still falls in the gunsmithing category so long as the gunsmithing is after the purchase order of the parts. Right now I have decided to hold off completely till I see how the market is going to move with the new administration. |
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