How bad is it to become a manufacture

[daviscustom]

Is it a major nightmare to get a type 7 ffl /class 2 sot?

I realize it's going to be $550/year for both licenses (for a small manufact.), but is it difficult to get and keep them?

Liability insurance is oppressively expensive I assume? Does the size of the manufacture (small obviously) make a positive difference in insurance costs?

Would there be any other license required to sell to individuals.

What brings all this up is today I visited a small gun shop, in a small town....and 1/3 of the store is a small one/two man machine shop where they build suppressors. Apparently they have been doing it since 1985. The guy was a bit difficult to talk to about anything I brought up, so I wasn't about to ask him about it...but it was the sort of set-up I could get interested in starting if I were to decide to take the leap. Just wondered if some of you folks could enlighten me a little on the down side to pursuing such an adventure.

[BLAKE2131]

i was told you have to have a facility along with business plans, designs, prices, etc and that the ATF is picky when it comes to manufacturing no small garage shop tinkering but just call the ATF and ask thats how i found out about the process along with talking to bendersquint

[Table Rock Arms]

You can do it in a small shop or even from your home. Many people do. If the city, or county that you plan to do it in will let you do it, then ATF will also let you do it. When ATF comes out to do your initial interview, they do ask what you plan to do, but if you are actually going to do business it should be obvious and you would have no problem. I have heard that sometimes they wanna see equipment when they come out.

ITAR is $2250 per year, SOT is $500 unless your selling lots then it is $1000, Insurance varies but figure a couple grand per year.

If you have extra money sitting around that your not attached to then its really not that hard.

Ryan

[bakerjw]

IMHO the ITAR is what is the killer for the deal. Were it not for that I think that we'd have a lot more people operating as manufacturers.

[M40A1308M]

Under current ATF ruling I was under the impression that if I want to PAINT a firearm or modify a 1911 dust cover or make a race gun that I have to have a manufacture's license. I own a small shop that is in a neighborhood and I do mostly work for other companies NON gun related. I would like to start building single stack firearms off the 1911 design and do hi level gunsmiths. But I looked at a Gunsmith's FFL but it will not cover modifying any part of a gun just simple replacement. I have talked with the technical branch of the ATF and there was no mention of me providing a business plan or showing them machines.

So if I am after a simple 7 FFL then am I to understand I have to have machines in place already? My shop does not have large machines to facilitate a gun manufacture's needs I was hoping to get the license and make some money and buy better machines.

[daviscustom]

IMHO the ITAR is what is the killer for the deal. Were it not for that I think that we'd have a lot more people operating as manufacturers.

If I have no interest in import/export is this required?

What are the benefits of this fee for a small manufacture?

Edit- I did a little research. So it is a yearly registration to keep an eye on things related to national defense tech. and you don't even get any import/export privileges.

bakerjw- your right that sucks. So $2800/year for the ITAR, type 7 ffl, the class 2 SOT....

[Wicked]

IMHO the ITAR is what is the killer for the deal. Were it not for that I think that we'd have a lot more people operating as manufacturers.

THIS is all that's holding me back at the moment. My business easily meet all other 07/02 requirements.

I am unwilling at this point to pay ITAR, but feel certain that I would be required to do so.

Many smaller operations may just turn a blind eye and do not pay. Take your chances if you want. I just can't roll that way as the FFL/SOT would be an addition to an existing business that would also then be placed at risk.


Either I will line up enough work to make ITAR compliance profitable or will continue to sit out.



viewtopic.php?f=13&t=68262

[Table Rock Arms]

Under current ATF ruling I was under the impression that if I want to PAINT a firearm or modify a 1911 dust cover or make a race gun that I have to have a manufacture's license. I own a small shop that is in a neighborhood and I do mostly work for other companies NON gun related. I would like to start building single stack firearms off the 1911 design and do hi level gunsmiths. But I looked at a Gunsmith's FFL but it will not cover modifying any part of a gun just simple replacement. I have talked with the technical branch of the ATF and there was no mention of me providing a business plan or showing them machines.

So if I am after a simple 7 FFL then am I to understand I have to have machines in place already? My shop does not have large machines to facilitate a gun manufacture's needs I was hoping to get the license and make some money and buy better machines.

If you have the tools to do what you plan on doing then I am sure that would be fine. When I had my interview my guy didn't even ask to see any equipment. I have just heard that sometimes they do. As for business plan, when I did my interview the guy asked me why I wanted to get in the gun business. I told him I like guns and that was it. It is pretty easy to do. The biggest thing is if your city will allow it. If they do then ATF wont stop you.

Ryan

[M40A1308M]

Thanks, I will give it a try. I have some city support and my neighbors support my ideas and would love to have a gun smith/ manufacture in house so to speak. I know that sounds weird but that was part of my decision on where I live. The whole neighborhood is comprised of PD {that like guns}, and gun enthusiast and NFA collectors.

Thanks

[rcrdps]

So they basically don't want hobbiests getting an FFL to collect and make guns. If you're in business for yourself, then you'll probably be wanting to make over $80K a year, and that extra $3000 in fees isn't so big of a deal. Still feels like you're getting raped, just like our $200 stamp, but certainly doable in the big picture if you're really serious. It takes money to make money.

This is my long way of saying, "Tag".

Gene

[Table Rock Arms]

Thanks, I will give it a try. I have some city support and my neighbors support my ideas and would love to have a gun smith/ manufacture in house so to speak. I know that sounds weird but that was part of my decision on where I live. The whole neighborhood is comprised of PD {that like guns}, and gun enthusiast and NFA collectors.

Thanks

It is not as much if your neighbors are cool with it as much as if your city will give you a business license to manufacture guns. Now depending on where you live, you might have to get some sort of conditional use permit and then the neighbors are gonna come into play. First thing you need to do is find out what zone your property is in and then see if your city would allow you to conduct that kind of business in that zone.

Ryan

[rockmup]

Its all VERY subjective depending on your examiner and your areas position on the issues.

You do Not have to have any machinery or a business plan.
You do have to make sure you are zoned for manufacturing and have your buisness lic., permits , EIN etc. in place before your interview.

I was told by BATFE that unless I'm exporting, I do NOT need to pay ITAR. His name is Ted Clutter. Hes at the tech branch but got the answer and called me back

YMMV

[daviscustom]

Since the type 7 FFL and class 2 SOT are manufacture's license/taxes..... are you able to sell just like a standard dealer...just with the added bonus of being able to sell NFA items? Just wondered if being a manufacture had any limitations on how you can sell the stuff you make.

If building suppressors (or any NFA item), is there any tax that the manufacture has to pay on each suppressor, or is it just the buyer that pays the excise tax? Assuming that is what the SOT covers...but wasn't sure.

[Bandit]

I was told by BATFE that unless I'm exporting, I do NOT need to pay ITAR. His name is Ted Clutter. Hes at the tech branch but got the answer and called me back

YMMV

DING DING we have a winner.
You can email Ken Mason at NFA branch for clarification on that.
I said in another thread that ITAR pertains to import/export and defense contracts only, not domestic sales.

Since the type 7 FFL and class 2 SOT are manufacture's license/taxes..... are you able to sell just like a standard dealer...just with the added bonus of being able to sell NFA items? Just wondered if being a manufacture had any limitations on how you can sell the stuff you make.

If building suppressors (or any NFA item), is there any tax that the manufacture has to pay on each suppressor, or is it just the buyer that pays the excise tax? Assuming that is what the SOT covers...but wasn't sure.

SOT2 can sell as well as make the NFA items except no transferable MG's no more.
They make it and register them tax free on F2. Dealer transfer is tax free on F3.
Only buyers on F4's are taxed the $200.



.

[bakerjw]

DING DING we have a winner.
You can email Ken Mason at NFA branch for clarification on that.
I said in another thread that ITAR pertains to import/export and defense contracts only, not domestic sales.

I recommend that you contact the state department and ask them. If Ken Mason is correct then great! Get it in writing. But ITAR is state department and from my inquiries IS required if you manufacture. But I'd highly recommend getting the facts from the source as the penalty (fine and prison time) for not having an ITAR is very steep.

[Wicked]

I said in another thread that ITAR pertains to import/export and defense contracts only, not domestic sales.

I recommend that you contact the state department and ask them. If Ken Mason is correct then great! Get it in writing. But ITAR is state department and from my inquiries IS required if you manufacture. But I'd highly recommend getting the facts from the source as the penalty (fine and prison time) for not having an ITAR is very steep.

The BATFE doesn't have squat to do with ITAR. It is a Department of State issue. The regs for ITAR do not say anything about only pertaining to import/export.

Damn near everything but "sporting shotguns" is on the US Munitions List and subject to ITAR Part 121.

Citation: Part 121 US Munitions List http://www.fas.org/spp/starwars/offdocs ... 21.htm#C-I

Category I-Firearms

*(a) Nonautomatic, semi-automatic and fully automatic firearms to caliber .50 inclusive, and all components and parts for such firearms. (See § 121.9 and §§ 123.16-123.19 of this subchapter.)

(b) Riflescopes manufactured to military specifications, and specifically designed or modified components therefor; firearm silencers and suppressors, including flash suppressors.

*(c) Insurgency-counterinsurgency type firearms or other weapons having a special military application (e.g. close assault weapons systems) regardless of caliber and all components and parts therefor.

(d) Technical data (as defined in § 120.21 of this subchapter) and defense services (as defined in § 120.8 of this subchapter) directly related to the defense articles enumerated in paragraphs (a) through (c) of this category. (See § 125.4 of this subchapter for exemptions.) Technical data directly related to the manufacture or production of any defense articles enumerated elsewhere in this category that are designated as Significant Military Equipment (SME) shall itself be designated SME.



Citation: ITAR part 122.1 (a), Registration of Manufacturers and Exporters: http://pmddtc.state.gov/regulations_law ... rt_122.pdf

"Any person who engages in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services is required to register with the Directorate of Defense Trade Controls. For the purpose of this subchaper, engaging in the business of manufacturing or exporting defense articles or furnishing defense services requires only one occasion of manufacturing or exporting a defense article or furnishing a defense service. Manufacturers who do not engage in exporting must nevertheless register."



READ ITAR. If you are an 07/02 and make one (1) suppressor or build one (1) rifle, then you must pay ITAR. Period. Doesn't say jack about domestic use. There are a few exceptions for R&D and the like but you must apply for the exception. Read it for yourself. The language seems pretty clear, if you bother to actually read it. Then again, I am not an attorney and not qualified to give legal advice.



Citation: http://www.exportrules.com/

"Export control laws provide for substantial penalties, both civil and criminal. Failure to comply with ITAR can result in civil fines as high as $500,000 per violation, while criminal penalties include fines of up to $1,000,000 and 10 years imprisonment per violation. Under EAR, maximum civil fines can reach $250,000 per violation, while criminal penalties can be as high as $1,000,000 and 20 years imprisonment per violation. Given the ease with which violations can occur, inadvertent violations by unaware companies and their officers can have drastic consequences."

[Wicked]

http://www.firearmslawgroup.com/publica ... eed-to-pay

[CThomas]

*(c) Insurgency-counterinsurgency type firearms or other weapons having a special military application (e.g. close assault weapons systems) regardless of caliber and all components and parts therefor.

Who comes up and writes this crap, "close assault weapon".

From link above
What are “defense services?”
For an understanding of what constitutes defense services, an examination of the USML is required. Providing a service to an item listed in the USML will constitute defense services. Recall that USML section 1 governs automatic and semiautomatic firearms, while USML section 3 governs ammunition. Any business that engages in providing gunsmithing services or the commercial sale of ammunition is also required to register under ITAR.

A gunsmith needs to register now-WTF? If this is not some end run to cripple the firearms industry what is.

[daviscustom]

Found this, it kind of supports the theory that we aren't included in ITAR. Still think the best bet is to contact the State Dept for sure...apparently the person that deals with this stuff is the Deputy Assistant Secretary for Defense Trade Controls

The important question is what are Defense Articles? Am I making defense articles?


Designating/Determining Defense Articles - 120.3
•
Policy criteria
–
specifically designed or modified for military application
–
does not have predominant civil application
–
does not have performance equivalent to an article used for civil application
–

specifically designed, developed, configured, adapted, or modified for military application AND HAS
–
significant military or intelligence applicability such that ITAR control is necessary

this is an excerpt from http://www.buyusa.gov/netherlands/en/ze ... iefing.pdf


The folks at the link that Wicked provided seem pretty unequivocal, which is cause for concern that I may be wrong.

[daviscustom]

I just launched an email to the office at the State Dept that answers questions related to ITAR.....so we can just wait and get it directly from the horses mouth.

[rcrdps]

Those folks also said that someone got fined for manufacturing night vision goggles. Would be interesting to know the story. Did they market them as mil-spec, or even bid for a military contract? Is it, "Will be used by military", or "can be used by military". The wording seems to be if you market or make it for military use. But if the department is of more liberal background like the ATF, then the interpretation is more likely to be that you must pay no matter what.

Gene

[daviscustom]

Can't believe it, but I already have a response...and it isn't the answer I wanted.

Here is the e-mail I sent:

I am looking into the possibility of becoming a type 7 FFL/ class 2 SOT firearms/suppressor manufacture. Manufacture in the very smallest sense of the word, meaning that I would like to set up a small one or two person gun shop doing custom gun work and small quantity suppressor manufacture. The business would not involve any export or military contracts. I would only be selling to the civilian and possibly law enforcement market. Would this type of business be required to register under ITAR and what would the fees be if required?



Here is the response I got:

Registration with DDTC would be required since you would be manufacturing a defense article. Suppressors are Category I (e) items on the US Munitions List. Manufacturers of defense articles must register whether or not they export. The annual registration fee for manufacturers is $2,250.00. There are no exceptions to this requirement for small businesses.


Should you decide to produce suppressors, do the following:

Go to http://www.pmddtc.state.gov and on the Home Page click on the link to Registration. There you will find the application form and complete instructions for a complete submittal package.

If this is a renewal of registration, please note that renewal is exactly the same as registering for the first time. You must submit a complete package.



Send your documents by courier service (FedEx, DHL, or UPS) to:

U.S. DEPARTMENT OF STATE

PM/DDTC, SA-1, 12TH Floor

Attn: Registration

2401 E Street NW

Washington DC 20037




Stephen M. Geis
DDTC Response Team
Contractor, XL

NOTE: Information in this message generally discusses controls and information contained in the Arms Export Control Act and International Traffic in Arms Regulations (ITAR), both of which are authoritative on this matter. The Response Team fields basic process and status questions, and assists exporters in identifying how to get answers to more complex questions handled by the Directorate of Defense Trade Control's licensing and compliance offices. The Response Team's services are not a substitute or replacement for the advisory opinion, general correspondence, and commodity jurisdiction processes delineated in the ITAR, which should be used to obtain authoritative guidance on export control issues, and do not in any way relieve exporters from their responsibilities to comply fully with the law and regulations.



I sent them a follow-up question asking if registration was still required if the NFA items were taken out of the equation .....I will post the response.

[daviscustom]

Another fast response, and again not the answer I wanted.

The question I sent:

Thank you for the rapid response. One more question, if you would be so kind again. If the NFA items were taken out of the picture would registration still be required?.... for example if I was building custom 1911 semi automatic pistols or custom rifles (standard custom gunwork), again for non-defense related customers, is ITAR registration required?



The response:

Yes, registration would be required. Those items are Category I (a) on the US Munitions list. The USML makes no distinction between sporting and military arms, except for sporting shotguns which are under Commerce Department jurisdiction for export.



Stephen M. Geis
DDTC Response Team
Contractor, XL

[Bandit]

I tried to remember where I read the other thread about this but it was at least 6 months ago.
Probably arfcom but anyway, if ever in doubt always ask so I called the Response Team at (202) 663-1282 number from the ITAR website.
I got an answer and it's not what I expected either.
ITAR website says nothing about sporting firearms so I don't know how that can be true but, they'll f!!! us any way they can. So much for guys who want to make a honest buck.
I guess what I read elsewhere was another internet rumor so disregard my enthusiasm on trying to encourage a little capitalism. So much for so called freedom of venture.

Oh I was told that before manufacturing any firearms related items for sale you must register with ITAR.
With 5-6 SOT2's on this forum why didn't any of them jump in with any info. ?????
So much for everyone in the firearms business sticking together.



.

[rcrdps]

With 5-6 SOT2's on this forum why didn't any of them jump in with any info. ?????
.

Maybe they're taking the cheaper route. Wild guess says ITAR won't come looking for you until you make enough for it to be worth their while. Do you think everyone that sells "defence" related stuff goes through ITAR? If I hadn't read this, and I wanted to manufacture some muzzle brakes and other stuff that doesn't require an FFL, I can guarantee you it wouldn't have crossed my mind that there was this revenue generator,.. I mean law.

Gene