Firearms are manufactured under the authority of an ATF-issued Type 07 or Type 10 license. That license defines the permissible activities that are regulated by ATF and subsequently “reviewed” for compliance during an official FFL compliance inspection. According to the ATF’s website, they cite the process for inspecting a licensee to be as follows: “The IOI will introduce themselves to the licensee, show their ATF credentials, and explain why they’re there. They will also provide their contact information for any follow-up questions. During an inspection, the IOI will conduct the following activities (not necessarily in this order):

• Review business operations, including ownership and responsible person information
• Evaluate the licensee’s internal controls and security measures
• Verify that licensee is in compliance with state and local laws
• Conduct a complete physical inventory of firearms
• Review the acquisition & disposition (A&D) record, also known as the bound book
• Review all ATF forms, including Forms 4473
• Suggest voluntary actions or steps the licensee can take to improve compliance”

Orchid’s team of attorneys and FFL compliance experts have witnessed these actions firsthand. In fact, Orchid has been on the ground during actual ATF inspections for the largest of US firearm manufacturers and worked (independently) along-side the ATF’s major inspection unit – a special team created by ATF to audit “mega factories.”  While the activities shown above definitely demonstrate the ATF’s procedures, there are important areas to take note of if you manufacture guns. In every inspection that we’ve witnessed ATF has spent significant time evaluating firearm serialization, markings and on-hand inventory. And, if you manufacture NFA forms, then the proper timing and accuracy of the NFA Form 2 and related transfer forms (i.e., NFA Form 3, 4, 5, 9) come into play. The following are some key things that you should know: Serialization and Markings

• ATF has and likely will inspect the time to serialize frames and receivers found in “work-in-process” to ensure that they are properly serialized within 7 days. Stockpiling of unserialized firearms can be a significant violation.
• ATF may evaluate the proper depth of serial number markings and ensure that other required marks such as city, state, model (etc) are properly identified and recorded in the records.

Firearm Inventory Audits In almost every inspection that we’ve participated, this is where ATF has spent the majority of their inspection time – conducting a bi-directional book to physical of firearms, especially in these areas:

• Receiving dock – when did the serialized firearm arrive and has it been recorded in the Bound Book?
• Shipping dock – Have firearms sitting on the shipping dock already been “disposed” even though possession has not transferred? Or, have recent shipments left the dock but failed to be disposed in the bound book?
• Work-in-Process and Inventory Cages – Are all of the firearms in these locations properly recorded in the bound book? Are all of the firearms showing as “open dispositions” in the bound book on-site or easily traceable to the possession of an employee for bona fide business purposes?

While there are many other aspects of ATF compliance included in the inspection process, such as import compliance for example, these two areas standout as more time intensive and “riskier” areas of the manufacturing FFL inspection.  Orchid’s legal resources and FFL compliance experts recommend that manufacturing FFLs design sound controls in these areas, self-inspect their FFL operations and make corrections to processes and ATF records only where and how permitted by the law. If you have any questions regarding the responsibilities of a manufacturing FFL, associated legal risk or compliance and technology concerns, don’t hesitate to contact our team.

Ready to Learn More About Orchid’s Expanded Offerings? Contact Us Today.