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But Does It Help Manufacturers

Written by jon rydberg

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June 14, 2013

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(Download Above or Read Below) But Does It Help Manufacturers? Delivered to the desk of the Governor on May 22, 2013 was a bill passed by the Missouri Legislature asserting state supremacy in matters of intrastate firearm manufacture.  Kansas enacted similar legislation on April 16, 2013 and several more states are advancing similar bills.  These “Second Amendment Protection Acts” are a legislative trend evolving from similar, earlier legislation called “Firearms Freedom Acts.” The gist of these bills is a direct challenge to the Supremacy Clause of the U.S. Constitution through the Interstate Commerce Clause, using the Ninth and Tenth Amendments and coupling them to the Second Amendment.  To stay on these rails, state legislatures are focusing on intra-state versus inter-state commerce – essentially the difference between what a state can regulate and what the federal government can preempt.  State governments are making their political point by carving out the intrastate manufacture of firearms and ammunition. But will any of these acts help manufacturers of firearms and ammunition? The lure is enticing.  States with this approach use the slant of friendly to manufacturers, limiting state-imposed regulations and rejecting federal requirements for in-state manufacture and sale.  Particularly for manufacturers who have either made the decision to relocate or who are contemplating a change, the timing puts this legislative trend on the boardroom agenda. The recent Kansas legislation is an interesting case in point.  Under the Kansas “Second Amendment Protection Act,” if a firearm is manufactured in Kansas, owned in Kansas, and remains in Kansas, the firearm is exempt from federal requirements and subject only to state requirements.  It requires “Made in Kansas” to be stamped on a central metallic part, such as the receiver or frame.  It allows for component parts to be brought into Kansas for manufacture while retaining the intrastate protections.  The Kansas act is hyperlinked in the right hand column on this Advisory, complete with a Table of Contents for Manufacturers. The Kansas “Second Amendment Protection Act” triggered an immediate response from the federal government.  One day after these and other provisions became effective in Kansas, the U.S. Attorney General sent a letter to the Governor of Kansas, in part stating “Moreover, the United States will take all appropriate action, including litigation if necessary, to prevent the State of Kansas from interfering with the activities of federal officials enforcing federal law.”  The Governor of Kansas responded.  Both letters are available in our on-line research library. The origin of these acts date back to 2009, when the Governor of Montana signed into law their “Firearms Freedom Act.”  The ATF immediately sent an “Open Letter” to all Montana FFLs – a process it repeated to Tennessee (2009) and Wyoming (2010).  Similar acts were passed in Alaska, Arizona, Idaho, South Dakota, and Utah.  A lawsuit filed by the Montana Shooting Sports Association in 2009 to uphold the Montana Firearms Freedom Act was dismissed at the federal District Court level, but is pending on appeal to the 9th Circuit Court of Appeals where oral arguments were heard on March 4, 2013.  You can find these statutes and the decision pending appeal by signing in to our on-line research library. The constitutional issues raised by these “Firearms Freedom Acts” and “Second Amendment Protection Acts” will undoubtedly make them a subject of future lawsuits. The challenge for manufacturers presented by these acts is two-fold.  First, there is the possibility that a lawsuit renders the state act unconstitutional in whole or in part through a process taking a period of years.  If a manufacturer elects to operate under the terms of an act that is determined to be unconstitutional, it could face an abrupt shift in operations.  Second, there is the possibility that the manufacturer becomes the test case.  While the Montana lawsuit was initially dismissed for “lack of standing” because manufacturing operations had not been impaired or impeded by the federal government while relying upon the terms of the state act, a manufacturer which is impacted would face the decision of whether to cut its operational losses and settle with the federal government or pursue litigation to defend its reliance upon the state statute. The immediate questions facing manufacturers can be stated in two categories.  First, if you are operating in state under its “Federal Firearms Protection Act” or “Second Amendment Protection Act,” does your business model include a contingency for operations if the state act is declared unconstitutional and/or if your company is faced with negative federal audit results?  And, second, if you are considering relocating operations to one of these states, does your analysis take into consideration the potential cost of defending to uphold the state act and/or extending federal compliance to intrastate manufacture and sales? We welcome the opportunity to join you for these and other conversations to strategize your operational compliance.

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