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New Rule Proposal: Definition of “Engaged in the Business” as a Dealer in Firearms

Written by Austin Alterio

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September 07, 2023

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The Department of Justice (“Department”) proposes amending Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) regulations to implement the provisions of the Bipartisan Safer Communities Act (“BSCA”), effective June 25, 2022, that broaden the definition of when a person is considered “engaged in the business” as a dealer in firearms other than a gunsmith or pawnbroker. This proposed rule incorporates the BSCA’s definition of “predominantly earn a profit,” creates a stand-alone definition of “terrorism,” and amends the definitions of “principal objective of livelihood and profit” and “engaged in the business” to ensure each conforms with the BSCA’s statutory changes and can be relied upon by the public.

The proposed rule also clarifies what it means for a person to be “engaged in the business” of dealing in firearms, and to have the intent to “predominantly earn a profit” from the sale or disposition of firearms. In addition, it clarifies the term “dealer,” including how that term applies to auctioneers, and defines the term “responsible person.”

These proposed changes would assist persons in understanding when they are required to have a license to deal in firearms. Consistent with the Gun Control Act (“GCA”) and existing regulations, the proposed rule also defines the term “personal collection” to clarify when persons are not “engaged in the business” because they make only occasional sales to enhance a personal collection, or for a hobby, or if the firearms they sell are all or part of a personal collection.

This proposed rule further addresses the lawful ways in which former licensees, and responsible persons acting on behalf of such licensees, may liquidate business inventory upon revocation or other termination of their license. Finally, the proposed rule clarifies that a licensee transferring a firearm to another licensee must do so by following the verification and recordkeeping procedures instead of using a Firearms Transaction Record, ATF Form 4473.

The document is set to be published in the Federal Register on September 8, 2023, and more details will be available online. Additionally, you can download the printed version here.

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How could this ruling affect FFLs if passed?

  1. Expanded Definition of “Engaged in the Business”: The proposed rule broadens the definition of when a person is considered “engaged in the business” as a firearms dealer. This expansion could potentially result in more individuals or entities being required to obtain an FFL, as they may now fall under the new criteria for engaging in firearm sales for profit.
  2. Definition of “Personal Collection”: FFLs should pay attention to the new definition of “personal collection.” It clarifies when individuals are not considered to be in the business of dealing firearms due to occasional sales for personal collection enhancement or hobby purposes. FFLs should understand this definition to ensure compliance and avoid unnecessary regulatory burdens.
  3. Liquidation of Business Inventory: The proposed rule addresses the lawful ways in which former licensees, including FFLs, and responsible persons acting on their behalf, can liquidate business inventory after license revocation or termination. FFLs should familiarize themselves with these procedures to ensure they are in compliance when closing their businesses.
  4. Transferring Firearms to Another Licensee: The proposed rule clarifies the procedures for FFLs when transferring firearms to another licensee. It emphasizes following verification and recordkeeping procedures instead of using ATF Form 4473 for such transfers. FFLs should adapt their internal processes accordingly.

Conclusion

It’s essential for FFLs to closely follow the regulatory process, seek legal counsel or guidance as needed, and ensure they understand and implement any new requirements introduced by the proposed amendments to ATF regulations to avoid potential legal issues and maintain their licensing status.

Contact Orchid for compliance and legal support at orchidadvisors.com/contact.

 

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