[Federal Register Volume 65, Number 167 (Monday, August 28, 2000)]
[Proposed Rules]
[Pages 52054-52056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21903]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 178

[Notice No. 902]
RIN 1512-AC08


Commerce in Firearms and Ammunition--Annual Inventory of Firearms 
(99R-502P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Bureau of Alcohol, Tobacco and Firearms (ATF) is proposing 
to amend the regulations to require Federally licensed importers, 
manufacturers, and dealers of firearms to take at least one physical 
inventory each year. The proposed regulations also specify the 
circumstances under which these licensees must conduct a special 
physical inventory. In addition, the proposed regulations clarify that 
when a firearm is stolen or lost in transit between licensees, for 
reporting purposes it is considered stolen or lost from the 
transferor's/sender's inventory.

DATES: Written comments must be received on or before November 27, 
2000.

ADDRESSES: Send written comments to: Chief, Regulations Division; 
Bureau of Alcohol, Tobacco and Firearms; P.O. Box 50221; Washington, DC 
20091-0221; ATTN: Notice No. 902. Written comments must be signed. 
Submit e-mail comments to: [email protected]. E-mail comments 
must contain your name, mailing address, and e-mail address. They must 
also reference this notice number and be legible when printed on not 
more than three pages 8\1/2\" × 11" in size. We will treat e-mail 
as originals and we will not acknowledge receipt of e-mail. See the 
Public Participation section of this notice for alternative means of 
providing written comments.

FOR FURTHER INFORMATION CONTACT: James P. Ficaretta, Regulations 
Division, Bureau of Alcohol, Tobacco and Firearms, 650 Massachusetts 
Avenue, NW., Washington, DC 20226 (202-927-8230).

SUPPLEMENTARY INFORMATION:

Background

    Section 923(g)(6) of the Gun Control Act of 1968 (GCA) requires 
licensed manufacturers, licensed importers, licensed dealers, and 
licensed collectors to report any theft or loss of firearms from the 
licensee's inventory or collection to ATF and the appropriate local 
authorities within 48 hours after the theft or loss is discovered.
    The regulation that implements section 923(g)(6) is contained in 27 
CFR 178.39a. This section provides that each Federal firearms licensee 
(FFL) must report the theft or loss of a firearm from the licensee's 
inventory (including any firearm which has been transferred from the 
licensee's inventory to a personal collection and held as a personal 
firearm for at least 1 year), or from the collection of a licensed 
collector within 48 hours after the theft or loss is discovered. 
Licensees must report such thefts or losses by telephoning 1-800-800-
3855 (nationwide toll free number) and by preparing ATF Form 3310.11, 
Federal Firearms Licensee Theft/Loss Report, in accordance with the 
instructions on the form. The original of the report must be forwarded 
to the office specified on the form, and Copy 1 must be retained by the 
licensee as part of the licensee's permanent records. The licensee must 
also report the theft or loss of a firearm to the appropriate local 
authorities.
    Section 178.129(c) requires licensees to retain each copy of Form 
3310.11 for a period of not less than 5 years after the date the theft 
or loss was reported to ATF.

Proposed Regulations

27 CFR 178.130

    In 1998 and 1999, licensees filed theft/loss reports on over 5,000 
incidents, involving over 27,000 lost or stolen firearms. Inventory 
discrepancies, recordkeeping errors, and employee theft (problems which 
often only become apparent when a physical inventory is conducted) 
accounted for almost 40 percent of the reported incidents and over 
11,000 missing firearms.
    Accordingly, ATF is proposing that all Federally licensed 
importers, manufacturers, and dealers in firearms be required to 
conduct at least one annual physical inventory of their firearms 
inventory and reconcile that inventory with the records of receipt and 
disposition required under part 178. In addition, ATF is proposing that 
these licensees be required to conduct special firearms inventories 
under the following conditions: at the time of commencing business 
(already a requirement for licensed dealers under 178.125(e)), at the 
time of changing the location of their business premises, at the time 
of discontinuing business, and at any other time the Director of 
Industry Operations may require in writing. These special inventory 
requirements are necessary to account for changes in business 
operations that often affect inventories.
    Any theft or loss of a firearm disclosed during the annual 
inventory or during a special inventory must be reported within 48 
hours after its discovery in accordance with the statutory requirements 
of 18 U.S.C. 923(g)(6). Without the inventory requirements, licensees 
could not effectively fulfill these reporting requirements.
    The annual inventory requirement is considered to be an ordinary 
and customary business practice.

27 CFR 178.39a

    Current regulations do not specify if firearms are considered the 
inventory of the sending or receiving Federal firearms licensee while 
in transit

[[Page 52055]]

between licensees on a common carrier. Therefore, current regulations 
do not specify whether the sending or receiving licensee is responsible 
for reporting the theft or loss of a firearm while it is in transit 
between licensees on a common carrier. The lack of clarity over which 
FFL is responsible for reporting the theft or loss may result in 
neither party reporting the theft or loss. In Fiscal Year 1999, there 
were 1,271 crime guns traces in which the FFL claimed that it never 
received the firearm shipped to it and the firearm had not been 
reported to ATF as lost or stolen. Thus, a significant number of 
firearms lost or stolen in transit are not being reported to ATF and 
the appropriate local authorities. In addition, common carriers are not 
required under Federal law to report the theft or loss of firearms 
shipped in commerce. These omissions prevent ATF and local law 
enforcement from investigating the specific theft or loss which is not 
reported and hinders ATF's tracing capabilities.
    To eliminate this problem, ATF proposes that a firearm stolen or 
lost in transit between licensees be considered stolen or lost from the 
transferor's/ sender's inventory. Accordingly, the transferor/sender of 
the missing firearm must report the theft or loss of the firearm within 
48 hours after the theft or loss is discovered by the transferor/sender 
to ATF and to the appropriate local authorities.
    In addition, in order to enable the transferor/sender of the 
firearm to have the knowledge necessary to fulfill these reporting 
responsibilities, the transferor/sender must have, or establish, 
commercial business practices which let him or her learn whether the 
transferee/buyer of the firearm ultimately received the firearm. The 
transferor/sender can fulfill this verification requirement by 
contacting the transferee/buyer by telephone, facsimile, or e-mail and 
asking whether he or she had received the firearm. The transferor/
sender also could, by contract, require the transferee/buyer to always 
confirm receipt of firearms.
    We determined it is more logical to put the reporting burden on the 
transferor/sender, rather than the transferee/buyer, because the 
transferor/ sender is more likely to know the circumstances of when and 
how the firearm was shipped. Accordingly, it will be less burdensome 
for the transferor/sender to assure that he/she has the knowledge 
necessary to fulfill the reporting requirement than it would be for the 
transferee/buyer.
    If a firearm is lost or stolen in transit, the notation in the 
acquisition and disposition book of the transferor/sender that the 
firearm was disposed of to a particular transferee/buyer is inaccurate. 
Therefore, a transferor/sender must verify that the transferee/buyer 
received the shipped firearm in order to fulfill his/her statutory 
responsibility to maintain accurate records. 18 U.S.C. 922(m), 
923(g)(1)(A), and 923(g)(2).
    ATF recognizes that the proposed regulation is not consistent with 
the Uniform Commercial Code's (UCC's) treatment of the transfer of 
title for risk of loss purposes. In the absence of State law governing 
the transfer of a firearm between the seller and the buyer, the UCC 
allows the seller and buyer to establish when the title of the firearm 
would pass from the seller to the buyer. However, ATF determined that 
adopting the UCC rule in the context of reporting firearms lost or 
stolen in transit from a common carrier would be problematic, both for 
FFLs to apply and for ATF to enforce. Rather than being able to follow 
the flat rule that the transferor/sender FFL always is responsible for 
reporting lost or stolen firearms, an FFL would have to look at each 
contract it had with another FFL to determine whether he/she had the 
reporting responsibility in a particular circumstance. The transferor/
sending FFL may have the reporting responsibility under some contracts, 
and not have it under other contracts. Because of shifting 
responsibilities, it would be more likely that some lost or stolen 
firearms would slip through the cracks and go unreported.
    Furthermore, it would be more difficult for ATF to ensure the 
reporting requirements were being fulfilled under the UCC rule. ATF 
would have to ask FFLs about their contracts with other FFLs. 
Therefore, ATF opted to propose the clear-cut rule of imposing the 
reporting requirements on the sending FFL, even though this requires 
the sending FFL to take additional steps to be informed of the theft or 
loss.

How This Document Complies With the Federal Administrative 
Requirements for Rulemaking

A. Executive Order 12866

    We have determined that this proposed regulation is not a 
significant regulatory action as defined by Executive Order 12866. 
Therefore, a Regulatory Assessment is not required.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. We hereby certify that this proposed regulation, if 
adopted, will not have a significant economic impact on a substantial 
number of small entities because the revenue effects of this rulemaking 
on small businesses flow directly from the underlying statute. 
Likewise, any secondary or incidental effects, and any reporting, 
recordkeeping, or other compliance burdens flow directly from the 
statute. Accordingly, a regulatory flexibility analysis is not 
required.

C. Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collections of information should be 
sent to the Office of Management and Budget, Attention: Desk Officer 
for the Bureau of Alcohol, Tobacco and Firearms, Office of Information 
and Regulatory Affairs, Washington, DC 20503, with copies to the Chief, 
Document Services Branch, Room 3110, Bureau of Alcohol, Tobacco and 
Firearms, at the address previously specified. Comments are 
specifically requested concerning:
    Whether the proposed collections of information are necessary for 
the proper performance of the functions of the Bureau of Alcohol, 
Tobacco and Firearms, including whether the information will have 
practical utility;
    The accuracy of the estimated burden associated with the proposed 
collections of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced; and
    How the burden of complying with the proposed collections of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology.
    The collections of information in this proposed regulation are in 
27 CFR sections 178.39a and 178.130. This information is required to 
fulfill the statutory requirements of reporting the theft or loss of 
firearms to ATF. The collections of information are mandatory. The 
likely respondents are businesses. Since the annual inventory 
requirement under section 178.130 is considered to be an ordinary and

[[Page 52056]]

customary business practice, we are stating that there is no additional 
reporting and/or recordkeeping burden. The following burden hours are 
for the additional reporting requirements of section 178.39a.
    Estimated total annual reporting and/or recordkeeping burden: 
15,483 hours (estimated total hours for follow-up verification 
requirements of section 178.39a).
    Estimated average burden hours per respondent and/or recordkeeper: 
.1 hours (estimated one-tenth of an hour per follow-up verification).
    Estimated number of respondents and/or recordkeepers: 100,293 
(total population of Federal firearms licensees excluding ammunition 
manufacturers).
    Estimated annual frequency of responses: 929,000 (estimated number 
of firearm shipments per year).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.

Public Participation

    We are requesting comments on the proposed regulations from all 
interested persons. In addition, we are soliciting comment on whether 
the inventory requirements should be applied to licensed collectors. We 
are also specifically requesting comments on the clarity of this 
proposed rule and how it may be made easier to understand.
    You may submit comments by facsimile transmission to (202) 927-
8602. Facsimile comments must:
     Be legible;
     Reference this notice number;
     Be 8\1/2\"  x  11" in size;
     Contain a legible written signature; and
     Be not more than three pages long.
    We will not acknowledge receipt of facsimile transmissions. We will 
treat facsimile transmissions as originals.
    Comments received on or before the closing date will be carefully 
considered. Comments received after that date will be given the same 
consideration if it is practical to do so, but assurance of 
consideration cannot be given except as to comments received on or 
before the closing date.
    We will not recognize any material in comments as confidential. 
Comments may be disclosed to the public. Any material which the 
commenter considers to be confidential or inappropriate for disclosure 
to the public should not be included in the comment. The name of the 
person submitting a comment is not exempt from disclosure.
    Any interested person who desires an opportunity to comment orally 
at a public hearing should submit his or her request, in writing, to 
the Director within the 90-day comment period. The Director, however, 
reserves the right to determine, in light of all circumstances, whether 
a public hearing is necessary.

Disclosure

    Copies of this notice and the written comments will be available 
for public inspection during normal business hours at: ATF Public 
Reading Room, Room 6480, 650 Massachusetts Avenue, NW., Washington, DC.

Regulation Identification Number

    A regulation identification number (RIN) is assigned to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in the Federal Register in April and October of each year. The RIN 
contained in the heading of this document can be used to cross-
reference this action with the Unified Agenda.

Drafting Information

    The authors of this document are James P. Ficaretta, Regulations 
Division, and William Bowers, Firearms Trafficking Branch, Bureau of 
Alcohol, Tobacco and Firearms.

List of Subjects in Part 178

    Administrative practice and procedure, Arms and ammunition, 
Authority delegations, Customs duties and inspection, Exports, Imports, 
Incorporation by reference, Military personnel, Penalties, Reporting 
requirements, Research, Seizures and forfeitures, and Transportation.

Authority and Issuance

    For the reasons discussed in the preamble, ATF amends 27 CFR Part 
178 as follows:

PART 178--COMMERCE IN FIREARMS AND AMMUNITION

    Paragraph 1. The authority citation for 27 CFR Part 178 continues 
to read as follows:

    Authority: 5 U.S.C. 552(a); 18 U.S.C. 847, 921-930; 44 U.S.C. 
3504(h).

    Par. 2. Section 178.39a is amended by adding three sentences after 
the first sentence to read as follows:


Sec. 178.39a  Reporting theft or loss of firearms.

     * * * When a firearm is stolen or lost in transit between 
licensees, it is considered stolen or lost from the transferor's/
sender's inventory. Therefore, the transferor/sender of the missing 
firearm(s) must report the theft or loss of the firearm(s) within 48 
hours after the theft or loss is discovered. The transferor/sender must 
have, or establish, commercial business practices which enable him/her 
to determine whether the transferee/buyer of the firearm(s) received 
the firearm(s). * * *
    Par. 3. Section 178.130 is added to subpart H to read as follows:


Sec. 178.130  Inventory.

    (a)(1) Each licensed manufacturer, licensed importer, and licensed 
dealer must take at least one true and accurate physical inventory each 
year. The inventory must include all firearms on hand required to be 
accounted for in the records kept under this part. Furthermore, the 
licensee must conduct a special physical inventory:
    (i) At the time of commencing business, which is the effective date 
of the license issued upon original qualification under this part;
    (ii) At the time of changing the location of the business premises;
    (iii) At the time of discontinuing business; and
    (iv) At any other time the Director of Industry Operations may in 
writing require.
    (2) The special physical inventories required by paragraphs 
(a)(1)(i) through (iv) of this section count toward the annual physical 
inventory requirement.
    (b) Every physical inventory must be reconciled with the record of 
receipt and disposition required under this part. Any theft or loss of 
a firearm disclosed during inventory must be reported within 48 hours 
after its discovery in accordance with the requirements of 
Sec. 178.39a.
    (c) Every licensed manufacturer, licensed importer, and licensed 
dealer must maintain a record of any inventory required by this section 
for a period of not less than 5 years after the inventory was 
conducted. The record must include the following firearms information--
    (1) Name of manufacturer and/or importer;
    (2) Model;
    (3) Serial number;
    (4) Type; and
    (5) Caliber or gauge.

    Dated: June 20, 2000.
Bradley A. Buckles,
Director.
    Approved: August 3, 2000.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 00-21903 Filed 8-25-00; 8:45 am]
BILLING CODE 4810-31-P