Federal Firearms Licensees: Various Factors Have Contributed to the
Decline in the Number of Dealers (Letter Report, 03/29/96,
GAO/GGD-96-78).
Pursuant to a congressional request, GAO reviewed the Bureau of Alcohol,
Tobacco, and Firearms' (ATF) policies and procedures for licensing and
inspecting firearms dealers, focusing on: (1) the extent and nature of
the decline in the number of firearms dealers since 1993; (2) factors
that may have affected the decline, including whether ATF had a policy
to reduce the number of dealers; and (3) the views of interested
organizations on the advantages and disadvantages of reducing the number
of federal firearms dealers.
GAO found that: (1) as of September 30, 1995, the number of federally
licensed firearms dealers had declined by about 35 percent nationwide
from its high point in April 1993; (2) the decline occurred in every
state and in applications for both new licenses and renewals; (3) more
applications were abandoned or withdrawn and licenses voluntarily
surrendered than were denied or revoked by ATF; (4) the reasons for the
decline included new ATF efforts to increase enforcement of existing
laws through increased inspections, revised application requirements and
forms requiring more information, and new legislation that increased
license fees and licensing requirements; (5) increased state and local
enforcement of their laws may have also contributed to the decline; (6)
there was no evidence that ATF had a policy or deliberately sought to
reduce the number of licensed firearms dealers, although ATF realized
that its strict enforcement of the Gun Control Act of 1968 and the new
legislation would likely reduce the number of licensed dealers; (7)
officials of 7 organizations representing firearms interests concurred
with GAO-identified factors that led to the decline in dealers; (8) a
survey of former dealers found various reasons for their not renewing
their licenses; and (9) some organizations believed that reducing the
number of firearms dealers would lead to a reduction in crime and better
monitoring of dealers and guns, while other organizations believed that
the decrease would curb competition, raise prices, and limit the lawful
availability of firearms.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-96-78
TITLE: Federal Firearms Licensees: Various Factors Have
Contributed to the Decline in the Number of Dealers
DATE: 03/29/96
SUBJECT: Firearms
Gun control law
Licenses
Law enforcement
State law
Municipal law
Crime prevention
Federal/state relations
IDENTIFIER: ATF National Firearms Program
ATF Operation Snapshot
ATF Strategic Plan
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Cover
================================================================ COVER
Report to the Chairman, Subcommittee on Treasury, Postal Service, and
General Government, Committee on Appropriations, House of
Representatives
March 1996
FEDERAL FIREARMS LICENSEES -
VARIOUS FACTORS HAVE CONTRIBUTED
TO THE DECLINE IN THE NUMBER OF
DEALERS
GAO/GGD-96-78
Federal Firearms Licensees
(187012)
Abbreviations
=============================================================== ABBREV
ASSC - American Shooting Sports Council, Inc.
ATF - Bureau of Alcohol, Tobacco and Firearms
GCA - Gun Control Act of 1968
IACP - International Association of Chiefs of Police
NASGD - National Alliance of Stocking Gun Dealers
NAFLFD - National Association of Federally Licensed Firearms
Dealers
NRA - National Rifle Association
VPC - Violence Policy Center
Letter
=============================================================== LETTER
B-262133
March 29, 1996
The Honorable Jim Lightfoot
Chairman, Subcommittee on Treasury,
Postal Service, and General Government
Committee on Appropriations
House of Representatives
Dear Mr. Chairman:
Your August 2, 1995, letter requested that we review various aspects
of the Bureau of Alcohol, Tobacco and Firearms (ATF). This report
responds to your request that we review ATF's policies and procedures
for licensing and inspecting firearms dealers. Since 1993, the
number of federally licensed firearms dealers has declined
significantly. You requested this report because concerns had been
raised by some organizations about the effects of the decline and
factors contributing to it, including ATF's role, if any, in causing
the decline. We agreed to (1) determine the extent and nature of
recent declines in the number of firearms dealers; (2) determine what
factors may have affected recent declines in the number of firearms
dealers, including whether ATF had a policy to reduce the number of
dealers; and (3) obtain the views of pertinent organizations on the
advantages and disadvantages of reducing the number of federal
firearms dealers.
While ATF issues various categories of federal firearms licenses,
including those for manufacturers and importers of firearms, this
report deals primarily with federal firearms dealer licenses.
Firearms dealer licenses are granted to dealers and pawnbrokers who
sell firearms at wholesale or retail and gunsmiths who repair
firearms. Federal firearms dealer licenses account for about 90
percent of all federal firearms licenses.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Since reaching a high point in April 1993, the number of licensed
firearms dealers sharply declined by about 35 percent, from about
260,700 to about 168,400 dealers, as of September 30, 1995. This
decline occurred nationwide, ranging from a 23-percent decline in
Montana to a 45-percent decline in Hawaii. A decline occurred both
in applications for new licenses and renewals of existing licenses.
During this period, the number of applications abandoned and
withdrawn by former and prospective dealers was much higher than the
number of licenses denied and revoked by ATF.\1
Our analysis of ATF data showed that several factors collectively
contributed to this decline. Principal among these factors were
that:
Since January 1993, ATF has implemented efforts to increase
enforcement of existing laws by closely scrutinizing firearms
dealer applicants and licensees through increased inspections.
In response to an August 1993 presidential memorandum, ATF, in late
1993, revised the application requirements to obtain more
information about applicants.
Federal legislation passed in November 1993 increased licensing
fees, and legislation passed in September 1994 added more
licensing requirements, including requiring applicants for
firearms dealer licenses to certify compliance with state and
local laws as a condition for federal licensing.
In addition, state and local agencies' enforcement of their laws may
have resulted in reductions in the number of firearms dealers.
On the basis of our review of ATF and other documents and interviews
with numerous agency officials, we found no evidence that ATF had a
policy, or sought, to reduce the number of licensed dealers by some
targeted number. However, ATF recognized that its efforts, beginning
in 1993, to strictly enforce the Gun Control Act of 1968, as amended,
(GCA) by closely scrutinizing applicants and licensees, as well as
the above-mentioned legislative actions, would likely result in a
reduction in the number of licensed dealers.
Officials from seven organizations representing the firearms
industry, firearms consumers, law enforcement, and gun control
interests confirmed the results of our analysis regarding factors
contributing to the decline in licensed firearms dealers. The
organizations also provided us with a variety of views on the
advantages and disadvantages of reducing the number of firearms
dealers. Their views ranged from those who believed that by reducing
the number of dealers there could be less crime and better monitoring
of dealers to those who feared that dealer decreases would curb
competition, raise prices, and limit the lawful availability of
firearms.
--------------------
\1 An application is "abandoned" when an applicant submits an
incomplete or improperly executed application and does not respond to
ATF's notification to correct the application within 30 days of the
notification. An application is "withdrawn" when an applicant
submits an incomplete application and, when notified by ATF,
voluntarily withdraws the application.
BACKGROUND
------------------------------------------------------------ Letter :2
GCA, as amended, provided an enhanced licensing system for persons
engaged in the business of manufacturing, importing, and dealing in
firearms. These licensees are allowed to transport, ship, and
receive firearms in interstate commerce among themselves and are
required to certify that they comply with the requirements of state
and local laws in the conduct of their businesses. GCA also
established a comprehensive record-keeping system at the dealer
level.
GCA, as amended, contains federal licensing standards for various
firearms businesses. More specifically, the act provides, in part,
that no person shall engage in the business of dealing in firearms
until he has filed an application with and received a license to do
so from the Secretary of the Treasury. The act further provides, in
general, that any application submitted shall be approved if the
applicant (1) is 21 years of age or older; (2) is not prohibited from
transporting, shipping, or receiving firearms or ammunition in
interstate or foreign commerce under [18 U.S.C.] section 922(g) and
(n);\2 (3) has not willfully violated GCA or its regulations; (4) has
not willfully failed to disclose any material information or has not
made any false statements as to any material fact, in connection with
his application; (5) has premises from which he conducts business or
from which he intends to conduct business; and (6) makes certain
certifications, such as that the business will comply with the
requirements of state and local law applicable to the conduct of the
business.
The Secretary of the Treasury was authorized to promulgate
regulations to facilitate the enforcement of GCA. This
responsibility, including the authority to approve or deny firearms
license applications, was delegated within the Department to ATF.
ATF's principal firearms regulatory responsibilities are to (1)
process and review firearms license applications and inspect
applicants to determine their qualifications, under GCA, for
licenses; (2) conduct periodic compliance inspections of licensees;
and (3) support ATF's Criminal Enforcement Offices in their efforts
to curb the illegal possession and/or use of firearms. ATF carries
out its firearms regulatory responsibilities at its headquarters in
Washington, D.C.; its Firearms and Explosives Licensing Center in
Atlanta, Georgia, which processes firearms license applications; and
its 5 districts and 37 area offices located throughout the country
that inspect applicants and licensees.
The term "dealer" is defined in Section 921(a)(11) of Title 18 as (A)
any person engaged in the business of selling firearms at wholesale
or retail; (B) any person engaged in the business of repairing
firearms or of making or fitting special barrels, stocks, or trigger
mechanisms to firearms; or (C) any person who is a pawnbroker.\3
The term "engaged in the business," as applied to a dealer in
firearms, is defined in Section 921(a)(21)(C) of Title 18, in part,
as a person who devotes time, attention, and labor to dealing in
firearms as a regular course of trade or business with the principal
objective of livelihood and profit through the repetitive purchase
and resale of firearms. The definition further provides that such
term shall not include a person who makes occasional sales,
exchanges, or purchases of firearms for the enhancement of a personal
collection or for a hobby, or who sells all or part of his personal
collection of firearms. A similar provision in Section 921(a)(21)(D)
defines "engaged in the business" as applied to the repair of
firearms by gunsmiths.
--------------------
\2 Section 922(g) of Title 18 provides, in part, that it shall be
unlawful for any person--(1) who has been convicted in any court of a
crime punishable by imprisonment for a term exceeding 1 year; (2) who
is a fugitive from justice; (3) who is an unlawful user of or
addicted to any controlled substance; (4) who has been adjudicated as
a mental defective or who has been committed to a mental institution;
(5) who, being an alien, is illegally or unlawfully in the United
States; (6) who has been discharged from the Armed Forces under
dishonorable conditions; (7) who, having been a citizen of the United
States, has renounced his citizenship; or (8) who is subject to
certain restraining orders--to ship or transport in interstate or
foreign commerce, or possess in or affecting commerce, any firearm or
ammunition; or to receive any firearm or ammunition that has been
shipped or transported in interstate or foreign commerce. Section
922(n) provides that it shall be unlawful for any person who is under
indictment for a crime punishable by imprisonment for a term
exceeding 1 year to ship or transport in interstate or foreign
commerce any firearm or ammunition or receive any firearm or
ammunition that has been shipped or transported in interstate or
foreign commerce.
\3 This report focuses on two types of licenses: dealers ("01"
licenses), which include gunsmiths, and pawnbrokers ("02" licenses).
Because pawnbrokers are in the business of selling firearms, in this
report the term "dealers" refers to both "01" and "02" licenses.
Whenever possible, we used ATF data on firearms dealer licenses in
this report. However, in some cases, ATF data include all categories
of licensees, including manufacturers and importers, as opposed to
individual categories. Where there are references in this report to
"federal firearms licensees," it means all categories of licensees.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
To address our objectives, we reviewed ATF documents and data and
discussed policies with agency officials. As agreed with you, we did
not verify licensee and inspection data provided by ATF because of
time limitations. We did our work at ATF headquarters, ATF's
Firearms and Explosive Licensing Center, four ATF district offices,
and four ATF area offices. We discussed policies and practices with
officials at various levels within ATF. We obtained the views of
representatives of seven external organizations on (1) the advantages
and disadvantages of reducing the number of licensed firearms dealers
and (2) on the reasons for recent declines in the number of licenses.
In addition, we conducted a limited survey of former firearms dealer
licensees to learn why they no longer held licenses. Appendix I
provides a detailed discussion of our objectives, scope and
methodology.
We did our work from August 1995 through January 1996 in accordance
with generally accepted government auditing standards. We requested
comments on a draft of this report from the Secretary of the
Treasury. Responsible Treasury officials provided oral comments at a
meeting on March 7, 1996. Their comments are discussed at the end of
this letter.
EXTENT AND NATURE OF DECLINES
IN THE NUMBER OF DEALER
LICENSES
------------------------------------------------------------ Letter :4
Since reaching a high point in April 1993, the number of licensed
firearms dealers declined steadily and sharply by approximately 35
percent as of September 30, 1995. The decline occurred in every
state. ATF received substantially fewer applications for licenses;
in particular, applications for new licenses dropped very sharply
from April 1993 to April 1994, during the first year of declines.
Also, in fiscal years 1993 and 1994, the number of ATF denials of
both new and renewal applications remained relatively small, but
there was a substantial increase in the number of new applications
abandoned and withdrawn. Similarly, during the same years, as a
result of ATF inspections, the number of licenses revoked\4 remained
small, but the number of licenses voluntarily surrendered\5 was high.
--------------------
\4 According to ATF officials, ATF's only recourse is revocation
because it has no authority to fine a licensee or suspend a federal
firearms license.
\5 A "voluntarily surrendered" license generally results from an ATF
compliance inspection in which one or more violations are detected
and ATF provides the licensee the opportunity to surrender the
license rather than have the license formally revoked. The term also
includes licenses surrendered after the licensee is advised by ATF of
non-compliance with state or local ordinances.
NUMBER OF DEALERS HAS
SHARPLY DECREASED SINCE 1993
---------------------------------------------------------- Letter :4.1
The number of federal firearms dealer licenses (classes 01 and 02)
rose steadily until April 1993, when they peaked at 260,703. The
number declined sharply since then. As of September 30, 1995, there
were 168,395 dealer licensees--the lowest number since fiscal year
1980. To provide the context for interpreting the more recent
decline, figure l depicts trend data on the number of federally
licensed firearms dealers at the end of fiscal years 1975 to 1995,
and appendix II lists the actual number of dealers at the end of each
fiscal year.
Figure 1: Number of Federally
Licensed Firearms Dealers, at
End of FYs 1975-1995
(See figure in printed
edition.)
Source: ATF.
DEALER DECLINES OCCURRED
THROUGHOUT THE COUNTRY
---------------------------------------------------------- Letter :4.2
As shown in figure 2, the decline in the number of firearms dealer
licenses from April 1993 through September 1995 occurred throughout
the country. The overall average decline among the states was
approximately 35 percent, ranging from 23 percent in Montana to 45
percent in Hawaii.
Figure 2: Range of Percentage
Declines in the Number of
Federally Licensed Firearms
Dealers in Each State
(See figure in printed
edition.)
\a Data for the District of Columbia is included with that for
Maryland.
Source: GAO analysis of ATF
data.
(See figure in printed
edition.)
The decline in the number of firearms dealer licenses occurred in all
regions of the country. The percentage decline was almost identical
for each region of the country represented by ATF's five regulatory
enforcement district offices, ranging from 34.5 percent in ATF's
Midwest district to 37.1 percent in ATF's Southeast district.
NATURE OF DECLINES IN NUMBER
OF DEALERS
---------------------------------------------------------- Letter :4.3
Declines in the number of firearms dealer licenses were primarily a
function of declines in the number of new applications and of
renewals of existing licenses. Over the past 3 years, a large
decline occurred in applications for both new licenses and for
renewals of existing licenses. According to ATF officials, the
number of new applications increased dramatically between December
1992 and March 1993 to a high of 7,003, primarily because of
publicity concerning the ease of obtaining firearms licenses. The
number of new applications then declined to the level prior to the
increase, and remained at approximately this level for the remainder
of 1993. Another sharp decline occurred beginning in February 1994,
and the number has remained fairly steady since then, with 485 new
applications being received in September 1995. Figure 3 shows the
number of new and renewal applications received monthly by ATF from
January 1992 through September 1995.\6
Figure 3: All Categories of
New and Renewal Federal
Firearms Applications Received
Monthly by ATF, January
1992-September 1995
(See figure in printed
edition.)
\a Because of the limitations of ATF data, renewal numbers refer to
the number of renewal licenses issued within 45 days through December
1993 and the number of renewal applications received by ATF from
January 1994 through September 1995.
Source: ATF Firearms and Explosives Licensing Center data.
New and renewal applications can result in four outcomes: (1)
licenses granted, (2) licenses denied, (3) applications abandoned,
and (4) applications withdrawn. In addition, existing licenses can
be either revoked or voluntarily surrendered as a result of ATF
inspections. Generally, the number of applications abandoned and
withdrawn has been much higher than the number of licenses denied and
revoked. (To provide a broader context for interpreting the more
recent declines, appendix III shows licenses issued and revoked by
ATF and the outcome of applications received in fiscal years 1975
through 1995.)
The number of abandonments and withdrawals for new and renewal
applications increased significantly in fiscal year 1993. The number
of abandonments of new applications continued to increase
significantly in fiscal year 1994 and declined since then. The
number of abandonments of renewal applications continued to rise in
fiscal years 1994 and 1995, and the number of withdrawals of renewal
applications remained at approximately the same level in fiscal years
1994 and 1995. Figures 4 and 5 show the number of abandonments and
withdrawals, respectively, for both new and renewal applications in
fiscal years 1990 through 1995.
Figure 4: Number of
Abandonments of Applications
for Federal Firearms Licenses,
All Categories, FYs 1990-1995
(See figure in printed
edition.)
Source: ATF.
Figure 5: Number of
Withdrawals of Applications for
Federal Firearms Licenses, All
Categories, FYs 1990-1995
(See figure in printed
edition.)
Source: ATF.
In fiscal year 1993, ATF denied far more new applications (343) than
in prior years. Only about 47 new applications, on average, were
denied from 1990 to 1992. However, in fiscal year 1995, the number
of denials of new applications declined to the pre-1993 level. The
number of denials of renewal applications reached its recent peak in
fiscal year 1994 and declined in 1995. Overall, the number of
denials remained quite small compared to abandonments and
withdrawals. Figure 6 shows denials of both new and renewal
applications in fiscal years 1990 through 1995.
Figure 6: Number of Denials of
Applications for Federal
Firearms Licenses, All
Categories, FYs 1990-1995
(See figure in printed
edition.)
Source: ATF.
Since 1990, ATF has increased its inspections of federal firearms
licensees. As a result, the number of revoked licenses increased but
remained relatively small compared to the number of application
abandonments and withdrawals. In fiscal year 1995, 35 licenses were
revoked. However, a large number of licenses were voluntary
surrendered by licensees as a result of ATF inspections (discussed
later). A total of 7,593 licenses were surrendered by licensees
during fiscal years 1994 and 1995.\7
--------------------
\6 Unless otherwise stated, information discussed in this section of
the report on the nature of the declines refers to all categories of
federal firearms licenses.
\7 ATF did not collect data on voluntary surrenders prior to fiscal
year 1994.
SEVERAL FACTORS CONTRIBUTED TO
THE DECLINE IN THE NUMBER OF
DEALERS
------------------------------------------------------------ Letter :5
The following factors contributed to the recent decline in the number
of federally licensed firearms dealers:
In January 1993, ATF initiated a National Firearms Program, which
consisted of several regulatory enforcement strategies,
including efforts to increase the number of inspections of
applicants for federal firearms dealer licenses and the
operations of licensees to ensure strict compliance with the
GCA.
In an August 1993 memorandum, the President directed the Department
of the Treasury and ATF to take actions to ensure compliance
with federal firearms license requirements. The President
pointed out that there were over 287,000 federal firearms
licensees (all categories), many of which he stated probably
should not have been licensed because they were not engaged in a
legitimate firearms business.
In late November 1993, Congress passed the Federal Firearms License
Reform Act of 1993,\8 which increased the licensing fees for
obtaining and renewing a federal firearms dealer license.
In December 1993, in response to the President's memorandum, ATF
significantly revised the application process and forms for
obtaining and renewing federal firearms licenses, including
requiring applicants to submit fingerprints and a photograph as
a positive means of identification. ATF began using its revised
application form (dated December 1993) in February 1994.
In September 1994, Congress passed the Violent Crime Control and
Law Enforcement Act of 1994, which added more licensing
requirements. Among other provisions, this act required
applicants for firearms licenses to certify that their firearms
business will comply with the requirements of state and local
laws.
In addition to factors at the federal level that contributed to the
decline in the number of federal firearms dealers licensees, state
and local agencies' enforcement of their laws may have resulted in
reducing the number of licensees. For example, local agencies'
enforcement of zoning ordinances dealing with businesses operating in
residential areas may have resulted in declines in the number of
firearms dealer licensees.
The decline in the number of federally licensed firearms dealers and
the factors contributing to the decline are shown in figure 7. A
time lag existed between the occurrence of the factors contributing
to the decline and when the decline actually began. For example,
while the President's
Figure 7: Declines in the
Number of Federally Licensed
Firearms Dealers and Factors
Contributing to Declines
(See figure in printed
edition.)
memorandum was issued in August 1993, ATF's implementation of actions
taken pursuant to the memorandum, such as revising the application
form, did not occur until late 1993 and early 1994, with resulting
declines in the number of dealers occurring thereafter.
(See figure in printed
edition.)
Source: GAO analysis of ATF information.
We found no evidence that ATF had a policy, or sought, to reduce the
number of licensed dealers by some targeted number. Rather, all of
the factors mentioned above, including ATF's increased enforcement
efforts, collectively contributed to declines in the number of
dealers in 1994 and 1995. These factors were reiterated by various
organizations from whom we obtained views on the reasons for the
decline and by our independent survey of randomly selected former
firearms dealers.
--------------------
\8 The licensing fee increase provisions are contained in the Federal
Firearms License Reform Act of 1993, found in Title III of Public Law
103-159. The Brady Act, found at Title I of Public Law 103-159, is
sometimes referred to as the origin of such provisions.
ATF INCREASED INSPECTIONS OF
FIREARMS DEALER APPLICANTS
AND LICENSEES
---------------------------------------------------------- Letter :5.1
In January 1993, ATF initiated the National Firearms Program. As
part of the program, ATF initiated efforts to screen applicants for
federal firearms dealer licenses more thoroughly and increased the
number of inspections of applicants and licensees to ensure strict
compliance with GCA.
According to the Chief of the Firearms and Explosives Regulatory
Division, the ATF official responsible for managing ATF's Firearms
and Explosives matters, a number of factors led ATF to increase its
regulatory enforcement efforts over firearms dealer applicants and
licensees. These included rising violence associated with the
illegal use and sale of firearms, national media attention on the
ease of obtaining a firearms dealer license, administration policies
emphasizing increased enforcement of firearms licensing requirements,
and our 1992 report on ATF's firearms inspections suggesting better
targeting of inspections.\9
In addition, ATF's Operation Snapshot, an inspection project that was
conducted in 1992 and 1993 to obtain information about federal
firearms licensees and their business operations, reported that 46
percent of all licensees had sold no firearms in the previous 12
months, and another 34 percent had sold 1 to 10 firearms.\10
According to ATF, these survey results were invaluable in formulating
the National Firearms Program.
As part of ATF's National Firearms Program, ATF developed a number of
regulatory enforcement strategies, including targeting federal
firearms dealer applicants and licensees for inspection, especially
those in ATF-identified high-crime areas\11 for full field compliance
inspections and enhancing coordination with state and local
officials. The focus of the inspections was to ensure that
applicants and licensees strictly met the statutory requirements of
GCA. In early 1993, ATF tasked its district and area offices with
conducting
preliminary inspections (telephone interviews) of all applicants
for new firearms dealer licenses, regardless of geographic
location;
application inspections (full field, face-to-face inspections) if
warranted based on preliminary inspections; and
compliance inspections (full field, face-to-face inspections) of
all applicants for renewal dealer licenses who were located in
the 43 high-crime areas, were due for renewal, and had not been
inspected within the past 3 years.
ATF continued its National Firearms Program in fiscal years 1994 and
1995. In July 1995, ATF expanded its inspections beyond firearms
dealer licensees to include other categories of licensees, such as
manufacturers and importers, but not collectors of curios and relics.
Also, in lieu of preliminary inspections, ATF increased its scrutiny
of applicants for new licenses by requiring application inspections
(full field, face-to-face inspections) of all applicants regardless
of location.
The number of ATF inspections of federal firearms applicants and
licensees (all categories) increased from 19,910 in fiscal year 1992
to a high of 27,031 in fiscal year 1993--the time frame during which
the National Firearms Program was initiated. The number of
inspections then dropped to 22,529 in fiscal year 1994 and 17,772 in
fiscal year 1995. However, from 1993 to 1995, the number of
inspections as a percentage of the universe of firearms licensees
generally remained in the 9-percent range, compared to 7 percent in
1992.
Table 1 shows the number of ATF inspections and the number of
inspections as a percentage of the universe of federal firearms
licensees for fiscal years 1990 through 1995.
Table 1
Number of ATF Firearms License
Inspections, All Categories, FYs 1990-
1995
Inspections as
Applicati Complianc a percent of
on e Total the firearms
inspectio inspectio inspection licensee
Fiscal year ns ns s\a universe\b
-------------------- --------- --------- ---------- --------------
1990 3,358 8,471 11,829 4.40
1991 4,000 8,258 12,258 4.44
1992 3,582 16,328 19,910 7.01
1993 4,701 22,330 27,031 9.52
1994 2,462 20,067 22,529 8.98
1995 4,815 12,957 17,772 9.28
----------------------------------------------------------------------
\a ATF does not include preliminary inspections (discussed below) in
its total number of inspections.
\b Includes all categories of licensees.
Source: ATF.
In addition to full field application and compliance inspections, ATF
used preliminary inspections (telephone interviews) in fiscal years
1993 through 1995 as a means of scrutinizing federal firearms dealer
applicants. The number of preliminary inspections conducted in
fiscal years 1993, 1994, and 1995 was 25,922, 14,805, and 10,822,
respectively. ATF generally did not use preliminary inspections
before fiscal year 1993.
According to ATF, a substantial portion of the 2,527 applications
abandoned (see fig. 4) and 7,217 applications withdrawn (see fig.
5) during fiscal year 1993 was directly attributable to the
initiation of the preliminary inspections.
In addition to emphasizing that new and renewal firearms dealer
license applicants qualified under GCA, the National Firearms Program
also called for continued checks of other dealers for compliance with
GCA. Dealers were targeted for compliance inspections on the basis
of analysis of firearms tracing data, referrals from law enforcement,
and other factors. The over 27,000 inspections of all categories of
licensees in 1993, most of which were compliance inspections,
resulted in the discovery of 11,149 violations of records and
inventory requirements and 17,783 referrals to ATF criminal
enforcement and other federal, state, and local law enforcement
agencies. According to ATF, referrals increased by 13,030 over 1992
because of increased efforts under the National Firearms Program to
coordinate more closely with state and local authorities.
Also, as a result of ATF's compliance inspection efforts, a large
number of firearms dealer licensees voluntarily surrendered their
licenses in fiscal years 1994 and 1995--2 years for which the data
were collected. For example, when a compliance inspection showed
that a dealer was not "engaged in a firearms business" at the
location shown on the license, ATF's National Firearms Program called
for advising the dealer to voluntarily surrender the license, prior
to implementing a formal revocation action. According to ATF data,
as of September 30, 1995, 7,593 firearms dealer licenses were
surrendered as a result of ATF's National Firearms Program--4,936 in
fiscal year 1994 and 2,657 in fiscal year 1995--the only 2 years for
which the data were collected.
In addition, the number of federal firearms licenses (all categories)
revoked as part of ATF's inspection efforts increased from 24 in
fiscal year 1992 to a high of 44 in fiscal year 1994 and then
decreased to 35 in fiscal year 1995. The total number of federal
firearms licenses revoked was relatively small--less than 1 percent
compared to the total number of inspections conducted. Under its
National Firearms Program, ATF is to first seek voluntary surrenders
of licenses rather than pursuing formal administrative actions to
revoke a license to save the time, effort, and expense involved with
administrative proceedings.\12
To conduct increased firearms regulatory inspections, ATF devoted
increased staff to the effort. According to ATF data, the number of
ATF inspector staff years devoted to firearms regulatory activities
increased from 90 inspector staff years in fiscal year 1992 to 114
inspector staff years in fiscal year 1994 and then dropped to 105
inspector staff years in 1995.
--------------------
\9 ATF Firearms Inspections: Use of Results to Improve Inspection
Targeting Has Been Limited (GAO/GGD-93-30BR, Dec. 11, 1992).
\10 According to ATF's report on Operation Snapshot, dealers whose
records or businesses could not be located were included in the 46
percent reported as not engaged in the sale of firearms.
\11 ATF, utilizing Uniform Crime Reports for 1991, identified 43
major statistical areas that had a violent crime rate of at least 900
offenses per 100,000 inhabitants. According to ATF, violent crime
includes murder, forcible rape, robbery, and aggravated assault.
\12 When ATF denies an application or revokes a license, the
applicant or licensee is entitled under Section 923(f) of Title 18 to
take advantage of a statutory process to challenge ATF's decision.
ATF REVISED APPLICATION FORM
AND PROCESS IN RESPONSE TO
PRESIDENTIAL MEMORANDUM
---------------------------------------------------------- Letter :5.2
In an August 1993 memorandum, the President directed the Department
of the Treasury and ATF to take actions to ensure compliance with
present firearms licensing requirements. The President pointed out
that there were over 287,000 federal firearms licensees (all
categories), many of whom he stated probably should not have been
licensed. The President cited ATF estimates that 40 percent of
licensees conducted no business at all and were persons who used the
license to obtain the benefits of trading and buying guns at
wholesale. The President listed a number of steps that ATF could
take to ensure compliance with present licensing requirements,
including revising the application process to require the applicant
to supply all information relevant to establishing qualification for
a license, and requiring more reliable forms of identification of the
applicant, such as fingerprinting. (App. IV contains the
President's Memorandum on Gun Dealer Licensing.)\13
In response to the President's memorandum, ATF implemented a number
of actions to improve the thoroughness and effectiveness of screening
applicants for federal firearms licenses. For example, in late 1993
and early 1994, ATF significantly revised the firearms licensing
process to obtain more information about applicants to determine
whether they met the requirements of GCA. For the first time, ATF
began doing criminal background checks on applicants applying for
renewals of their licenses. Also, ATF substantially revised the
application form by adding a number of questions and requirements for
supporting information to assist it in determining whether applicants
intended to engage in the firearms business. For example, ATF
required applicants to (1) submit fingerprints and photographs of
themselves, (2) furnish a diagram of the business premises where
their firearms inventories were located, and (3) provide a
description of their security system for safeguarding firearms
inventories. Further, ATF stopped using its short application form
previously used for renewing firearms dealer licenses and required
applicants applying for renewal of their licenses to use the longer,
more detailed application form.\14 ATF's Firearms and Explosives
Licensing Center began mailing out the application form (dated
December 1993) in February 1994.
Concurrent with implementing these substantive changes, ATF officials
said they placed more responsibility on applicants to correctly and
completely file applications and more emphasis on ensuring that all
applicants complied with GCA. For example, ATF licensing examiners
were instructed to return incomplete applications for licenses rather
than attempt to correct them by telephone.
As a result of the application form revisions, together with the
increased license fees passed in the Federal Firearms License Reform
Act of 1993 and new requirements added by the Violent Crime Control
and Law Enforcement Act of 1994 (discussed below), ATF began
experiencing backlogs and delays in issuing firearms dealer licenses.
According to ATF, the backlog of applications was due primarily to
the large number of incomplete application packages being submitted;
approximately 80 percent of the applications were returned due to
errors and omissions. In addition, ATF received numerous complaints
from applicants about the complicated form and delays in receiving
licenses.
To address this backlog problem and related complaints, in July 1995
ATF again revised the application form for firearms dealer licenses
and took steps to expedite the application process. Specifically,
ATF reduced the number of questions and the amount of supporting
documents and forms required in the application package. For
example, ATF eliminated (1) questions requiring a diagram of the
premises, a description of the security system, and a description of
restrictions and ordinances relating to conducting a business; and
(2) the requirement for supporting documents, such as lease
agreements. When revising the application form and process in July
1995, ATF obtained input from the firearms industry.\15
--------------------
\13 In addition to the President's memorandum, the Secretary of the
Treasury, in a January 1994 speech expressed his concerns about the
high number of federal firearms licensees and the need for licensing
reform. (App. V contains the Secretary of the Treasury's remarks.)
\14 ATF said it will revert to the use of a revised shorter form for
license renewals after all existing licensees requalify under the
additional licensing requirements of the Violent Crime Control and
Law Enforcement Act of 1994.
\15 During the last few years, according to ATF officials and some of
the firearms industry organizations, ATF has increased and improved
its outreach efforts to the industry. The ATF Director's September
1994 Strategic Plan directed ATF officials to work closely with
industry members and others to develop coalitions and partnerships,
and some industry officials indicated that as a result they had more
interaction with ATF recently. In comparison, when revising and
implementing the application form in late 1993 and early 1994, ATF
did not make a concerted effort to notify and obtain the views of
firearms industry and consumers groups regarding these changes. The
firearms industry and consumer organizations we contacted told us
that they had not been given the opportunity to comment on ATF's
proposed changes.
FEDERAL LEGISLATION
INCREASED LICENSING FEES AND
ADDED MORE REQUIREMENTS
---------------------------------------------------------- Letter :5.3
Along with executive branch actions discussed above, Congress passed
legislation in 1993 and 1994 affecting the licensing provisions of
GCA. Concurrent with ATF's revision of the application form, the
Federal Firearms License Reform Act of 1993, passed in November 1993
increased the licensing fees for obtaining and renewing federal
firearms dealer licenses. The 1993 act increased the licensing fee,
effective November 30, 1993, from $10 per year to $200 for a new
3-year license and from $10 per year to $90 for a 3-year renewal
license. According to ATF, since the fee increase took effect
immediately, many applications were received with insufficient fees
and had to be returned, thus causing some backlogs.
The Violent Crime Control and Law Enforcement Act of 1994, passed in
September 1994, added more licensing requirements. The 1994 act
enacted an already existing ATF requirement that an applicant for a
federal firearms license furnish a photograph and fingerprints as a
positive means of identification. In addition, the 1994 act required
that an applicant for a federal firearms license make various
certifications, such as that (1) the firearms business to be
conducted under the license is not prohibited by state and local law
and (2) the business will comply with state and local law applicable
to the conduct of the business within 30 days after the application
is approved. This latter provision, according to the Chief of ATF's
Licensing Center, was a significant factor that added to the backlogs
because applications that were in process had to be returned to
obtain the applicants' certifications.
ATF'S EFFORTS TO USE
COMPLIANCE WITH STATE AND
LOCAL LAWS AS A FACTOR IN
LICENSING FIREARMS
DEALERS
-------------------------------------------------------- Letter :5.3.1
Prior to the Violent Crime Control and Law Enforcement Act of 1994,
ATF would not deny an application or revoke a license solely on the
basis of noncompliance with state and local laws. However, ATF used
noncompliance with state and local laws as a basis for advising
applicants to withdraw their applications. Under its National
Firearms Program, if ATF found an applicant/licensee was not in
compliance with state and local laws, ATF inspectors were to advise
the applicant/licensee that information on noncompliance would be
referred to the appropriate state and local officials. Further,
inspectors were to give applicants/licensees the opportunity to
withdraw their applications or surrender their licenses and re-apply
when they were in compliance with the requirements of state and local
laws.
With the passage of the Violent Crime Control and Law Enforcement Act
of 1994, ATF was provided the authority to condition issuance of a
federal firearms license on the certification, by an applicant, of
compliance with state and local laws. According to ATF officials in
December 1995, ATF found that its five districts and some area
offices within districts were enforcing the licensing requirement on
compliance with state and local laws differently. Two districts were
taking a "hard-line" approach by withholding issuance of licenses
until all state and local compliance matters were resolved. Three
other districts were generally taking a more moderate approach to
enforcement of the licensing requirement. For example, these three
districts would not withhold issuance of licenses if local agencies
were not enforcing local zoning requirements.
To address this inconsistency, the Chief of the Firearms and
Explosives Regulatory Division in a March 1, 1996, memorandum, issued
guidance to ATF field offices on procedures for dealing with zoning
laws as they relate to federal firearms license applications. The
memorandum directed all District Directors (Regulatory Enforcement)
to communicate the following policy guidance to all Regulatory field
personnel and the Firearms and Explosives Licensing Center:
"1.In situations where zoning laws are enforced by local
authorities, a license application will be disapproved if the
local zoning law prohibits the conduct of the business.
2.In situations where zoning laws appear to prohibit a Federal
firearms licensee from conducting business, but where the laws
are not enforced, ATF will not take adverse action on a license
application based solely on apparent non-compliance with zoning
restrictions."
STATE AND LOCAL AGENCIES
ENFORCEMENT MAY HAVE
RESULTED IN DEALER DECLINES
---------------------------------------------------------- Letter :5.4
Along with federal laws and administration actions, the enforcement
of state and local laws may have resulted in reduction in the number
of firearms dealers. Such laws include licensing, taxing, and other
business-related state and local laws and zoning ordinances.
Although we did not systematically review state and local laws and
enforcement efforts relating to firearms dealers, the Chief of ATF's
Firearms and Explosives Licensing Center informed us that several
states, including California, Rhode Island, and Connecticut, have
strict gun laws that have contributed to significant decreases in the
number of federal firearms licenses. It should be noted that those
three states had declines of 41.5, 43.1, and 40.2 percent,
respectively, in the number of firearms dealer licenses from April
1993 to September 1995.
Concerning California, ATF's Los Angeles Area Office Supervisor told
us that California's requirements for a firearms dealer license
contributed to the decline in the number of dealers. California
requires that applicants for dealer licenses obtain a state
certificate of eligibility, a state seller's permit, and a local
business license or permit.
In addition, during the course of our work, we obtained several
examples of where the enforcement of local laws, including zoning
requirements, resulted in reductions in the number of firearms
dealers. These are summarized below:
According to ATF's Detroit Area Office Supervisor, the city of
Detroit used an existing zoning ordinance that forbids people
from operating businesses out of their homes to reduce the
number of firearms dealers in the city. If not in compliance
with the zoning ordinance, the City of Detroit is to give the
firearms dealers the option of withdrawing their federal
licenses or moving to a location properly zoned for commercial
sales. Dealers are given 30 days to comply. If they are not in
compliance, they are to be cited and prosecuted.
According to ATF's Acting New York Area Office Supervisor, in New
York City and three New York Counties--Westchester, Nassau, and
Suffolk--the number of firearms dealer licensees declined
primarily due to enforcement of local laws and zoning
requirements enforced through a joint program with ATF and local
law enforcement agencies. ATF inspectors were accompanied on
applicant inspections by local law enforcement personnel who
checked for compliance with local requirements, particularly
zoning ordinances.
In Honolulu, Hawaii, according to the Chief of ATF's Firearms and
Explosives Regulatory Division, the number of federal firearms
dealer licensees has decreased significantly because of a city
ordinance banning the sale of firearms within the city limits.
ATF DID NOT SEEK TO REDUCE
DEALERS TO A TARGETED NUMBER
BUT RECOGNIZED ITS
ENFORCEMENT ACTIONS WOULD
LIKELY RESULT IN REDUCTIONS
---------------------------------------------------------- Letter :5.5
We found no evidence from our review of ATF and other documents and
interviews with numerous agency headquarters and field officials that
ATF had a policy, or sought, to reduce the number of licensed dealers
by some targeted number. Instead, we found that ATF's strategy since
1993 has been to strictly enforce GCA by closely scrutinizing
firearms dealer applicants and licensees to ensure that licenses
would not be used for purposes other than conducting legitimate
firearms businesses. Further, ATF recognized that its strategy of
increased enforcement, along with the legislative actions discussed
earlier, would likely result in a reduction in the number of licensed
dealers.
To obtain information on whether ATF had a policy, or sought, to
reduce the number of firearms dealers to some targeted number, we
reviewed numerous ATF documents and interviewed 40 ATF officials,
including headquarters officials responsible for developing policy
and field officials responsible for implementing policy.
We reviewed numerous ATF documents on its National Firearms Program,
including memoranda, ATF briefs (which outline annual program
requirements), annual operating plans and reports, issue papers,
briefing papers, and firearms dealer application forms and
standardized letters. We also accessed ATF's computer database of
active and obsolete policy and program documents.
Our review of these documents showed that ATF's strategy was to
closely scrutinize firearms dealer applicants and licensees to ensure
strict compliance with GCA. For example, we noted a memorandum dated
June 16, 1993, from ATF's Associate Director (Compliance Operations)
to All Regional Directors (Compliance)\16
providing guidance on implementation of the National Firearms Program
that stated "[o]ur [ATF's] mission is not to put federal firearms
licensees out of business, but to ensure that all licensees adhere to
the requirements of the Gun Control Act (GCA)."
We interviewed the Chief of the Firearms and Explosives Regulatory
Division, who was responsible for developing policy on firearms
regulatory matters. We also interviewed ATF officials responsible
for implementing ATF policy, including: (1) the Chief of the
Firearms and Explosives Licensing Center and licensing examiners; (2)
the Directors of the Western, Southwest, Southeast, and Midwest
Districts; and (3) Area Office Supervisors and inspectors from the
Los Angeles, Dallas, Atlanta, and Detroit Area Offices. These
discussions indicated that ATF did not have a policy or an objective
to reduce the number of firearms dealers by a targeted number.
However, partly on the basis of the results of Operation Snapshot,
conducted in 1992 and 1993, ATF recognized that its increased
enforcement efforts would likely result in declines in the number of
firearms dealers not engaged in a firearms business. ATF's report on
Operation Snapshot stated that 46 percent of all licensees had sold
no firearms in the previous 12 months, and another 34 percent had
sold between 1 to 10 firearms.
In addition to its own increased enforcement efforts, ATF attributed
the declines in the number of firearms dealers to various other
factors, particularly the Federal Firearms License Reform Act of 1993
and the Violent Crime Control and Law Enforcement Act of 1994. ATF
stated that it received correspondence from a number of applicants
who cited increased fees, reluctance to provide fingerprints, and
state and local restrictions as reasons for not pursuing new or
renewal licenses. ATF also commented that a number of licensees were
unwilling or unable to certify compliance with state and local laws,
and ATF was therefore unable to issue new or renewal licenses.
While ATF commented that it did not have empirical data to
categorically show why licensees went out of business, it stated that
many licensees had obtained licenses only to purchase firearms at a
discount to enhance a personal collection. ATF stated that
additional licensing requirements, including increased licensing fees
and costs associated with compliance with state and local laws,
negated the benefits of a license.
--------------------
\16 The position of Associate Director (Compliance Operations) has
been eliminated and replaced with the equivalent position of Deputy
Associate Director, Regulatory Enforcement Field Operations.
Similarly, Regional Directors are now called District Directors.
VARIOUS ORGANIZATIONS' VIEWS
ON REASONS FOR THE DECLINE
IN THE NUMBER OF DEALERS
---------------------------------------------------------- Letter :5.6
To help determine reasons for declines in the number of licensed
firearms dealers, we obtained the views of representatives of seven
organizations. These included three firearms industry
organizations--the American Shooting Sports Council, Inc. (ASSC),
National Alliance of Stocking Gun Dealers (NASGD), and National
Association of Federally Licensed Firearms Dealers (NAFLFD); a
firearms consumers organization--the National Rifle Association
(NRA); two handgun control/violence prevention organizations--
Handgun Control, Inc., and the Violence Policy Center (VPC); and a
law enforcement organization--the International Association of Chiefs
of Police (IACP). (App. VI contains descriptions of these
organizations.)
The firearms industry organizations and the NRA were of the opinion
that the primary reason for the decline in the number of dealers was
ATF's December 1993 revised licensing requirements and the related
application form. They generally believed that the type and amount
of detailed information required by the new form discouraged many
persons from applying for or renewing a license. ASSC and NASGD, as
well as Handgun Control, Inc., cited the requirements to provide
fingerprints and photographs (subsequently enacted in the Violent
Crime Control and Law Enforcement Act of 1994) as a major reason for
the declines.
In addition, IACP, an organization of police executives, also pointed
to the overall tightening of the application process as a reason for
the decline in the number of dealers. However, it did not believe
that this or other additional changes were onerous burdens on
legitimate business operations.
Two of the firearms industry organizations--ASSC and NAFLFD, as well
as Handgun Control and VPC--also cited the increased licensing fee
authorized by the Federal Firearms License Reform Act of 1993 as a
major cause for the decline in the number of dealers.
Handgun Control and VPC believed other reasons for the decline were
(1) ATF's increased enforcement of already existing laws,
particularly the "engaged in the business" provision of GCA; and (2)
the Violent Crime Control and Law Enforcement Act of 1994 provision
requiring applicant certification of compliance with state and local
laws as a condition for federal licensing. IACP also cited this
provision as a factor contributing to declines in the number of
dealers. In addition, VPC attributed the declines to legislative and
enforcement actions by state and local governments and law
enforcement agencies to regulate the licensing of firearms dealers in
their jurisdictions.
SURVEY OF FORMER LICENSEES
SUGGESTED MULTIPLE REASONS
FOR DECLINES IN THE NUMBER
OF DEALERS
---------------------------------------------------------- Letter :5.7
We conducted a telephone survey of a sample of former federal
firearms dealer licensees to determine why they did not renew their
licenses. We randomly selected 80 licensees whose licenses had
expired between October 1, 1994, and March 31, 1995. We were able to
reach 56 of the 80 (70 percent) former licensees. We asked the
respondents for the reasons their licenses had expired, the average
number of firearms they had sold a year, and any other comments they
had about ATF. Since we asked an open-ended question about the
reasons for the expiration of the license, our results are likely to
underestimate the frequency of each reason. Also, because we
introduced the survey as part of a study of how ATF administers the
licensing process, reasons concerning ATF's role are likely to have
been recalled more easily than other reasons. Because we were unable
to contact 30 percent of our sample and the size of our sample was
limited, the results should be interpreted cautiously. Finally, we
cannot be certain that the reasons provided by these dealers would
apply to those whose licenses expired at other times. (See app. I
for more details on the survey and the sampling errors associated
with each estimate; see app. VII for the survey questionnaire.)
On the basis of our sample results, we estimated that 57 percent of
former licensees would list federal licensing fees or other federal
requirements as one of the reasons for not renewing their licenses;
because of sampling errors, this figure could be as low as 43
percent. Aspects of the federal requirements mentioned include
application filing requirements, amount of paperwork, fingerprinting,
and diagram of premises. Most licensees who mentioned one of these
federal requirements also mentioned at least one other reason for
nonrenewal.
We examined the other reasons provided by our respondents for
nonrenewal of their licenses. For example, some licensees went out
of business for unrelated reasons, or decided that they could not
make a profit selling firearms. Some indicated they just forgot to
renew their licenses. We estimated that 79 percent of former
licensees believed that there was at least one reason, other than a
federal requirement, for not renewing their licenses; because of
sampling errors, this figure could be as low as 67 percent.
As discussed earlier, ATF's Operation Snapshot reported that as many
as 46 percent of dealer licensees were not selling firearms. Our
survey results indicated that similar proportions of the former
licensees in our sample period were probably not selling firearms.
We asked our respondents how many firearms they sold in an average
year when they had a license. On the basis of their responses, we
estimated that between 27 percent and 55 percent of licensees had not
sold any firearms in an average year. In addition, we estimated that
at least 50 percent, and as many as 78 percent, of former licensees
had sold fewer than six firearms in an average year. We also found
that only 2 of the 56 former licensees had sold 100 firearms or more
per year. These results help support ATF's conclusion that part of
the decline in the number of licensees involves those not actually
selling firearms dropping out of the population of licensees.
ORGANIZATIONS' VIEWS ON THE
ADVANTAGES AND DISADVANTAGES OF
REDUCING THE NUMBER OF DEALERS
VARIED
------------------------------------------------------------ Letter :6
Representatives of the seven previously mentioned organizations also
provided us with a wide range of views on the advantages and
disadvantages of reducing the number of firearms dealers. Their
views, which are summarized below, generally concerned the effect
that declines in the number of firearms dealers may have on crime,
regulatory enforcement, and economics.
Three organizations--NASGD, Handgun Control, and VPC--indicated that
reducing the number of dealers to only those who are legitimately
"engaged in the business" was advantageous as a step toward reducing
crime. Handgun Control and VPC expressed concerns that "kitchen
dealers," those who operate out of their homes or vehicles, or at gun
shows, were a major source of black market firearms used to commit
crimes. The NASGD Executive Director stated "reductions in the
number of non-legitimate firearms dealers has a direct impact on
reducing crime."
Several organizations saw declines as advantageous to regulatory
enforcement efforts. The Executive Director of ASSC indicated that
reducing the number of licensed dealers would allow better use of
regulatory resources. The President of NAFLFD stated that with fewer
licensed firearms dealers, ATF's firearms tracing operations should
become more efficient and effective. IACP indicated that reducing
the number of federally licensed firearms dealers would enable the
limited number of [ATF] inspectors to do their jobs. Similarly,
Handgun Control and VPC stated that when the number of licensed
dealers was about 244,000, ATF could not effectively monitor them.
They stated that with fewer licensed dealers, ATF would be able to
more efficiently and effectively monitor dealer compliance with
federal law. As a disadvantage, the President of NAFLFD raised a
concern that reducing the number of licensed dealers too much could
lead to an "underground economy," an environment where firearms
transactions would go unregulated and firearms tracing would be
difficult.
Two firearms industry organizations--NAFLFD and ASSC--expressed
concerns that a reduction in the number of retail dealers could
negatively affect competition. NRA representatives said they were
less concerned with the number of dealers than with ATF artificially
reducing the number of dealers due to its policies and enforcement
efforts. NRA indicated that as a representative of firearm
consumers, it is vitally interested in ensuring that government
policies do not have a detrimental effect on the legal supply and
availability of firearms. The President of NAFLFD indicated that the
smaller firearms dealers did not represent competition for successful
storefront dealers; therefore, the elimination of smaller dealers
would not affect the availability or prices of legally traded
firearms. IACP indicated that the reduction in the number of dealers
had not made it any more difficult for law-abiding citizens to
purchase firearms.
AGENCY COMMENTS
------------------------------------------------------------ Letter :7
We requested comments on a draft of this report from the Secretary of
the Treasury. Department of the Treasury officials from the Office
of the Under Secretary for Enforcement and ATF provided Treasury's
comments at a meeting on March 7, 1996.\17
Overall, the officials stated that the report was accurate, thorough,
and balanced. They also provided technical comments, which have been
incorporated in this report where appropriate.
--------------------
\17 The Senior Advisor to the Under Secretary of the Treasury for
Enforcement could not attend the meeting, but his comments were
provided by ATF representatives. ATF representatives at the meeting
included the Deputy Associate Director, Regulatory Enforcement
Programs; Deputy Associate Director, Regulatory Enforcement Field
Operations; Chief, Firearms & Explosives Regulatory Division; Chief,
Enforcement Management Staff, Office of Enforcement; and Associate
Chief Counsel (Firearms & Explosives), Office of Chief Counsel.
---------------------------------------------------------- Letter :7.1
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time we will send copies of
the report to the Secretary of the Treasury and the Director of ATF.
Copies will also be made available to others upon request.
The major contributors to this report are listed in appendix VIII.
If you have any questions about this report, please call me on (202)
512-8777.
Sincerely yours,
Norman J. Rabkin
Director, Administration
of Justice Issues
OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I
Because of concerns by various organizations over declines in the
number of federally licensed firearms dealers during the last several
years, the Chairman of the House Subcommittee on Treasury, Postal
Service, and General Government, Committee on Appropriations,
requested that we review ATF's policies and procedures for licensing
and inspecting firearms dealers. We agreed to (1) determine the
extent and nature of recent declines in the number of licensed
firearms dealers; (2) determine what factors were likely to have
affected recent declines in the number of licensed firearms dealers,
including whether ATF had a policy to reduce the number of licensed
dealers; and (3) obtain the views of pertinent organizations on the
advantages and disadvantages of reducing the number of licensed
firearms dealers.
To obtain information on ATF's policies and procedures, we obtained
and reviewed documents and discussed current policies with agency
officials. We accessed policy and program documents through ATF's
directive system, a computer database containing both current and
obsolete policy directives. This database included ATF orders,
briefs, and other memoranda. We also reviewed related materials that
may have affected ATF's policies and procedures. For example, we
examined a 1993 Presidential Memorandum, a 1994 speech by the
Secretary of the Treasury, and various congressional hearings
records. We also obtained and reviewed recent legislation dealing
with the licensing process and discussed the implications of these
laws with ATF officials.
To obtain information on the number of firearms dealer licenses and
the extent and nature of recent declines in the number of firearms
dealers, we analyzed ATF data on the number of dealers; the number of
applications received; licenses issued, denied, and revoked; and
applications withdrawn and abandoned by applicants. Whenever
possible, we used ATF information on firearms dealer licenses; in
some cases, the only available ATF information aggregated all
firearms licensees. As agreed with the requester, we did not verify
license and inspection data provided by ATF because of time
limitations.
To determine the factors likely to have affected declines in the
number of firearms dealer licenses, we reviewed ATF documents and
analyzed ATF data. We reviewed federal legislation and discussed
ATF's interpretation with ATF officials. We also obtained the views
of representatives of seven organizations representing the firearms
industry, firearms consumers, law enforcement, and gun control
interests. We judgmentally selected the organizations on the basis
of our knowledge of their missions and objectives and on suggestions
from the Subcommittee staff, ATF officials, and firearms industry
representatives in an attempt to obtain a wide range of views. We
obtained comments from representatives of the National Alliance of
Stocking Gun Dealers, the American Shooting Sports Council, the
National Association of Federally Licensed Firearms Dealers, the
National Rifle Association, the International Association of Chiefs
of Police, Handgun Control Incorporated, and the Violence Policy
Center. (These organizations are described in app. VI.)
To understand how ATF implemented its policies, we visited four ATF
district offices, four ATF area offices, and ATF's Firearms and
Explosives Licensing Center. We visited ATF's Southeast, Southwest,
Western, and Midwest district offices and ATF's Atlanta, Dallas, Los
Angeles, and Detroit area offices. We judgmentally selected the
eight field offices on the basis of geographic diversity, significant
declines in the number of dealer licensees, inclusion of both urban
and rural licensees, and availability of our staff to conduct the
work. We cannot be certain that our results apply to the other 33
ATF area offices. We also did some limited work at ATF's area office
in New York City.
During our visits to the ATF field offices, we interviewed both top
management and other employees. We discussed actual inspection
procedures with available ATF inspectors and supervisors to determine
whether their views were shared by others. We obtained any
guidelines concerning the licensing and inspection process that had
been developed in each field office.
To determine reasons some former licensees were no longer licensed,
we conducted a telephone survey of a random sample of former
licensees. We identified a universe of 36,614 licenses that were
entered in ATF's database as having expired in the 6-month period
between October 1, 1994, and March 31, 1995. This period was
sufficiently distant to ensure that renewal applications were not
still being processed, but sufficiently recent to enable respondents
to remember why their licenses had expired. We selected a simple
random sample of 90 licensees from the population of former
licensees. Because of time constraints, we were unable to complete
more interviews. Our results do enable us to make estimates to the
universe of former licensees, although the small sample requires
those estimates to be made with fairly large confidence intervals.
Of the 90 licenses in the sample, 10 were not eligible for the
following reasons: 7 actually had been renewed, 1 had expired more
than 5 years earlier, 1 was pending renewal, and 1 was pending
denial. After eliminating these 10, we had a sample of 80 to
represent the licenses that expired during our 6-month review period.
We were able to obtain survey information on 56 of these individuals,
for a response rate of 70 percent. We conducted our telephone survey
between October 1995 and January 1996.
The survey consisted of four types of questions. First, we verified
that the respondents did have licenses that expired in the period
specified in the ATF database. Second, we asked for the reasons why
the license had expired or had not been renewed. We asked this
question in an open-ended manner and probed for more information or
additional reasons. Third, we asked the respondent to provide an
estimate of the average number of firearms sold in the years when the
license was in effect. And fourth, we asked whether there was
anything else the respondent would like to tell us about the
licensing or inspection process, or about ATF. (A copy of the
questionnaire form appears in app. VII.)
Several aspects of the survey should be kept in mind in interpreting
the results. We cannot be certain that the nonrespondents would have
answered our questions in the same way as the respondents. When we
compared respondents and nonrespondents using the limited ATF data on
size of dealer businesses, we found that most nonrespondents (as most
respondents) sold very few firearms. In addition, when we compared
the reasons for nonrenewal provided by respondents who were harder to
reach with those who were easier to reach, we found no remarkable
differences. Despite these similarities, the possibility remains
that those we did not reach may differ in other important ways from
our respondents.
In addition, we used an open-ended question to identify reasons for
expiration of the license. We adopted this approach because we did
not have time to conduct a pretest that could have identified a
comprehensive list of reasons for a closed, check-list question.
Using open-ended questions (rather than a list of items read to the
respondent) is likely to result in an under-reporting of reasons.
Therefore, we have not reported an upper bound for estimates of
answers to this question. Also, the survey was introduced to the
respondents as GAO's study of ATF. Given this context, it is likely
that reasons related to ATF were more completely reported than were
other reasons. We tried to partially balance this potential problem
by probing for additional reasons after the respondents answered the
question. Finally, our results apply only to licenses expiring
between October 1, 1994, and March 31, 1995. However, we have no
reason to believe that these results would be any different for any
other 6-month period since the implementation of the relevant
legislative and policy changes.
In this report the 56 sample interviews have been used to provide
estimates of the characteristics of the population of all licenses
that expired during this period. All such sample results are subject
to sampling error. This occurs because the sample results are likely
to differ to some extent from the results that would have been
obtained if all individuals in the universe had been contacted. The
sizes of sampling errors depend largely on the completed sample size
and the amount of variability in the data. In this report, all
estimates have 95 percent confidence intervals of no more than plus
or minus 14 percent. This means that, if we drew repeated samples
from the entire study population, 19 out of 20 samples would produce
estimates within 14 percent of the true proportion of the total
population.
In addition to the reported sampling errors, any survey may be
subject to nonsampling errors. For example, differences in how a
particular question is interpreted, in the sources of information
that are available to respondents, or in the types of people who do
not respond can introduce unwanted variability into survey results.
To minimize nonsampling errors, we took several steps in developing
and conducting the survey. We discussed the wording of our questions
with ATF officials before finalizing the survey form. Interviewers
were told to ask the questions as written, and follow-up questions
were provided for the interviewers. In addition, a tentative list of
reasons for expiration of licenses was provided on the interview form
to facilitate the systematic interpretation of the open-ended
responses. The completed survey forms were reviewed by two of our
analysts, and all counts of responses were checked independently.
To obtain information on whether ATF had a policy to reduce the
number of firearms dealer licensees, we reviewed ATF documents--
memoranda, ATF briefs (which outline annual program requirements),
annual operating plans and reports, issue papers, briefing papers,
and firearms dealer application forms and standardized letters--and
interviewed ATF officials. In particular, we spoke with the
headquarters officials responsible for developing regulatory policy
and strategies and field officials responsible for implementing them.
To obtain information on the advantages and disadvantages of reducing
the number of firearms dealers, we obtained the views of
representatives of the same seven organizations previously discussed
and further described in appendix VI.
NUMBER OF FEDERALLY LICENSED
FIREARMS DEALERS FISCAL YEARS 1975
THROUGH 1995
========================================================== Appendix II
Fiscal year ending Type 01\a Type 02\b Total
------------------------- ------------- ------------- =============
1975 146,429 2,813 149,242
1976 150,767 2,882 153,649
1977 157,463 2,943 160,406
1978 152,681 3,113 155,794
1979 153,861 3,388 157,249
1980 155,690 3,608 159,298
1981 168,301 4,308 172,609
1982 184,840 5,002 189,842
1983 200,342 5,388 205,730
1984 195,847 5,140 200,987
1985 219,366 6,207 225,573
1986 235,393 6,998 242,391
1987 230,888 7,316 238,204
1988 239,637 8,261 247,898
1989 231,442 8,626 240,068
1990 235,684 9,029 244,713
1991 241,706 9,625 251,331
1992 248,155 10,452 258,607
1993 246,984 10,958 257,942\c
1994 213,734 10,872 224,606
1995 158,240 10,155 168,395
----------------------------------------------------------------------
\a This type of license is issued to dealers and gunsmiths.
\b This type of license is issued to pawnbrokers.
\c The number of firearms dealers peaked in April 1993 at 260,703.
Source: ATF.
DATA ON ALL CATEGORIES OF FEDERAL
FIREARMS LICENSES AND
APPLICATIONS, FISCAL YEARS 1975
THROUGH 1995
========================================================= Appendix III
Voluntaril
Fiscal y
year Origin Renewa Revoke surrendere Origin Renew Origin Renew Origin Renew
ending al l d d al al al al al al
-------- ------ ------ ------ ---------- ------ ----- ------ ----- ------ -----
1975 29,183 138,71 7 N/A 150 273 1,651 334 N/A N/A
9
1976 29,511 138,05 6 N/A 209 261 2,077 436 N/A N/A
0
1977 32,560 136,62 10 N/A 216 207 1,645 409 N/A N/A
9
1978 29,531 139,38 0 N/A 151 168 1,015 141 414 449
3
1979 32,678 143,02 12 N/A 124 93 432 240 433 942
1
1980 36,052 143,52 10 N/A 96 31 601 336 661 800
7
1981 41,798 152,15 7 N/A 85 16 742 385 329 495
3
1982 44,745 161,39 4 N/A 52 12 580 332 370 350
0
1983 49,669 163,38 6 N/A 151 48 916 514 649 700
6
1984 39,321 163,95 9 N/A 98 23 706 449 833 825
0
1985 37,385 52,768 18 N/A 103 9 666 226 598 307
\a
1986 42,842 47,648 27 N/A 299 14 698 135 452 181
1987 36,835 61,596 14 N/A 121 38 874 428 458 225
1988 32,724 52,738 4 N/A 30 19 506 422 315 182
1989 34,318 54,892 12 N/A 34 14 561 1,456 360 215
\b
1990 34,336 61,536 9 N/A 46 29 893 48 404 63
1991 34,567 57,327 17 N/A 37 15 1,059 82 685 106
1992 37,085 58,873 24 N/A 57 4 1,337 26 611 88
1993 41,545 66,811 26 N/A 343 53 6,030 1,187 1,844 683
1994 25,393 37,079 44 4,936 136 191 4,480 1,128 3,917 969
1995 7,777 19,541 35 2,657 49 65 1,046 1,077 1,180 1,254
-----------------------------------------------------------------------------------------
N/A = ATF did not maintain data.
\a ATF switched from 1-year to 3-year renewals in 1985.
\b According to ATF, this number is due to a clean-up of three
regional offices' firearms files that were transferred to the
Firearms and Explosives Licensing Center in 1989. Also, 1989 was the
renewal year for the 3-year ammunition-only licenses issued in 1986,
prior to a change in the law eliminating the need for a license to
deal in ammunition only. These licensees were advised to withdraw
their renewal applications.
Source: ATF.
(See figure in printed edition.)Appendix IV
PRESIDENT'S MEMORANDUM ON GUN
DEALER LICENSING
========================================================= Appendix III
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)Appendix V
REMARKS OF THE SECRETARY OF THE
TREASURY ON GUN DEALER LICENSING
========================================================= Appendix III
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
DESCRIPTION OF ORGANIZATIONS
CONTACTED BY GAO
========================================================== Appendix VI
AMERICAN SHOOTING SPORTS
COUNCIL, INC.
-------------------------------------------------------- Appendix VI:1
The American Shooting Sports Council represents the firearms industry
and interested individuals. The Council promotes the sport of
shooting and lobbies on firearms issues. The Council has about 350
members and is headquartered in Atlanta, GA.
HANDGUN CONTROL, INC.
-------------------------------------------------------- Appendix VI:2
Handgun Control, Inc., is a public citizens lobby organization
working for legislative controls and governmental regulation on the
manufacture, importation, sale, transfer, and civilian possession of
guns. The organization has about 400,000 members and is
headquartered in Washington, D.C.
The Center to Prevent Handgun Violence is a nonprofit education,
research, and legal advocacy organization established in 1983 to
reduce handgun violence. The Center is an affiliate of Handgun
Control, Inc. They work closely with one another to disseminate
information on handgun violence.
INTERNATIONAL ASSOCIATION OF
CHIEFS OF POLICE
-------------------------------------------------------- Appendix VI:3
The International Association of Chiefs of Police is an organization
of police executives who are commissioners, superintendents, chiefs,
and directors of national, state, provincial, and municipal
departments. The organization provides leadership, support, and
research services in all phases of law enforcement activity. This
nonprofit organization has about 14,500 members from 81 countries and
is headquartered in Alexandria, VA.
NATIONAL ALLIANCE OF STOCKING
GUN DEALERS, INC.
-------------------------------------------------------- Appendix VI:4
The National Alliance of Stocking Gun Dealers is a trade organization
representing independent, storefront shooting sports dealers,
distributors, and manufacturers. The Alliance has about 16,300
members and is headquartered in Havelock, NC.
NATIONAL ASSOCIATION OF
FEDERALLY LICENSED FIREARMS
DEALERS
-------------------------------------------------------- Appendix VI:5
The National Association of Federally Licensed Firearms Dealers is a
trade association representing individuals licensed by the federal
government to sell firearms. The Association provides firearms
retailers with low-cost liability insurance, current information on
new products for the industry, and retail business guidance. It has
about 10,000 members and is headquartered in Fort Lauderdale, FL.
NATIONAL RIFLE ASSOCIATION
-------------------------------------------------------- Appendix VI:6
The National Rifle Association of America is a nonprofit sports
organization representing target shooters, hunters, gun collectors,
gunsmiths, police officers, and others interested in firearms. The
Association promotes the rights of individuals to possess and use
firearms, promotes shooting sports and firearms safety, and
encourages civilian marksmanship. It has about 3.2 million members
and is headquartered in Fairfax, VA.
VIOLENCE POLICY CENTER
-------------------------------------------------------- Appendix VI:7
The Violence Policy Center is a national nonprofit educational
foundation that conducts research on violence in America and works to
develop violence-reduction policies and proposals. The Center
examines the role of firearms in America, conducts research on
firearms violence, and explores new ways to decrease it. The Center
is headquartered in Washington, D.C.
(See figure in printed edition.)Appendix VII
GAO TELEPHONE SURVEY OF FORMER
FIREARMS DEALER LICENSEES
========================================================== Appendix VI
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
Daniel C. Harris, Project Director
Samuel A. Caldrone, Project Manager
Carolyn S. Ikeda, Senior Evaluator
Barry J. Seltser, Supervisory Social Science Analyst
Joanne M. Parker, Senior Social Science Analyst
James M. Fields, Senior Statistician
Bonita J. Vines, Computer Specialist
Pamela V. Williams, Communications Analyst
Katherine M. Wheeler, Publishing Advisor
DALLAS FIELD OFFICE
Christopher H. Conrad, Senior Evaluator
Frederick T. Lyles, Jr., Evaluator
LOS ANGELES FIELD OFFICE
Richard R. Griswold, Senior Evaluator
James R. Russell, Evaluator
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C.
Jan B. Montgomery, Assistant General Counsel
Geoffrey R. Hamilton, Senior Attorney
Sandy Ballou, Legal Extern
*** End of document. ***