We reviewed “knowing and identifying your customers” (ATF Ruling 2001-5) and how to properly establish and maintain a compliant bona fide “loan-out” program (ATF Ruling 2010-1) in last week’s blog. We hope you found that information to be of value to your store’s operations. This week, we are diving into two rulings that most of you should know but some may not have seen, yet.
Use of software to streamline and enhance compliance is nothing new. Though many believe that simply buying or signing up for a service means they are compliant, the reality is that you are responsible for ensuring the software you use is compliant regardless of what the software claims. The only way to know if your software is compliant is to have some level of understanding of the above two rulings.
Let’s get started.
ATF RULING 2016-1:
Long story short – until 2008, the FFL had to submit a variance request for approval in order to use an electronic Bound Book. The approval process meant ATF vetted the specific software you were using so that it met ATF’s minimum requirements. Therefore, upon approval, it gave the FFL some piece of mind that ATF knew their software was compliant. ATF issued a ruling in 2008 to make it easier for FFLs to go digital. However, this now meant ATF was not vetting software and opened the door for software to hit the market that may not actually be compliant.
What happens when your software is not compliant? ATF has stated numerous times that the software used by an FFL is 100% the FFL’s responsibility. You are solely responsible for knowing how the software you use works and what requirements it must meet prior to using it. Ignorance is no excuse and ATF will hold you accountable if you are using software that does not meet the requirements of this ruling.
The requirements are extensive and you might want to start asking your current or future provider some tough questions around each of these. Directly from the ruling itself:
1. The licensee records in the computer system all of the acquisition and disposition information required by 27 CFR 478.121, 478.122, 478.123, 478.125(e), 478.125(f), and 27 CFR 479.131, as applicable. Required information includes a record of both the manufacturer and the importer (if any). Additional columns can be utilized to capture certain additional information (e.g., inventory number, new/used, etc.), so long as the additional information is separate from the required information and the required information is readily apparent. An ATF Form 4473 serial number may be used instead of the address for recording the transfer of a firearm to a non-licensee if such forms are filed numerically.
2. The electronic acquisition and disposition bound book software must track corrections and changes utilizing one of the following methods of tracking changes:
a. The system must retain any correction as an entirely new entry, without deleting or modifying the original entry. When the software generates the bound book, the system must be able to quickly and easily change views of the bound book as follows:
1. Only view the original entries;
2. Only view the corrected entries; and
3. View both the original and corrected entries in the same bound book.
b. The system must be able to print the corrections as a separate report containing the same parameters as are required for a paper bound book, including the firearm information, acquisition details, and disposition details. The format of the correction report may follow the traditional bound book format or may be presented in any column format as long as the necessary information outlined above exists in the report (which may include a notes column).
c. If a spreadsheet program (e.g., excel) is being utilized, the system must be able to track any edits/corrections/amendments in a “notes” column. Any edits/corrections/amendments may overwrite the original entry so long as the “notes” column explains any edits/corrections/amendments and/or tracked changes (i.e., what was changed, who made the change, and why the change was needed).
3. The system cannot rely upon invoices or other paper/manual systems to provide any of the required information. Also, if a licensee chooses to use an electronic recordkeeping system for any of its required acquisition and disposition records, then all acquisition and disposition records, regardless of type (e.g., gunsmithing, sales, NFA), must also be in the electronic format as prescribed by this ruling.
4. The system must allow queries by firearm serial number, acquisition date, name of the manufacturer or importer, name of the purchaser, address of purchaser or other transferee, and ATF Form 4473 transferor’s transaction serial number (if any).
5. The licensee must download all records from the system to a physical storage device (e.g. hard drive, Compact Disc (CD), Digital Versatile Disc (DVD), or Universal Serial Bus (USB) Flash Drive) at the licensee’s business premises, or print and maintain them at the licensee’s business premises:
a. at least semiannually; however, if the records are downloaded, from a host facility (e.g., remote server or cloud storage provider) contracted/leased by the licensee as provided in condition #9, they must be downloaded at least daily. In all cases, the records must be downloaded in a format that is unencrypted with the required information readily apparent;
b. upon request of an ATF officer (must be provided within 24 hours);
c. prior to discontinuance or change of: the software (program); the database system, whether or not maintained by a host facility (e.g., remote server or cloud storage provider); and/or the host facility (if applicable); and
d. prior to discontinuance of the licensee’s firearms business.
The downloads/printouts must include all firearms in inventory, as well as all firearms transferred during the period covered, sequentially by date of acquisition, and must be limited to display only the information required by the applicable regulations. The downloads/printouts may contain additional columns capturing certain additional information, provided that the required information is readily apparent.
6. If a licensee downloads the records onto a physical storage device (e.g., hard drive, CD, DVD, or USB Flash Drive), the download must be retained on the physical storage device until the next download is prepared. Additionally, the licensee must be able to present the most current version of the requested records in a printed format at ATF’s request.
7. If the licensee prints out the records, the printout must be retained until the next printout is prepared.
8. Downloads/printouts may include antique firearms, but cannot include other merchandise. However, antique firearms must be identified as such in the “firearm type” column.
9. Electronic firearms acquisition and disposition records may be stored on a computer server or device owned and operated by the licensee, or contracted/leased by the licensee through a host facility (e.g., remote server or cloud storage provider), provided that:
a. The firearms acquisition and disposition records are readily accessible through a computer or device located at the licensed premises during regular business hours; and
b. The licensee’s server is located within the United States or its territories, or if a host facility is used, that facility must have a business premises within the United States or its territories, and must be subject to U.S. legal process.
Licensees are strongly encouraged to ensure that there are proper and robust security protection measures in place (e.g., encryption) to ensure all data is protected.
10. If the licensee contracts with, leases from, or changes a host facility (e.g., remote server or cloud storage provider), the licensee must, within 30 days, notify his/her respective ATF Area Office of the name and address of the host facility.
11. Each licensee must maintain its firearms acquisition and disposition records on a separate/partitioned database that cannot be intermingled with the records associated with another license.
12. The storage system must back-up the firearms acquisition and disposition records on at least a daily basis to protect the data from accidental deletion or system failure.
13. Licensees must retain all records in accordance with 27 CFR 478.129, ATF Rul. 2010-8, Consolidation of Required Records for Manufacturers, and ATF Rul. 2011-1, Consolidation of Required Records for Importers (as applicable). It is strongly recommended that upon reaching 20 years, those electronic firearms acquisition and disposition records be either permanently maintained by the licensee or forwarded to the ATF Out-of-Business Records Center for preservation.
14. Upon discontinuance of business, the licensee must send required records to the ATF Out-of-Business Center in accordance with 27 CFR 478.127. The licensee must print out the required records or download them to a physical storage device (as defined in paragraph 5) or, at the discretion of the licensee, both. The complete printout or download must provide an American Standard Code for Information Interchange (ASCII) text file (in conformity with industry standards) containing all acquisition and disposition records, and a file description. The complete printout or downloaded ASCII text file (and file description) must contain all information prescribed by regulation. The NTC converts these files into image files not searchable by name.
Whew, ok, that is a lot to digest. Reread it again and again until you have it down. Then pick up the phone and call your current provider and make them show you, not just tell you “our lawyers say it is compliant”, that it meets these requirements.
Today, most eBound Books also come with an integrated e4473. The benefits of information flowing from receipt of the firearm in the eBound Book to the e4473 are fantastic. If you are still using old-school, handwritten paper 4473s you are sitting on a ticking time bomb. There are over 80 potential errors just waiting to be made every time you hand a blank 4473 and pen to your customer. Using an e4473 software (a compliant one) will mitigate 95% or more of those errors.
In order to be compliant, the e4473 software you use must meet the requirements of ATF Ruling 2016-2. Let’s look at those now. And, again, there is a lot of information here. Take your time and if you have questions, you can always reach out to 4473 Cloud for an answer.
ATF RULING 2016-2:
Like 2016-1, this ruling has extensive requirements and the software you use must meet each and every one of them. Here they are, directly from the Ruling:
1. The licensee will follow the Notices, Instructions, and Definitions governing the use of the OMB-approved version of the ATF Form 4473, and either:
(a) acquires and uses his/her own electronic Form 4473 software; or
(b) downloads from ATF’s website and saves to his/her computer ATF’s most current electronic version of Form 4473, known as ATF e-Form 4473.
2. The e-Form 4473 displays clearly, on the same screen, or upon mouse-clicking, a conspicuously displayed screen item, all of the Notices, Instructions, and Definitions contained on the current Office of Management and Budget (OMB) approved ATF Form 4473.
3. The computer software must allow for a new e-Form 4473 to be created and completed upon each transaction. The system cannot populate Section A from previous transfers from the same transferee (buyer).
4. The transferee (buyer) of the firearm(s) must answer the questions for Section A of e-Form 4473 while physically present at the seller’s premises (to include a qualifying gun show or event). The questions presented on the computer screen must be legible and contain the same wording as the current OMB-approved version of ATF Form 4473 (5300.9), Firearms Transaction Record. Where Form 4473 requires “checking” or “marking,” the transferee may mouse-click in an appropriate box to answer the question on the e-Form 4473. Where Form 4473 requires “printing” or “handwriting” the transferee may enter the information on the e-Form 4473.
5. The e-Form 4473 must allow the transferee to review and amend his/her answers until he/she selects or mouse-clicks a statement on the screen that he/she “agrees with and certifies” the same transferee certification statement as the current OMB-approved ATF Form 4473 (5300.9). Once the statement has been selected or mouse-clicked, the transferee can no longer make revisions to his/her answers.
6. The transferee (buyer) confirms his/her answers with his/her signature and date on the form, certifying that his/her answers are true, correct, and complete and that he/she has read, understood, and complied with the conditions, notices, definitions, and instructions for the form.
7. The transferor (seller) of the firearm(s) enters the information into the licensee’s computer for Section B and Section D of the e-Form 4473. The questions presented on the computer screen must be legible and contain the same wording as the current OMB-approved version of ATF Form 4473.
8. The transferee and transferor signatures on the e-Form 4473 may be electronic signatures captured via an electronic signature pad prior to printing or may be handwritten (ink) signatures on the printed copy of the e-Form 4473.
9. If the electronic signature pad breaks or fails to operate properly, the licensee must discontinue the use of electronic signatures and obtain handwritten (ink) signatures on the OMB-approved ATF Form 4473 or the printed copy of the eForm 4473.
10. If the transferee (buyer) cannot read and/or write, another person, excluding the licensee or any employee of the licensee, may complete the answers. Two persons, other than the licensee or any employee of the licensee, must then sign as witnesses to the buyer’s answers and signature. The person who cannot read and/or write may electronically sign or mark the e-Form 4473. The two additional persons’ signatures must be handwritten in ink on the printed e-Form 4473.
11. All NICS or State POC-related information must be entered accurately on the eForm 4473 in the applicable fields. These entries can be made via electronic population (auto-population of the fields) or manual electronic entry (typing the information into the fields). They may also be handwritten onto the form after it is printed.
12. In order to electronically populate information related to the NICS background check, the FFL must contact the FBI NICS or appropriate State agency to request authorization to transfer specific NICS data from e-Check into the computerized system.
13. Pursuant to 27 CFR 478.102(d) and 27 CFR 478.131(a)(2), if an exception to the NICS or State POC check exists, the licensee must record such information on the ATF Form 4473 (i.e., if a transferee possesses a NICS or State POC exempt permit) in the applicable fields.
14. If the licensee wishes to maintain e-Forms 4473 for pending transactions, the forms must be downloaded from the system to a physical storage device (e.g., hard drive, Digital Versatile Disc (DVD), server) at the licensee’s business premises, or printed and maintained at the licensee’s business premises:
a. At least daily, in a format that is unencrypted with the required information readily apparent;
b. Upon request of an ATF officer (must be provided within 24 hours);
c. Prior to discontinuance or change of: the software (program); the database system, whether or not maintained by a host facility (e.g., remote server or cloud storage provider; and/or the host facility (if applicable); and
d. Prior to discontinuance of the licensee’s firearms business.
15. If the licensee wishes to maintain e-Form 4473 for pending transactions, the forms may be stored on a computer server or device owned and operated by the licensee, or contracted/leased by the licensee through a host facility (e.g., remote server or cloud storage provider), provided that:
a. The e-Forms 4473 are readily accessible through a computer server or device located at the licensed premises during regular business hours.
b. The e-Forms 4473 documenting a pending transaction must be printed out upon request by any ATF officer.
c. The e-Forms 4473 documenting a pending transaction must be searchable by the transferee’s (buyer’s) last name, address, and by firearms information, such as by serial number, manufacturer, and importer (if applicable).
d. The licensee’s server is located within the United States or its territories, or if a host facility is used, that facility must have a business premise within the United States or its territories, and must be subject to U.S. legal process.
e. Each licensee must maintain its stored e-Form 4473 on a separate/partitioned database that cannot be intermingled with another licensee’s records.
f. The storage system must back up the stored e-Form 4473 on at least a daily basis to protect the data from accidental deletion or system failure.
g. Licensees are strongly encouraged to ensure that there are proper and robust security protection measures in place (e.g., encryption) to ensure all data is protected.
16. If the licensee contracts with, leases from, or changes a host facility (e.g., remote server or cloud storage provider), the licensee must, within 30 days, notify his/her respective ATF Area Office of the name and address of the host facility.
17. If the transfer of the firearm(s) takes place on a different day from the date that the transferee (buyer) signed Section A, the transferee must complete Section C immediately prior to the transfer of the firearm(s). The computer software cannot allow the electronic signature to be automatically populated in the form from a previously captured signature or information in the software.
18. The e-Form 4473 must be printed, including instructions, at the time the transfer of the firearm is complete and prior to the transferee departing the business premises. The transferor must verify that the signature and date are present and in the appropriate fields on the printed ATF Form 4473.
19. In the case of “denied,” no sale or canceled transactions, the ATF Form 4473, including instructions, must be printed and the printout retained pursuant to 27 CFR 478.129(b).
20. If the transaction is not completed within the 30-day period after initially contacting NICS, the ATF Form 4473, including instructions, must be printed and the printout retained pursuant to 27 CFR 478.129(b).
21. The licensee must print all ATF Forms 4473, including the Notices, Instructions, and Definitions, on 8 1/2” x 11” white paper. The pages must be stapled together. The entire printed ATF Form 4473 must be a verbatim/exact image of the current OMB-approved ATF Form 4473 (5300.9). Each response to a question must be legibly printed and aligned in the particular space or box allotted for that question on ATF Form 4473. If the licensee is unable to print the ATF Form 4473, he/she must use the current hard copy of the OMB-approved version of the form. The pages may be printed either single-sided or double-sided.
22. The licensee must retain the printed ATF Forms 4473 at the licensed premises in accordance with 27 CFR 478.124(b) and 129.
Just like 2016-1, you need to ask the tough questions of your current and/or future e4473 software provider. If you don’t ask, you are taking someone else’s word as gospel and your compliance health is at risk.
To review the entirety of these rulings and the others we are in the middle of talking about use these links:
- ATF Ruling 2001-5 : Identification of Transferee
- ATF Ruling 2010-1 : Temporary Assignment of a Firearm by an FFL to an Unlicensed Employee
- ATF Ruling 2016-1 : Requirements to Keep Firearms Records Electronically (A&D/Bound Book)
- ATF Ruling 2016-2 : Electronic ATF Form 4473
- ATF Ruling 2021R-05f : Definition of “Frame or Receiver” and Identification of Firearms
- ATF Ruling 2022-1 : Electronic Storage of Forms 4473
Next week, we will review the most recent rulings that impact your business. You do not have to wait for that blog to get started today with upgrading your store operations by going fully digital! By the time that blog hits the internet, you can already have an account set up, notification to ATF, and be storing your 4473s digitally in 4473 Cloud. Click here and don’t waste another penny printing 4473s.
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