UPDATEThings are much clearer now. The ATF believes the lowers are illegal because the fire control cavity is, indeed, formed during the manufacturing process. The order in which this happens doesn’t matter.
80% lower receivers aren’t considered firearms as long as insufficient manufacturing processes have been completed to turn it into a functioning firearm. The ATF has stated an opinion on exactly when that is in the process of making an AR-15. The general rule of thumb is that the point at which the fire control cavity is milled out is when the hunk of metal becomes a gun.
EP Armory believed that they could make a polymer lower that was easier for people to finish by making the fire control area a different color plastic. It would eliminate the need for precise machining, letting buyers just drill it out instead of painstakingly milling and using a jig. In order to stay in the clear in regards to the 80% requirement, they believed that by molding the fire control area first (something they referred to as a “biscuit”) and then molding the receiver around that biscuit, that they could produce an 80% receiver that included the helpful, differently colored guide.
Their logic was that since the plug was constructed first and the lower molded around it, then at no point was that fire control cavity “created” — it was always filled with material.
The ATF disagreed.
Basically what this means is that the ATF claims Ares Armor was selling "firearms" without NICS checks and logging them, i.e., illegally. I don't even know if Ares is an FFL. I don't think so. Unless Areas can defend themselves in court to a judge's satisfaction, it won't end well.
