Section 922 Paragraph R states:
“It shall be unlawful for any person to assemble from imported parts any semiautomatic rifle or any shotgun which is identical to any rifle or shotgun prohibited from importation under section 925(d)(3) of this chapter as not being particularly suitable for or readily adaptable to sporting purposes except that this subsection shall not apply to–
- the assembly of any such rifle or shotgun for sale or distribution by a licensed manufacturer to the United States or any department or agency thereof or to any State or any department, agency, or political subdivision thereof; or
- the assembly of any such rifle or shotgun for the purposes of testing or experimentation authorized by the Attorney General. “
Full Text of Title 18 of the US Code (18 USC), Chapter 44 Section 922
In the past, ATF has issued letters stating that this type of conversion does and does not come into play. I was talking with Joshua Prince, a PA Gun Trust Lawyer®, and he believes that 922R does not come into play because 922r deals with sporting arms and only makes it a crime to manufacture the item not be in possession of it.
There are several good discussions of 922r if you want to read about it. One that goes into a lot of detail is found on this page.