The position held by Olympic Arms as stated on their website (As far as I am concerned, not gospel; but information, nonetheless. Still seeking info from other makers. Always glad to help muddy the waters):
Lacquer Coated Ammo
If you plan on using lacquer-coated ammo in your Olympic Arms AR-15, please be aware of the following. We have received many recent phone calls, as well as some rifles sent in for repair, complaining about reliability problems in their Oly Arms AR's. The first question usually asked is, "What ammunition are you using?" The answers to the question, as well as seeing the chambers of the rifles that were sent in are showing us that lacquer coated ammo is clogging the chambers badly.
What we are seeing is that once the chamber in the rifles gets hot, it is melting the lacquer off of the casings, and leaving a gelatinous goo in your chamber. Under continuous fire, this is usually not noticed, but once you stop, the barrel cools, the lacquer sets and you now cannot chamber and/or properly extract your ammunition. You will experience this in AR-15's much more frequently than other rifles such as the SKS and AK/MAC variants. In most cases the 7.62x39 rifles have chambers cut to the large end of the safety spectrum so that feeding and reliability is uncompromised by the type of ammunition or the consistency of the case dimensions. AR style rifles, and especially those from Oly Arms will have tighter chambers so that you can experience a greater level of accuracy that these rifles are capable of performing...
...Major brands of lacquer coated ammo we have seen are Wolf, most Russian ammo (even if it has the Remington head stamp), Norinco (or most Chinese) and most all former eastern block countries.
Our recommendations: DO NOT USE LACQUER COATED AMMO. Otherwise, be prepared for the consequences. Additionally, most lacquer-coated ammo utilizes steel cases instead of brass. BAD FOR YOUR CHAMBER.
The Consequences: Poor feeding, poor extraction, poor accuracy, and an impossible to clean chamber possibly resulting in a rifle that simply does not work.
Although Olympic Arms only warrants their firearms when used with new production brass cased US manufactured ammo, we would be remiss to think that the bulk of our customers do not use remanufactured, imported or reloaded ammo. We know that they will, and do. The reason that our warranty does not cover the use of this ammo is as much to protect you, as it is our product and our product. If you are using factory US new manufactured brass cased ammo, and something goes wrong and the rifle is damaged, the ammo manufacturer will usually take care of any repair costs. If not, and the damage can be proven to be the fault of the ammo, you have some sort of course of action you can take against that manufacturer to recover some or all of the expenses of the repairs. If you use foreign lacquer coated ammo as an example, you have NO options.
Is your rifle worth it?...
...What ammo should I use?
We recommend that you use brass cased domestically produced new production ammo only. There are many manufactures and types of ammo that meet these specifications, so your options are large. But remember this, any autoloading rifle is only as good as the ammo and magazines you use in it. I will never understand why a person would spend $800- $1,000 on a new firearms, and then go out and buy a whole case of the cheapest garbage ammo he can find, and then complain because his rifle does not work properly when firing it. To me this is a bigger mystery than Bigfoot or the Bermuda Triangle. Use junk ammo, get junk results. Use quality ammo, get quality results.
Fine Print Warning!
We have all heard this before, but it applies here as well; always read the fine print. There are several well known manufacturers of ammunition that also sell ammo that is manufactured over-seas and then imported to the US. Additionally, most major manufacturers offer "less expensive" lines of ammunition bearing their factory names. I will not single out specific brands other than the Winchester which has caused many a problem, there's no getting around that.
The thing that these major brands have going for them is the name recognition. People see names they recognize, and they by the ammo with confidence thinking it is a good quality ammo. But the fact remains, that this is not always the case. CHECK THE FINE PRINT!
I have some ammo in my hand, sold under a major brand name label. I have 6 boxes of ammo, all from the same manufacturer, and they manufactured in 5 different foreign countries and imported back into the US. Italy, R.P. (Haven't figured this one out yet), RSA (Republic of South Africa), R.O. Korea, are all represented on this list.
So what is quality ammo?
Here is a short (incomplete) list of quality ammunitions in no particular order:
Ammunition that has been used by Oly Arms as test fire ammo:
Hornady
Black Hills (new production)
Federal
PMC (US Manufactured only)
Remington (new, non-UMC brand)
American Eagle
Ammo that may cause reliability problems *:
Wolf
PMC (imported ammo only: READ the fine print)
Reloaded ammo if not properly re-sized
Winchester (imported only: read the fine print)
(*Based on customer reported reliability problems)