Federal Register, Volume 73 Issue 90 (Thursday, May 8, 2008)

[Federal Register Volume 73, Number 90 (Thursday, May 8, 2008)]
[Proposed Rules]
[Pages 26200-26307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9095]

[[Page 26199]]

-----------------------------------------------------------------------

Part II

Department of the Treasury

-----------------------------------------------------------------------

Alcohol and Tobacco Tax and Trade Bureau

-----------------------------------------------------------------------

27 CFR Part 19

Proposed Revision of Distilled Spirits Plant Regulations (2001R-194P);
Proposed Rule

Federal Register / Vol. 73, No. 90 / Thursday, May 8, 2008 / Proposed
Rules

[[Page 26200]]

-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 19

[Docket No. TTB-2008-0004]; [Notice No. 83]
RIN 1513-AA23

Proposed Revision of Distilled Spirits Plant Regulations (2001R-
194P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) proposes to
amend its distilled spirits plant regulations. Many of these proposed
revisions are the result of comments submitted by the Distilled Spirits
Council of the United States in response to a Bureau of Alcohol,
Tobacco and Firearms notice of proposed rulemaking (NPRM) published in
November 1998. Other proposed revisions are a result of a comprehensive
TTB review of the distilled spirits plant regulations. This NPRM
supersedes the NPRM issued in November 1998. We believe the proposed
amendments will modernize the requirements for operating distilled
spirits plants and make the regulations easier to understand, thereby
allowing proprietors of such plants to operate in a more efficient
manner. The proposed regulations are also written in a plain language
format to improve clarity.

DATES: We must receive your written comments on or before August 6,
2008.

ADDRESSES: You may send comments on this notice to one of the following
addresses:
http://www.regulations.gov (via the online comment form
for this notice as posted within Docket No. TTB-2008-0004 on
Regulations.gov, the Federal e-rulemaking portal); or
Mail: Director, Regulations and Rulings Division, Alcohol
and Tobacco Tax and Trade Bureau, P.O. Box 14412, Washington, DC 20044-
4412; or
Hand Delivery/Courier in lieu of Mail: Alcohol and Tobacco
Tax and Trade Bureau, 1310 G Street, NW., Suite 200-E, Washington, DC
20005.
See the Public Participation section of this notice for specific
instructions and requirements for submitting comments, and for
information on how to request a public hearing.
You may view copies of this notice and any comments we receive
about this proposal at http://www.regulations.gov. A direct link to the
appropriate Regulations.gov docket is available under Notice No. 83 on
the TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml. You also may view copies of this notice and any
comments we receive about this proposal by appointment at the TTB
Information Resource Center, 1310 G Street, NW., Washington, DC 20220.
To make an appointment, call 202-927-2400.

FOR FURTHER INFORMATION CONTACT: Daniel J. Hiland, Regulations and
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G
Street NW., Suite 200-E, Washington, DC 20220; telephone 202-927-8176.

SUPPLEMENTARY INFORMATION:

Table of Contents

Notice to Readers
Impact of the Homeland Security Act on this Rulemaking
I. Background Information for this Notice
A. Distilled Spirits Plant Operations under Current Law
Basic Definitions
Federal Laws and Regulatory Authority
Major Regulatory Provisions
B. Petition to Amend 27 CFR Part 19
C. General Changes Proposed in this Notice
Plain Language
Structure of Part 19
Redundancy with the Law
Alternate Methods or Procedures
D. Specific Changes Proposed in this Notice
Subpart A--General Provisions
Subpart B--Administrative and Miscellaneous Provisions
Subpart C--Restrictions on Production, Location, and
Use of Plants
Subpart D--Registration of a Distilled Spirits Plant
and Obtaining a Permit
Subpart E--Changes to Registrations and Permits
Subpart F--Bonds and Consents of Surety
Subpart G--Construction, Equipment, and Security
Requirements ----
Subpart H--Special (Occupational) Tax
Subpart I--Distilled Spirits Taxes
Subpart J--Claims
Subpart K--Gauging
Subpart L--Production of Distilled Spirits
Subpart M--Storage of Distilled Spirits
Subpart N--Processing of Distilled Spirits
Subpart O--Denaturing Operations and Manufacture of
Articles
Subpart P--Transfers, Receipts, and Withdrawals
Subpart Q--Return of Spirits to Bonded Premises and
Voluntary Destruction
Subpart R--Losses and Shortages
Subpart S--Containers and Marks
Subpart T--Liquor Bottle, Label, and Closure
Requirements
Subpart U--Reserved
Subpart V--Records and Reports
Subpart W--Production of Vinegar by the Vaporizing
Process
Subpart X--Distilled Spirits for Fuel Use
Subpart Y--Paperwork Reduction Act
II. Derivation Table for Proposed Part 19
III. Public Participation
Comments Invited
Submitting Comments
Confidentiality
Public Disclosure
IV. Regulatory Analyses and Notices
Paperwork Reduction Act
Regulatory Flexibility Act
Executive Order 12866
Executive Order 13132
V. Drafting Information
VI. List of Subjects
VII. Authority and Issuance
Text of the Proposed Rule

Notice to Readers--Impact of the Homeland Security Act on This
Rulemaking

Effective January 24, 2003, the Homeland Security Act of 2002 (Pub.
L. 107-296, 116 Stat. 2135 (2002)) divided the Bureau of Alcohol,
Tobacco and Firearms (ATF) into two new agencies, the Alcohol and
Tobacco Tax and Trade Bureau (TTB) in the Department of the Treasury
and the Bureau of Alcohol, Tobacco, Firearms and Explosives in the
Department of Justice. The regulation and taxation of alcohol beverages
remains a function of the Department of the Treasury and is the
responsibility of TTB. References to ATF in this notice reflect the
time period prior to January 24, 2003, while references to TTB are
after that date.

I. Background Information for This Notice

A. Distilled Spirits Plant Operations Under Current Law

Distilled spirits taxation is a specialized area of Federal law.
The following background material provides basic information about how
distilled spirits plants operate and are regulated under Federal law.
Basis Definitions
Distilled Spirits. The term ``distilled spirits'' refers to those
products that contain ethyl alcohol and are generally the result of
distillation. This term does not apply to wine and beer, which are
products of fermentation. Examples of distilled spirits products
include vodka, whiskey, gin, brandy, cordials, liqueurs, flavored
brandies, and other similar products.
Distilled Spirits Plants. The term ``Distilled Spirits Plant''
(DSP) refers to a plant at which distilled spirits are manufactured or
produced, aged or stored, or packaged or bottled, either for beverage
or industrial use.
Federal Laws and Regulatory Authority
Federal law prohibits the manufacture or production of distilled
spirits in the United States at other than a registered DSP that has
received a permit from

[[Page 26201]]

TTB. While Federal law allows for the limited home production of wine
and beer, no such exemption exists for distilled spirits.
DSPs are regulated under the provisions of two laws, the Internal
Revenue Code of 1986 (IRC) (Title 26 of the United States Code) and the
Federal Alcohol Administration Act (FAA Act) (Title 27 of the United
States Code). The IRC imposes an excise tax on distilled spirits,
requires plants to register, requires plants to obtain permits not
otherwise required by the FAA Act, and imposes strict controls over the
operation of DSPs. The FAA Act imposes a requirement to obtain a basic
permit and contains various consumer-protection provisions, including
provisions related to the formulation, labeling, and advertising of
alcohol beverages. The FAA Act also controls various trade practices
within the alcohol industry.
Under these two laws, TTB regulates the distilled spirits industry
in the United States. Each law authorizes the Secretary of the Treasury
to prescribe regulations to carry out and enforce its provisions, and
the Secretary has delegated this authority to TTB. The TTB regulations
concerning DSPs are contained in title 27 of the Code of Federal
Regulations, Part 19, Distilled Spirits Plants (27 CFR part 19).
Major Regulatory Provisions
A DSP consists of one or more of the following: production,
storage, processing, denaturation, and bottling facilities. A DSP may
be a large and complex plant, having all facilities, a simple storage
facility consisting of only one building, or a small bottling facility
with storage facilities. Production facilities are usually accompanied
by some storage facilities. Bottling facilities are often accompanied
by storage facilities, and must by law be accompanied by either a
production or a storage facility. However, large storage facilities are
often not accompanied by either of the other two types.
Registration. Before commencing operations, the DSP proprietor must
obtain an approved notice of registration. This application for
registration includes: documents to set up distilling apparatus,
environmental impact forms, personnel questionnaires, signature
authorities, and a statement of security.
Permits. Under the FAA Act, all persons who intend to engage in the
business of: (a) Distilling spirits; (b) rectifying, blending, or
bottling (processing) distilled spirits; or (c) warehousing and
bottling distilled spirits, must file for a basic permit.
To maintain control over the industrial use of distilled spirits,
the IRC requires that an operating permit be obtained before commencing
the production, warehousing, or bottling of alcohol for industrial use.
Specifically, a permit is required for:
Distilling for industrial use.
Bonded warehousing of spirits for industrial use.
Denaturation of spirits.
Bonded warehousing of spirits (without bottling) for non-
industrial use.
Bottling or packaging of spirits for industrial use.
Any other distilling, warehousing, or bottling operations
not required to be covered by a basic permit under the FAA Act.
DSP Bonded Premises. The physical premises of a DSP are divided
into two technical categories: ``bonded premises,'' and unbonded or
``general premises.'' All activities relating to the distilling,
storage, and processing (blending and mixing) of distilled spirits must
be conducted on bonded premises. All activities relating to taxpaid
alcohol beverages conducted at the distilled spirits plant must be
conducted on general premises.
Operations as a distiller, warehouseman, or processor may be
conducted only on the bonded premises of a DSP by a person qualified to
carry on such operations under 27 CFR part 19 and who has obtained the
basic permits required by 27 CFR part 1, or, as appropriate, the
operating permit required by part 19. However, certain other
activities, such as those of apothecaries, customs bonded warehousemen,
manufacturers of nonbeverage products, and users of specially denatured
alcohol, may be carried on outside of DSPs.
The continuity of a DSP must be unbroken except for separations
that may include public waterways, thoroughfares, or carrier rights-of-
way. In most instances, DSPs are also prohibited from being located in
a dwelling house, in a shed, yard, or enclosure connected with a
dwelling house, on board a vessel or boat, on premises where beer or
wine is produced, in a retail liquor establishment, or where any other
business is conducted.
Bonds. Normally, the distilled spirits tax is not collected while
spirits are held on the ``bonded'' premises of a distilled spirits
plant. The potential tax liability of the spirits held on bonded
premises is guaranteed by an operations bond, and taxable removals are
covered by a withdrawal bond.
The bond is a legally binding, written agreement involving three
parties: the taxpayer, the surety (insurance or bonding company), and
the U.S. Government. The purpose of the bond is to protect the
financial interest of the Government. If for any reason, the taxpayer
fails to pay the tax, then the surety (insurance or bonding company) is
obliged to pay, up to the limit of the bond.
Other Requirements. In addition to registering, obtaining a permit,
and providing a bond, plants are required to comply with a number of
regulations relating to plant security; the production, storage, and
processing of spirits; recordkeeping; inspection and audit; and filing
of reports. These requirements are outlined in 27 CFR part 19.
Recordkeeping Accounts. All operations at a DSP are accounted for
within three recordkeeping accounts: Production, Storage, and
Processing. Since the facilities (tanks and rooms) of a DSP may be used
for multiple purposes, the accountability of spirits must be maintained
by appropriate records within the three accounts instead of physical
separation.
Payment of Taxes. The Federal excise tax on distilled spirits
attaches to the spirits as soon as they are produced, and the distilled
spirits plant is held liable for the tax on all distilled spirits held
in the bond premises. The amount of Federal excise tax that a distilled
spirits plant must pay is based upon the taxable removal of the spirits
from the bonded premises. There are two basic methods of paying the tax
on distilled spirits withdrawn from bonded premises-deferred payment
and prepayment. Under the deferred payment system, the proprietor may
withdraw spirits from bond after tax determination but before payment
of tax. The excise tax paid is based on the amount of spirits removed
from bond during each return period. Under the prepayment system, the
proprietor must pay the distilled spirits tax after tax determination
but before withdrawal of the spirits from bonded premises. Most DSP
proprietors use the deferred payment system.
Currently, the Federal excise tax rate on distilled spirits is
$13.50 per proof gallon. The term ``proof gallon'' is unique to this
particular commodity and means: a liquid gallon that contains 50
percent ethyl alcohol.
Although the tax rate for distilled spirits is $13.50 per proof
gallon, many distilled spirits products are actually taxed at a lower
rate. Many products contain wine and/or flavors, and the IRC at 26
U.S.C. 5010 provides a credit for the wine and flavors content of the
product. These credits effectively

[[Page 26202]]

reduce the rate of excise tax paid on distilled spirits products that
contain wine and flavors.
Nontaxable Transactions. Certain types of shipments to and from a
distilled spirits plant are permitted without payment of tax. Examples
are:
Shipments of bulk (unbottled) spirits from one registered
distilled spirits plant to another. (Bottled spirits are not eligible
for untaxed transfer in bond between plants.)
Shipments of bulk imported spirits from U.S. Customs and
Border Protection custody to a distilled spirits plant. (Only bulk
imported spirits are eligible for this type of transfer.)
Direct exports of products from the United States.
Shipments to users of industrial alcohol (certain permit
holders who use alcohol for medical, research, or industrial purposes).

B. Notice No. 870 and the Petition To Amend 27 CFR Part 19

On November 30, 1998, ATF issued a notice of proposed rulemaking,
Notice No. 870 (63 FR 65720), that solicited comments on proposed
changes to several sections of the regulations in 27 CFR part 19. The
proposed changes included: (1) Delegations of authority, (2) removing a
special tax provision, (3) liberalizing the requirement for approval of
certain changes in plant personnel or procedures, (4) reducing the
paperwork when plant premises are alternated with other premises, (5)
providing for alternation of distilled spirits plant and brewery
premises, (6) allowing denaturation and manufacture of articles to be
done in a single, unified process, (7) specifying marks for packages of
industrial spirits withdrawn taxpaid, (8) clarifying regulations that
refer to a transfer record, and (9) incorporating a provision of an ATF
Industry Circular regarding alcohol fuel into the regulations.
In addition to these proposed changes, ATF asked for comments
regarding the general recordkeeping system for distilled spirits plants
prescribed in part 19.
In response to Notice No. 870, ATF received extensive comments from
the Distilled Spirits Council of the United States (DISCUS), a trade
association representing distilled spirits industry members with
interests in the U.S. market. While DISCUS provided comments on the
specific issues raised in Notice No. 870, it also asked that ATF
consider a broad range of regulatory changes to part 19. Essentially,
in its comments on part 19, DISCUS asked ATF to initiate a complete
revision of part 19. In support of its petition, DISCUS provided ATF
with sample regulations that consisted of a ``markup'' version of 27
CFR part 19, along with numerous copies of variances (alternate methods
or procedures) that ATF granted to members of the distilled spirits
industry over the years. Suggested amendments included a broad range of
issues, including, but not limited to, reduced recordkeeping
requirements for distilled spirits plants, greater use of commercial
records, reduced reporting requirements, reduced requirements for
reporting changes affecting the DSP's registration, liberalized use of
DSP premises, storage of distilled spirits on bonded premises through
``constructive segregation'' based on commercial records, and adoption
of alternative methods in the regulations for universal applicability.
In response to Notice No. 870, ATF also received comments from
Equistar Chemicals, LP. Equistar is a producer of industrial ethyl
alcohol, and its comments addressed issues in Notice No. 870 related to
industrial alcohol. Equistar also commented on other issues affecting
distilled spirits plants such as the amendment of plant registrations,
recordkeeping, denaturation, and gauging.
After reviewing the comments received in response to the Notice No.
870, ATF concluded that the amendments proposed in the 1998 NPRM were
not extensive enough to address the changes that have taken place in
the industry since the last major revision to the distilled spirits
plant regulations took place over 20 years ago when ATF implemented the
Distilled Spirits Tax Revision Act of 1979, commonly referred to as
``All in Bond.''
As the successor agency to ATF, TTB undertook a comprehensive
review of the distilled spirits plant regulations in 27 CFR part 19 and
the comments received in response to Notice No. 870. This notice of
proposed rulemaking is the result of that review, and this notice
supersedes Notice No. 870. We believe the proposed amendments will
modernize the requirements for operating distilled spirits plants and
make the regulations easier to understand, thereby allowing proprietors
of such plants to operate in a more efficient manner. A discussion of
our new proposal to amend part 19 in a more comprehensive way follows.

C. General Changes Proposed in This Notice

The following summarizes the general changes we propose to make to
27 CFR part 19.
Plain Language
On June 1, 1998, the President issued a memorandum that requires
Federal agencies to write regulations in ``plain language.'' We fully
support this initiative, and we have written these proposed regulations
in the plain language style. In an effort to make these regulations
easier to understand, we made several plain language changes to the
part 19 regulations:
We use the active voice in the regulations, whenever
possible;
We use shorter sentences, paragraphs, and sections; and
We minimize the use of jargon and unnecessary technical
terms.
Structure of Part 19
In its comments on part 19, DISCUS points out that part 19 is
``excessively long, overcomplicated and very difficult to read.''
Further, it stated that the regulations are ``divided into 25 subparts,
with many related and overlapping provisions included in two or more
subparts.'' DISCUS recommends ``consolidating and re-grouping a number
of regulatory provisions which are closely related, eliminating
regulations which merely are redundant of each other or the statute,
adding cross-references to related regulations, and clarifying
regulatory language.''
We reviewed the various sections and subparts in the current part
19 and determined that much of the basic structure for part 19 needs to
be amended. Under the current structure, information is not always
located where a reader would logically expect to find it.
For example, under the current regulations, information regarding
distilled spirits taxes is found in two separate subparts, Subpart C,
Taxes, and Subpart P, Transfers and Withdrawals. Subpart C contains
much of the basic information about distilled spirits taxes, including
the methods for calculating tax credits under the IRC at 26 U.S.C.
5010. However, information regarding determination of taxes and the
filing of tax returns is located in subpart P. Logically, all
information associated with distilled spirits taxes should appear
within the same subpart. The proposed regulations consolidate all of
the information concerning distilled spirits taxes into a new Subpart
I, Distilled Spirits Taxes. Similarly, we reviewed all of the major
topics covered in part 19 and attempted to group them together in a
more logical order. Accordingly, this proposed, amended version of part
19 has been restructured with new subparts and related

[[Page 26203]]

information has been consolidated, where appropriate, into a single
subpart. In addition, duplicative sections have been eliminated. The
intent of this restructuring is to assist the reader and make it easier
to locate related topics within part 19.
The proposed subparts are as follows:
Subpart A--General Provisions
Subpart B--Administrative and Miscellaneous Provisions
Subpart C--Restrictions on Production, Location, and Use
of Plants
Subpart D--Registration of a Distilled Spirits Plant and
Obtaining a Permit
Subpart E--Changes to Registrations and Permits
Subpart F--Bonds and Consents of Surety
Subpart G--Construction, Equipment, and Security
Requirements
Subpart H--Special (Occupational) Tax
Subpart I--Distilled Spirits Taxes
Subpart J--Claims
Subpart K--Gauging
Subpart L--Production of Distilled Spirits
Subpart M--Storage of Distilled Spirits
Subpart N--Processing of Distilled Spirits
Subpart O--Denaturing Operations and Manufacture of
Articles
Subpart P--Transfers, Receipts, and Withdrawals
Subpart Q--Return of Spirits to Bonded Premises and
Voluntary Destruction
Subpart R--Losses and Shortages
Subpart S--Containers and Marks
Subpart T--Liquor Bottle, Label, and Closure Requirements
Subpart U--Reserved
Subpart V--Records and Reports
Subpart W--Production of Vinegar by the Vaporizing Process
Subpart X--Distilled Spirits for Fuel Use
Subpart Y--Paperwork Reduction Act
Redundancy With the Law
In its comments on part 19, DISCUS recommends that several sections
of the regulations be deleted because those sections are ``redundant
with the law.'' DISCUS notes that many of the sections simply repeat
provisions of law contained in title 26 of the IRC. DISCUS recommends
we delete these redundant sections of part 19 or revise the regulations
to simply reference the appropriate section of the IRC.
TTB recognizes that some sections of the part 19 regulations repeat
provisions of the IRC. However, we intend that the part 19 regulations
provide users with a comprehensive and complete body of the
requirements for operating a distilled spirits plant. By making part 19
a complete reference tool, persons researching a particular issue will
not need access to both the IRC and the regulations. Therefore, when a
provision of law affects operations at a distilled spirits plant, we
included that provision in part 19. However, in some instances, we
deleted sections of the regulations that simply repeated information
found in other regulations within part 19.
Alternate Methods or Procedures.
Periodically, TTB allows industry members to use an alternate
method or procedure in lieu of a specific regulatory requirement in
part 19. The current regulation at 27 CFR 19.62 describes how DSP
proprietors may apply for an alternate method or procedure. Section
19.62 also describes the criteria that TTB uses when evaluating such
requests. Generally, TTB may approve the use of an alternate method or
procedure when:
Good cause has been shown for use of the alternate method
or procedure,
The alternate method or procedure is consistent with the
intent of the regulation, and
The alternate method or procedure is not contrary to the
law.
Over the years, DSP proprietors have applied for a wide range of
alternate methods or procedures in lieu of the requirements stated in
part 19. We have evaluated these requests on a case-by-case basis using
the criteria established in 27 CFR 19.62, and we have approved many of
these requests. Industry members commonly refer to these alternate
methods or procedures as ``variances.''
As part of its comments on part 19, DISCUS submitted numerous
copies of variances that have been granted to members of the distilled
spirits industry. The variances submitted by DISCUS were divided into
three general categories, recordkeeping, separation of premises, and
``other.'' In its comments, DISCUS asserts that ATF granted variances
from many of the regulatory requirements and that it is not aware of
any variance that has caused any problems with Federal excise tax
compliance. DISCUS recommends that variances granted to individual
plant proprietors be extended to all plants in the revised regulations.
In response to this suggestion, TTB reviewed the individual
variances submitted by DISCUS for possible applicability to all
distilled spirits plants. We found that many variances did, in fact,
have general applicability to all plants. As a result, we have
incorporated many of those methods or procedures into the proposed
regulations, where appropriate. For example:
Several variances were issued that allowed for the use of
computer-generated records. This proposal has been adopted into the
revised regulations at Sec. 19.572 and is discussed later in this
preamble under our discussion of Records in subpart V.
Several variances were issued that allowed for computer-
generated reports and computer-generated transaction forms. These
proposals were adopted into the revised regulations at Sec. 19.634,
and are discussed later in this preamble under our discussion of
records in subpart V.
A variance was issued that allows for the filing of
letterhead notices to report certain changes at a plant. This procedure
providing for the use of letterhead notices has been incorporated into
the new subpart E and is explained more fully under our discussion of
subpart E.
Several variances were issued that allow for the use of
``commercial records'' to record transactions and/or operations. The
use of documents created in the ordinary course of business, rather
than documents created expressly to meet the requirements of part 19 is
now provided for in the proposed regulations at Sec. 19.572 in subpart
V.
A variance was issued that allows modified
``abbreviations'' to be used. The proposed regulations will not
prescribe any official abbreviations for use on forms and records to
identify spirits, and the provisions of current Sec. 19.726, which
prescribe official abbreviations have been deleted from the proposed
regulations. However, we will continue to list authorized abbreviations
for marking containers found in the current regulations at Sec.
19.612.
A variance was issued that allows filled, capped, and
labeled bottles to remain on the bottling line at the end of each work
day if the same brand and size will be produced on the next bottling
shift. This variance was incorporated into the proposed regulations at
Sec. 19.358 and is discussed under subpart N.
A variance that allows the bottling of liqueurs from a
tank truck or tote was incorporated into the proposed regulations at
Sec. 19.352 and is discussed under subpart N.
A variance whereby certain small tanks are not required to
be mounted on scales was incorporated into the proposed regulations at
Sec. 19.183 and is discussed under subpart G.

[[Page 26204]]

Several variances have been approved that allow for the
use of meters in gauging spirits for purposes other than tax
determination. We are proposing significant changes in the new
regulations that will allow for the use of accurate mass flow meters,
without prior approval by TTB, for bulk tax determination gauges and
other required gauges at a distilled spirits plant if the meters meet
certain criteria for accuracy.
During our review of the variances submitted by DISCUS, we also
found several that were not appropriate for incorporation into the new,
revised regulations. In some instances, we did not wish to apply the
provisions of a particular alternate method or procedure to all DSP
proprietors without regard to their compliance history and other
factors. As such, proprietors may continue to apply for these types of
alternate methods or procedures, and we will evaluate them on a case-
by-case basis.
For example, we have issued several variances to DSP proprietors
regarding the timing and frequency of required inventories for bulk and
cased spirits. In evaluating this type of variance, we frequently
consider the compliance history of the particular plant, shortages and
gains disclosed by past inventories, along with other factors.
Accordingly, this type of authorization does not have general
applicability and is not appropriate for inclusion in the new proposed
regulations. However, we will continue to approve this type of request,
when appropriate, on a case-by-case basis.
In other instances, the subject matter of a particular variance
only applied to a very specific situation at a single plant and was,
therefore, not applicable to all plants. Accordingly, we did not
incorporate this type of variance into the new proposed regulations.
For example:
We approved several variances in regard to case markings
that did not have general application to the case markings used by
other plants.
We approved a ``business day'' for a plant that runs from
2 a.m. through 1:59 a.m. This type of variance does not have general
applicability to other plants.
In summary, we have incorporated a number of existing variances
into the proposed regulations where appropriate, and when the variance
would have general applicability to the industry.

D. Specific Changes Proposed in This Notice

The following is a discussion of the new, revised subparts in 27
CFR part 19 and the specific changes that we propose to make in the
part 19 regulations.
Subpart A--General Provisions
Proposed subpart A includes several sections that have general
applicability to part 19, including a revised definitions section, a
section that defines the territorial extent of the regulations, and a
section that identifies other regulations that relate to part 19.
In the proposed definitions section at Sec. 19.1, we propose some
minor amendments to the language used within this section to clarify
the meaning of some terms. We also propose to add some new terms and
delete an outdated term found in the current definitions section. We
propose to add the terms ``accurate mass flow meter,'' ``general
premises,'' ``letterhead application,'' ``letterhead notice,''
``National Revenue Center,'' ``TTB officer,'' and ``we.'' We propose to
delete the term ``region director.''
We also propose to move two sections currently located in subpart
D, under the heading ``Activities Not Subject To This Part,'' to
subpart A. The relocated sections are Sec. 19.4, Recovery and reuse of
denatured spirits in manufacturing processes, and Sec. 19.5,
Manufacturing products unfit for beverage use, which are currently
found at Sec. Sec. 19.57 and 19.58, respectively.
Subpart B--Administrative and Miscellaneous Provisions
Proposed subpart B contains the administrative and miscellaneous
provisions for part 19 that are currently found in subpart D. However,
some sections of regulations that are located in the current subpart D
have been relocated to other revised subparts, where appropriate. For
example, we propose to move sections relating to gauging to the new
proposed Subpart K, Gauging. Similarly, we propose to relocate sections
relating to the conveyance of spirits or wines on plant premises to the
new proposed Subpart C, Restrictions, Location, and Use of Plants.
Proposed subpart B includes a ``penalty of perjury'' section that
is currently located at Sec. 19.100. In its comments on part 19,
DISCUS proposes the deletion of the requirement that documents be
executed under penalties of perjury from several sections of
regulations. DISCUS states that ``these penalties are unnecessary and
excessive in light of the fact that a proprietor's permit is subject to
revocation under the Federal Alcohol Administration Act for failure to
comply with the Bureau's requirements.'' TTB did not adopt this
proposal. The penalty of perjury statement is an important safeguard
that places legal responsibility for the truthfulness of significant
documents filed with TTB on the documents' signatories. Generally, we
do not require the ``penalty of perjury'' statement on most documents
and records. Its use is generally restricted to claims, tax returns,
applications, and similar documents. The IRC at 26 U.S.C. 6065 states,
``Except as otherwise provided by the Secretary, any return,
declaration, statement, or other document required to be made under any
provisions of the internal revenue laws or regulations shall contain or
be verified by a written declaration that it is made under penalties of
perjury.'' Consistent with the IRC at 26 U.S.C. 6065 and along with the
other tax collection agencies within the Department of the Treasury,
TTB requires that such documents be signed under penalties of perjury.
The penalty of perjury provision in the proposed regulations is located
at Sec. 19.45.
Subpart C--Restrictions on Production, Location, and Use of Plants
Proposed subpart C covers restrictions associated with the
operation of a distilled spirits plant, along with the location and use
of DSP premises. In its comments on part 19, DISCUS makes several
recommendations affecting those sections of the current regulations
that govern restrictions, locations, and use of DSP premises. We
discuss these recommendations and our responses below.
Restrictions regarding location. Currently, 27 CFR 19.131 provides
that a distilled spirits plant may not be located on premises where
beer or wine is produced, or liquors of any description are retailed,
or (except as provided in Sec. 19.133) on premises where any other
business is conducted. DISCUS contends that physical separation of
commodities is meaningless and recommends that this restriction be
amended to allow a distilled spirits plant to be located on such
premises if the proprietor's records show the separate operations. We
did not adopt this proposal because Federal law does not provide for
``constructive'' separation of premises by records only. The language
of this regulation is derived directly from the language of the IRC at
26 U.S.C. 5178(a)(1)(B), which states that a distilled spirits plant
shall not be located ``on premises where beer or wine is made or
produced, or liquors of any description are retailed, or on premises
where any other business is carried on (except when authorized under
subsection (b)).'' This

[[Page 26205]]

provision appears in the proposed regulations at Sec. 19.52.
Continuity of premises. Currently, the regulation at Sec. 19.132
provides that the physical continuity of a distilled spirits plant must
be unbroken except for separation by public waterways, thoroughfares,
or carrier rights-of-way. However, TTB may approve other separations of
the plant premises when all parts of the plant are in the ``same
general location.'' DISCUS recommends that the term ``same general
location'' mean within 200 miles of the distilled spirits plant.
We did not adopt this recommendation in the proposed regulations.
Although DISCUS states that a ``200 mile rule'' would provide increased
operational flexibility for proprietors, they do not explain how this
would occur under their proposal and why that distance is more
appropriate than any other.
Over the years TTB has received a number of requests to establish
non-contiguous distilled spirits plant premises. We have evaluated each
of these requests on a case-by-case basis. In our evaluation of each
request, we consider a number of factors, such as:
Security and protection of the revenue,
Distance between the main plant premises and the proposed
non-contiguous premises,
Whether the non-contiguous premises would cross State
lines,
Whether the non-contiguous premises will facilitate
inspections and audits, and
Whether establishment of non-contiguous premises would
provide the proprietor with a means for delaying payment of taxes.
We propose to retain the case-by-case analysis based on multiple
factors, instead of adopting a 200 mile rule as proposed by DISCUS. As
a general rule, we believe that the ``same general location'' must not
be too large an area so that the revenue is placed at risk. Also,
because a distance of 200 miles could extend over a multi-state area
and would cross over into different field offices within TTB, such a
distance would create administrative difficulties for TTB. This
provision appears in the proposed regulations at Sec. 19.53.
Other businesses. Currently, the regulation at Sec. 19.68 provides
that TTB may authorize the carrying on of other businesses (not
otherwise prohibited) on DSP premises under certain conditions. The
other businesses should not pose a jeopardy to the revenue, hinder the
effective administration of part 19, or be contrary to law. There is a
similar section of regulations at Sec. 19.72. DISCUS recommends the
removal of Sec. 19.68 since it is redundant with Sec. 19.72.
We agree that Sec. Sec. 19.68 and 19.72 are very similar, and we
have merged the two sections into a single section within the proposed
regulations at Sec. 19.55.
Bonded warehouses not on premises qualified for production of
spirits. The current regulation at Sec. 19.134 allows for the
establishment of a bonded warehouse on premises that are not qualified
for the production of spirits, if the need for such is clearly
established. DISCUS recommends the amendment of this section by adding
language stating that the warehouse may be within 200 miles of the main
plant. We did not adopt this recommendation for the same reasons
discussed above under the heading, ``Continuity of Premises.'' This
provision is found in the proposed regulations at Sec. 19.56.
Taxpaid spirits or wines on bonded premises. The current regulation
at Sec. 19.97 provides that spirits or wines on which the tax has been
paid or determined may be conveyed across bonded premises but cannot be
stored or remain on bonded premises, and must be kept separate and
apart from spirits or wines on which the tax has not been paid or
determined. DISCUS recommends the addition of new language to this
section whereby the area where taxpaid spirits or wines are stored will
not be considered bonded premises if the proprietor's records show that
the tax has been paid or determined. They state that their proposal
would ``shift the focus from the outdated requirement of physical
segregation to a modernized, efficient approach based upon
`constructive segregation.' ''
We did not adopt this recommendation because the IRC does not allow
for the separation of premises solely by records. The IRC at 26 U.S.C.
5612 clearly states that taxpaid or tax determined spirits cannot be
stored on bonded premises. Further, the bonded area of a DSP is a
clearly defined physical area of the plant with clearly defined
boundaries. It is not an area defined only by records of the type of
spirits stored on the premises. In our proposed regulations, this
section is now found at Sec. 19.58.
Conveyance of untaxed spirits or wines within a distilled spirits
plant. Currently, the regulation at Sec. 19.98 provides that untaxed
spirits or wines can be conveyed between different bonded areas of a
plant and across areas of a plant that are not bonded. DISCUS
recommends the amendment of this section by adding language whereby if
the proprietor's records show the tax has not been paid or determined,
then the untaxed spirits will be considered to be on bonded premises
(constructive segregation).
We did not adopt this recommendation because the regulation already
allows for the transfer of untaxed spirits across areas of a plant that
are not bonded. The amendment proposed by DISCUS would only incorporate
the idea of ``constructive segregation'' into this section of the
regulations. However, since the regulation already allows for transfers
across areas of the plant that are not bonded, the amendment proposed
by DISCUS is not necessary. This section of the regulations is now
found at Sec. 19.59 in the proposed regulations.
Spirits in customs custody. Currently, the regulation at Sec.
19.99 provides that spirits in customs custody may be conveyed across
DSP premises under certain conditions. Those conditions include:
The spirits may not be stored or allowed to remain on DSP
premises.
The spirits must be kept separate from other spirits on
DSP premises.
The means and route of conveyance must be approved.
The proprietor must file a consent of surety.
DISCUS recommends the addition of language to this section whereby
if the proprietor's records show that spirits are in customs custody,
then the area where the spirits are stored will not be considered part
of the DSP premises.
We did not adopt this DISCUS recommendation for several reasons.
First, this section of regulations deals with conveyance of spirits in
customs custody across DSP premises. It does not deal with the storage
of such spirits on DSP premises.
In addition, TTB bonded premises and customs bonded premises are
two distinct types of bonded premises. TTB bonded premises are
established under the laws and regulations administered by the Alcohol
and Tobacco Tax and Trade Bureau, while customs bonded premises are
established under a separate set of laws and regulations administered
by U.S. Customs and Border Protection. As such, the premises cannot be
co-located, and there is no basis in the law for constructive
segregation of these bonded premises by records only. The bonded area
of a DSP is a clearly defined physical area of the plant with clearly
defined boundaries. It is not an area defined only by records. In our
proposed regulations, this section is now found at Sec. 19.60.
Production of distilled spirits for personal use. Frequently, TTB
receives

[[Page 26206]]

questions from the general public asking whether the law allows for the
production of distilled spirits in the home for personal use. Under
Federal law (26 U.S.C. 5171), distilled spirits may only be produced at
a registered distilled spirits plant. Therefore, we propose to add a
new section to subpart C, which will explain that a person may not
distill spirits at home for personal use. This new section is found in
the proposed regulation at Sec. 19.51.
Subpart D--Registration of a Distilled Spirits Plant and Obtaining a
Permit
The current regulations governing the qualification of a distilled
spirits plant are found in subpart G. These regulations cover a number
of issues, including the requirements for plant registration, operating
permits, alternation of premises, and amending registrations and
operating permits.
Proposed subpart D covers the initial registration of a distilled
spirits plant and procedures for obtaining an operating permit. We
propose to assign regulations concerning changes after the original
qualification of the plant to the new subpart E.
In the proposed subpart D, we also propose to rearrange the
information related to the qualification of a distilled spirits plant
in a more logical order. For example, we propose to group all
registration information together under a heading titled ``Requirements
for Registering a Plant,'' while information relating to operating
permits is grouped together under a separate heading titled
``Requirements for an Operating Permit Under the I.R.C.'' In the
current regulations, much of the information regarding registration and
operating permits is intermingled. We believe that separating these
subjects will make it easier for readers to understand which
requirements apply to plant registration and which requirements apply
to operating permits.
Other businesses. In its comments on part 19, DISCUS proposes the
inclusion of a cross-reference at Sec. 19.152 of the current
regulations, indicating that ``other businesses'' may be allowed under
a separate section of the regulations. We adopted this proposal in the
proposed regulations at Sec. [thns x p]19.73(b).
Major equipment. DISCUS also recommends in its comments that the
requirement to list major equipment on the application for
registration, currently found at Sec. 19.166, be amended. First, it
states that the regulation should be clarified to provide that ``major
equipment'' must be identified in the registration only if it is ``set
up'' and ``used for distillation, redistillation, or recovery of
spirits.''
We adopted this suggestion in part. We do not see any need to list
major equipment in the application that is not ``set up'' and used for
the production, storage, or processing of spirits. Therefore, we have
inserted language in the proposed regulations at Sec. 19.75, which
requires that equipment be listed if it is ``set up'' and used for the
production, storage, or processing of spirits.
DISCUS also recommends that a paragraph be added to Sec. 19.166
stating that ``bulk containers of less than 101 wine gallon capacity
and not meeting the criteria of a tank under Sec. 19.273 (such as
perks and small totes) are not items of major equipment and are not
required to be listed in the application for registration.'' This
recommendation is reasonable because such containers are not items of
major equipment, and we include it in the proposed regulation at Sec.
19.75.
In addition, DISCUS recommends that the requirement to provide a
``statement of certification of accurate calibration'' for tanks found
in the current regulations at Sec. Sec. 19.166 and 19.273(a)(6) be
eliminated. This recommendation is reasonable and has been adopted in
the proposed regulations because it only involves eliminating a
requirement to include a ``statement of certification of accurate
calibration'' in the notice of registration. The proposed regulation at
Sec. 19.182 will continue to require that tanks be accurately
calibrated.
Registration file. The IRC at 26 U.S.C. 5171(c) requires that
persons must apply for and receive a notice of registration before
commencing business as a distilled spirits plant. In regard to the
maintenance of the registration file, currently at Sec. 19.155, DISCUS
recommends the addition of language to allow the registration file to
be kept in computerized records. We did not adopt this proposal because
registration documents are normally submitted to TTB in a hard-copy
format and returned to the proprietor by TTB in hard-copy format.
DISCUS also recommended the elimination of the requirement that the
registration file be kept ``at the plant.'' We did not adopt this
proposal because the file must be readily available for inspection by
appropriate TTB officers.
LLCs and LLPs. The current regulations governing qualification of a
distilled spirits plant in subpart G only acknowledge three types of
business organizations, sole proprietorships, partnerships, and
corporations. In view of the increasing use of limited liability
companies (LLCs) and limited liability partnerships (LLPs), we have
included instructions for these types of business organizations in the
proposed regulations at Sec. 19.93.
Subpart E--Changes to Registrations and Permits
Proposed subpart E includes the regulations governing changes to
the distilled spirits plant registration, changes to operating permits,
and alternation of plant premises. Similar to the changes that we
propose in new subpart D, much of the information in the new subpart E
is arranged in a more logical order. For example, matters affecting
changes to registration are grouped together under the heading titled
``Rules for Amending a Registration,'' and matters affecting changes to
operating permits are grouped together under the heading titled ``Rules
for Amending an Operating Permit.''
In the current regulations, much of the information regarding
changes to the registration and changes to the operating permit is
intermingled. As with new subpart D, we believe that separating these
subjects will make it easier for readers to understand the specific
requirements that apply to amending either the plant registration or
the operating permit.
Letterhead notices and letterhead applications. In its comments on
part 19, DISCUS makes several recommendations regarding how proprietors
should apply for changes to a plant's registration or operating permit.
Generally, DISCUS recommends that, in most instances, the regulations
allow proprietors to request changes by filing a letterhead notice. In
its petition, DISCUS states that:

Subpart G provisions regarding changes in the information shown
in the original registration should be revised to eliminate
unnecessary prior submissions and prior approval requirements.
Similar to our alternation proposals, 27 CFR 19.180, 19.82 and
19.183 (application for amended registration, change in name of
proprietor and change of trade name, respectively) should be amended
to provide that a proprietor file a letterhead notice reporting any
change within 30 days after the change. Further, 27 CFR 19.184 and
19.185 (changes to largest stockholders and changes in officers and
directors, respectively) should be revised to provide identical
treatment (i.e., reported in the next amended registration) because
there is no reason to treat these changes differently.

TTB agrees that we should simplify the amendment of registrations
and permits wherever possible. Accordingly, we are proposing to expand
the use of both letterhead notices and letterhead applications for
reporting changes to the registration and permit. We will allow the use
of letterhead notices to report

[[Page 26207]]

minor changes affecting the registration or permit. We will allow for
the use of letterhead applications for more substantive changes but
these must be approved by TTB prior to the change. The use of amended
applications, letterhead applications, and letterhead notices are
discussed in the proposed regulations at Sec. Sec. 19.112 and 19.126.
Changes in the statement of plant security. In the current
regulation at Sec. 19.153(b), an application for amended plant
registration (form TTB F 5110.41) must be filed each time there is a
change in plant personnel or procedures contained in the statement of
security. In Notice No. 870, ATF proposed to liberalize this
requirement. Therefore, we propose that Sec. 19.153(b) be amended to
require that a letterhead application be filed for changes in the
security procedures listed in Sec. 19.153(a)(1)-(4), and that a
letterhead notice be filed for changes in the personnel listed in Sec.
19.153(a)(5). Thus, the letterhead application or letterhead notice
would replace the amended registration that was required each time that
the information in Sec. 19.153(a)(1)-(5) changed. The plant
registration would be updated on an annual basis to incorporate changes
made during the preceding year.
In its comments on Notice No. 870, Equistar Chemicals states that
it endorses the proposed changes and would encourage any additional
efforts to facilitate compliance through reducing nonessential
paperwork. However, Equistar asks for some clarification of this
proposal. It pointed out that the proposal allows companies to submit a
``letterhead application'' and ``letterhead notice'' for changes.
Equistar states that it presumes that we intended companies to simply
send an informal letter notifying the agency of procedure or personnel
changes. The company asks for a clarification of these terms.
In response to this request for clarification, TTB advises that the
terms ``letterhead application'' and ``letterhead notice'' refer to a
letter from a company representative, with signature authority, on
company letterhead (see definitions). The ``letterhead application'' is
subject to TTB approval prior to the change; however, the ``letterhead
notice'' is not subject to prior approval. These terms are now fully
explained in the proposed regulations at Sec. Sec. 19.112 and 19.126.
Equistar also points out that ``the proposal requires a letterhead
application for `changes in any of the information' listed in the
sections of the Statement of Physical Security that address procedural
changes.'' The company states that a requirement to advise us of ``any
changes'' is overly broad and could encompass non-substantive as well
as substantive changes. Equistar recommends that we maintain the rule's
original language that covers changes in ``procedure'' rather than
``any changes.''
The current regulation governing changes in plant security, which
appears at Sec. 19.153, has been rewritten to clarify the type of
changes that may be reported to TTB by letterhead application or
letterhead notice. In our proposed regulations, this section is now
located at Sec. 19.123.
In its response to Notice No. 870, DISCUS states that it supports
the proposal whereby a distilled spirits plant would file a letterhead
notice instead of an amended registration for changes in the
information provided under 27 CFR 19.153(a)(5). However, DISCUS
recommends the deletion of the word ``security'' from the proposed term
``security personnel listed in paragraph (a)(5).'' DISCUS states that
the term ``security personnel'' is not used in paragraph (a)(5) and is
not synonymous with the persons covered by paragraph (a)(5).
We agree that the term ``security personnel'' is not an accurate
term. Therefore, we propose deleting the word ``security'' from the
proposed regulation at Sec. 19.76.
DISCUS also recommends that the regulations conform their treatment
of changes in Sec. 19.153(a)(1)-(4) to the proposed changes in
paragraph (a)(5). DISCUS asks that the regulations allow these changes
to be reported by a letterhead notice within 30 days after the changes.
DISCUS states that the information required by paragraphs (a)(1)-(4)
and (a)(5) concern the same issues, and ``no reason exists to subject
subsection (a)(5) to different treatment than subsections (a)(1)-
(a)(4).''
In response to this recommendation, TTB advises that the
information at Sec. 19.153 is part of the data for an ``application''
for registration (27 CFR 19.152(k)). As such, the items of information
provided under Sec. 19.153 are subject to pre-approval for initial
qualification of a distilled spirits plant and continued qualification
of each plant. Further, the items listed under Sec. 19.153(a)(1)
through (4) represent crucial physical security features of a plant and
must, therefore, be subject to prior approval by TTB. In contrast, the
information required by Sec. 19.153(a)(5) is a listing of persons
having responsibility for custody and access to keys for approved locks
at the distilled spirits plant. Since plants are free to designate the
persons responsible for such custody, this particular item of
information is not something that needs to be pre-approved. Therefore,
this item will be treated as a ``notification'' rather than an
``application.'' These changes now appear in the new, proposed
regulations Sec. Sec. 19.76 and 19.123.
Change in name of proprietor. The current regulation at Sec.
19.182 requires that the proprietor file an application to amend the
registration and the operating permit whenever there is a change in the
name of the proprietor. DISCUS recommends the amendment of that
regulation to allow the filing of a letterhead notice within 30 days of
the name change, and that the new information be included in the next
application to amend the registration and the next application to amend
the operating and/or basic permit filed by the proprietor. DISCUS also
recommends deleting from the current regulations the phrase,
``Operations may not be conducted under the new name prior to approval
of the amended registration and issuance of the amended permit.''
The provisions of the current regulation at Sec. 19.182 will be
covered in the proposed regulations at Sec. Sec. 19.113 and 19.128,
and the proposed regulations will no longer require the filing of
amended applications. Instead, the proposed regulations will allow for
the filing of a letterhead application. However, since a change in the
proprietor's name is a substantive change, the proposed regulation will
still prohibit operations conducted under the new name before TTB
approves the letterhead application.
Change of trade name. The current regulation at Sec. 19.183
requires that the proprietor file an application to amend the operating
permit when there is a change in the trade name of the proprietor.
Operations may not be conducted under the new trade name until the
amended permit is approved. DISCUS recommends the amendment of the
regulation to allow for the filing of a letterhead notice within 30
days of the change and no longer require an application to amend the
operating permit.
In the proposed regulation at Sec. 19.129, TTB will no longer
require the filing of an amended application. Instead, the proposed
regulation will allow for the filing of a letterhead application.
However, since any change in the trade names used by the proprietor is
a substantive change, the proposed regulations will still prohibit
operations conducted under the new trade name prior to TTB's approval
of the letterhead application.
Change of stockholders. The current regulation at Sec. 19.184
allows for the filing of an annual report of changes in

[[Page 26208]]

major stockholders except where the sale or transfer of capital stock
results in a change in control or management. In its comments on part
19, DISCUS recommends that the language of the regulation be amended to
read, ``Changes in the list of stockholders furnished under the
provision of Sec. 19.167(c)(1) shall be reported in the next
application for amended registration on Form 5110.41 filed by the
proprietor.''
In the proposed regulations at Sec. Sec. 19.114 and 19.130 we will
allow a proprietor to submit an annual letterhead notice regarding
changes in major stockholders. Under the proposed regulations, the
changes must be incorporated in the next application filed, unless a
change of control occurs. If a change in control takes place, Sec.
19.114 requires that the proprietor must file TTB F 5110.41,
Registration of Distilled Spirits Plant, within 30 days of the change,
and Sec. 19.130 requires that the proprietor must file TTB F 5110.25,
Application for Operating Permit Under 5171(d), within 30 days of the
change.
Changes in officers and directors. The current regulation at Sec.
19.185 requires that a proprietor file an application for amended
registration on Form 5110.41 when there is a change in the list of
officers or directors. DISCUS recommends that the regulation be amended
to state that the proprietor will report the change on the next
application on TTB F 5110.41 for amended registration filed by the
proprietor.
In the proposed regulations at Sec. Sec. 19.115 and 19.131, we
propose to allow a proprietor to submit a letterhead notice at the time
of the changes and incorporate the changes in the next application for
amended registration filed on form TTB F 5110.41 and the next form TTB
F 5110.25 filed.
Permit transfers. In its comment on Notice No. 870, Equistar
Chemicals asked that ATF (BATF in its comment) examine ways to minimize
the paperwork and notice requirements associated with ATF permits when
a change of ownership occurs. Equistar states:

BATF should examine ways to minimize the paperwork and notice
requirements necessary to transfer BATF permit ownership in order to
facilitate a smoother and less burdensome transition to the
acquiring entity. Because the Securities and Exchange Commission
(SEC) obtains copious records on publicly traded companies, perhaps
BATF could coordinate efforts with SEC in cases where the acquiring
entity is a publicly traded company and obtain company information
through existing government databases. Alternatively, BATF could
also prevent duplication by allowing companies to submit their
annual reports in lieu of filling out numerous forms and
applications. Such solutions would simultaneously facilitate BATF's
access to companies' business information and alleviate the burden
on companies who must currently submit new documentation of standard
business information to each governmental branch who requests it.

In general, TTB agrees that we should simplify the amendment of
registrations and permits wherever possible. For this reason, we
propose to expand the use of both letterhead notices and letterhead
applications for reporting changes to the registration and the
operating permit.
However, in regard to utilizing SEC filings in cases where there is
a change in ownership or control, there are several problems. First,
much of the information that a proprietor submits in support of a plant
registration or an operating permit is specific to distilled spirits
operations. As such, this type of information, except for some similar
items of information, is not required by agencies such as the SEC and
so copies of such submissions would be inadequate for TTB purposes.
Adoption of formulas. The current regulation at Sec. 19.187
provides for the adoption of formulas by a successor. DISCUS recommends
in its comments on part 19 that the regulation refer to 27 CFR 5.28 and
that the language in Sec. 19.187 which is redundant with Sec. 5.28 be
removed.
In the proposed regulations we eliminated Sec. 19.187 as a
separate section of regulations and we have incorporated references to
the adoption of formulas and Sec. Sec. 5.28 and 20.63 into the
proposed regulations at Sec. Sec. 19.116 and 19.132.
Changes in premises. The current regulation at Sec. 19.190 refers
to several sections of regulations relating to alternation of premises.
DISCUS recommends the amendment of these references to ensure the
accuracy of cross-references to other appropriate sections in part 19.
The accuracy of cross-references is important so we propose to amend
the references at proposed Sec. 19.119 to reflect the new section
numbers for alternation of premises.
Change in operations. The current regulation at Sec. 19.191
requires that a DSP proprietor file an application to amend the
registration and operating permit if the proprietor wishes to engage in
a new business involving distilled spirits. This section also applies
to conducting other businesses on DSP premises. DISCUS recommends the
addition of language to the end of this section stating, ``Applications
may be approved as provided in Sec. 19.72.''
In the proposed regulation at Sec. 19.120, we now include a
reference to Sec. 19.55, which is the section of regulations relating
to other businesses.
Changes in construction or use of buildings and equipment. The
current regulation at Sec. 19.193 requires a DSP proprietor to submit
a letterhead notice prior to a material change in construction or use
of buildings or equipment and then incorporate the change into the next
amendment of the notice of registration. DISCUS recommends the
elimination of most of this section because it is redundant with the
general instructions relating to applications for amended registration
found at Sec. 19.180.
We did not eliminate this section because we do not believe that it
is redundant. Similar to the other sections in this subpart, it
provides specific instructions for amending the registration. The
provisions of current Sec. 19.193 appear in the proposed regulations
at Sec. 19.122.
Procedures for alternation of proprietors. The current regulation
at Sec. 19.201 covers the procedures that proprietors must follow when
DSP premises, or part of the premises, are alternated between different
proprietors. Alternation of premises refers to the formal, legal
transfer of operations from one proprietor to another proprietor.
DISCUS proposes to amend this regulation by eliminating the requirement
to provide a diagram of the area of the plant to be alternated.
Further, DISCUS proposes that language be inserted into the regulation
that would allow the proprietor's production, storage, and processing
records to be used to document the alternation of proprietors.
We did not adopt this DISCUS proposal. Records of production,
storage, and processing are used to record the details of production,
storage, and processing activities at a plant. These records are not
designed to officially document the alternation of plant premises from
one proprietor to another proprietor. Further, such records would not
identify the actual bonded areas of the plant that are alternated; only
a diagram can provide this information. However, we did substantially
rewrite this section of the regulations to clarify the procedure for
alternating proprietors. In addition, the requirement to file Form
5110.34 has been replaced with the requirement to file a letterhead
notice with TTB when such alternations occur. The proposed amended
section appears at Sec. 19.141.
Alternate operations. The current regulation at Sec. 19.202
provides for the alternate use of plant premises and equipment for
customs purposes whereby the premises of the plant are

[[Page 26209]]

converted from TTB bonded premises to Customs bonded premises. The
current regulation also requires that the proprietor file a notice on
Form 5110.34 whenever the plant premises are curtailed or extended for
customs purposes. In Notice No. 870 ATF proposed to substitute a
letterhead notice for the filing of Form 5110.34 each time that
distilled spirits plant premises are alternated for customs purposes.
The current regulations at Sec. Sec. 19.203 through 19.206 provide
for the alternation of distilled spirits plant premises with bonded
wine cellar premises, taxpaid wine bottling house premises, general
premises, and premises for the manufacture of eligible flavors. The
current regulations also require that the proprietor file a notice on
Form 5110.34 whenever the premises are curtailed or extended for these
purposes. In Notice No. 870, ATF proposed to simplify this requirement
by amending Sec. Sec. 19.203 through 19.206 to provide that after a
proprietor has received approval for the alternation plan that defines
the boundary of the premises to be alternated, the alternation may take
place pursuant to records kept in a logbook. In Notice No. 870, ATF
listed the requirements for the proposed logbook record in a new
section of regulations at Sec. 19.781. In Notice No. 870, ATF also
proposed to allow for the alternation of distilled spirits plant and
brewery premises under the same conditions. Alternation of distilled
spirits plant premises and brewery premises is not provided for in the
current regulations.
In its comments on Notice No. 870, DISCUS expresses support for the
proposal to eliminate the requirement to file Form 5110.34 each time
that the premises are alternated. However, DISCUS does not support the
proposal to require a proprietor to prepare a logbook containing the
information required by proposed Sec. 19.781 each time that the
proprietor alternates premises. DISCUS states that ``this proposal runs
contrary to the objective of effective regulatory reform; [sic] to
replace formal recordkeeping requirements with reliance upon commercial
business records maintained in the ordinary course of business.''
Further, DISCUS contends that the proposal does not eliminate the
requirements for prior submission and prior approval or the requirement
to physically segregate products by type (wine, beer, spirits, or
flavors). It asserts that the requirement in the regulations to
segregate products is burdensome and that companies can track,
distinguish, and identify products and operations by computer. DISCUS
also asserts that `` `constructive segregation' of product by
computerized records protects BATF's regulatory objectives, without the
inefficient use of space and time and effort inherent in requiring
physical separation.''
DISCUS recommends that the regulations allow alternation under
Sec. Sec. 19.202 through 19.206 if the distilled spirits plant
proprietor files a letterhead notice reporting the alternation within
30 days after the alternation takes place. It also proposes that the
proprietor's ordinary business records be used to substantiate the
alternation and that we eliminate the requirement to physically
separate products as currently required.
For the reasons discussed earlier in this notice, TTB is not
adopting these recommendations regarding dependence upon company
records for segregation of goods and reliance upon ``constructive
segregation.'' As stated earlier, the IRC does not provide for the
separation of premises solely by records. Further, the bonded area of a
DSP is a clearly defined physical area of the plant with clearly
defined boundaries. It is not an area defined only by commercial
records.
Therefore, in this current notice we propose a new section of
regulations at Sec. 19.142 to provide for the alternation of premises
for customs purposes whereby proprietors will file a letterhead notice
with TTB prior to any alternation of premises. We have also eliminated
the requirement to file Form 5110.34. We do not agree with the DISCUS
proposal that would allow notices to be filed up to 30 days after the
fact. Thus, the proposed regulation at Sec. 19.142 will require that
the letterhead notice must be filed prior to alternation of premises
for customs purposes.
In addition, we propose a new, single section of regulations at
Sec. 19.143 that will provide for extension and curtailment of
distilled spirits plant bonded premises with either general premises,
an adjacent bonded wine cellar, an adjacent taxpaid wine bottling
house, an adjacent brewery, or facilities for the manufacture of
eligible flavors. Under our proposed regulations, proprietors will
document such alternations in the record prescribed in proposed Sec.
19.627 at the time the alternation occurs, and we will not require the
filing of a letterhead notice with TTB or the filing of form TTB F
5110.34. The record prescribed in proposed Sec. 19.627 will allow for
the use of commercial records, when the commercial records provide the
same information required by Sec. 19.627 and are retrievable and
available for inspection by TTB officers. Because of the variability of
commercial records, we believe that there is a need to provide minimum
standards for the commercial records that document alternation of
premises. Further, the proposed regulation at Sec. 19.143 will still
require the segregation of products. We disagree with the DISCUS
recommendation that would allow for the ``constructive segregation'' of
products based on computerized records. This is not an actual
segregation of product as required by law at 26 U.S.C. 5178(a)(1)(B)
and 5612 and could result in the commingling of taxpaid and non-taxpaid
product.
Subpart F--Bonds and Consents of Surety
Proposed subpart F covers the bonding of distilled spirits plants.
For the most part, this subpart contains the same information found in
current regulations at subpart H, except that the proposed regulations
are written in plain language.
However, the proposed regulation at Sec. 19.163 will allow persons
who operate more than one distilled spirits plant serviced by TTB's
National Revenue Center to give TTB a single area operations bond that
covers the operations of two or more distilled spirits plants and
adjacent bonded wine cellars located within the same geographic area.
For practical purposes this means that, since TTB's National Revenue
Center services the entire United States, a proprietor's operations
bond may cover all of the proprietor's plants in the United States.
DISCUS did not recommend any substantive changes to these
regulations in its comments on part 19. However, it did recommend that
the requirement to execute a bond under penalties of perjury be
deleted. This recommendation is not being considered in this proposed
rule for the reasons discussed earlier in this notice.
Subpart G--Construction, Equipment, and Security Requirements
Under the current regulations in part 19, construction, equipment,
and security issues are covered at subpart I. In the regulations
proposed by this notice, those issues will be covered in the new
proposed subpart G. The following is a discussion of the changes we
that propose in the new subpart G.
Construction of buildings. The current regulation at Sec. 19.271,
Construction of buildings, will not be included in the proposed
regulations. We found that it simply repeats requirements already found
in Sec. Sec. 19.281(a) and 19.281(b).
Equipment. The current regulation at Sec. 19.272, Equipment, will
also be deleted. We found that it simply repeats

[[Page 26210]]

requirements found in several other sections of the current regulations
including: Sec. Sec. 19.152(h), 19.152(k), 19.153, 19.166, and
19.281(a), (c), and (d).
Tanks. DISCUS recommends that the requirement to permanently mount
scale tanks on scales should not apply to tanks that do not exceed a
55-gallon capacity. This proposal is reasonable because such small
tanks are intended to be portable and there is no need to mount them
permanently on scales. Therefore, we adopted this recommendation in the
proposed regulation at Sec. 19.183(b).
Continuous distilling system. We propose to eliminate the current
regulation at Sec. 19.275, Continuous distilling system, from the
regulations in the new proposed subpart G. The requirement for a
continuous distilling system is already covered in the proposed
regulations at Subpart L, Production of Distilled Spirits, and we found
Sec. 19.275 of the current regulations to be redundant.
Meters. During the course of certain operations at distilled
spirits plants, proprietors are required to measure the volume of
distilled spirits. When measuring spirits for purposes other than tax
determination, the regulations require that the spirits be measured in
a tank or a conveyance using calibration charts. The current regulation
at Sec. 19.277 also allows for the use of meters when measuring
spirits for purposes other than tax determination. However, in order to
use a meter, the proprietor must first submit an application to TTB,
along with technical data regarding the meter they intend to use. TTB
must approve the meter prior to its use at a plant.
In its petition and markup of part 19, DISCUS proposes the
elimination of the prior approval requirement for meters. DISCUS states
that this requirement imposes unnecessary and time-consuming burdens on
TTB resources and the industry and serves only to delay operations at a
DSP. DISCUS states that the proprietor should be responsible for using
and maintaining accurate equipment.
After careful consideration of this proposal, TTB has decided to
propose significant changes in the new proposed regulations whereby a
proprietor may use mass flow meters for all required bulk gauges at a
distilled spirits plant, including bulk tax determination gauges, if
the meters meet certain criteria for accuracy. This will reduce the
burden on industry members and TTB while ensuring the accuracy of bulk
measurements.
Accordingly, the proposed regulation at Sec. 19.188(c) provides
that a proprietor may use a mass flow meter for tax determination of
bulk spirits if the meter is certified by the manufacturer or other
qualified person as accurate within a tolerance of +/-0.1%. For all
other required gauges of bulk spirits at a distilled spirits plant, a
proprietor may use a mass flow meter if it is certified by the
manufacturer or other qualified person as accurate within a tolerance
of +/-0.5%. For both tax determination gauges and all other required
gauges, the proprietor must make corrections for the temperature of the
spirits being measured in conjunction with the volumetric measurement
of spirits by mass flow meter. The proprietor must also test mass flow
meters at least every 6 months to ensure that they are accurate within
the required tolerances.
Miscellaneous changes. In addition to the changes proposed above,
TTB also proposes to make several editorial changes in subpart G that
will make the regulations easier to understand. For example, the
current regulation at Sec. 19.273, Tanks, has been divided into
several shorter sections covering: (a) The general requirements for
tanks, (b) scale tanks, (c) graduation of scale tanks, and (d) testing
for accuracy. The proposed, shorter sections are found at Sec. Sec.
19.182, 19.183, 19.184, and 19.185.
Subpart H--Special (Occupational) Tax
On October 22, 2004, the President signed into law the American
Jobs Creation Act of 2004 (the Act), Public Law 108-357, 118 Stat.
1418. Section 246 of the Act amended the IRC by providing that, during
the 3-year period from July 1, 2005 through June 30, 2008, the rate of
special (occupational) tax imposed under IRC sections 5081, 5091, 5111,
5121, and 5131 is zero. The effect of this provision is that
proprietors of distilled spirits plants, including alcohol fuel plants
and certain other proprietors, are not subject to special
(occupational) tax during the suspension period. However, although the
tax rate for the occupations affected by the suspension is zero during
the suspension period, the IRC still requires that persons engaging in
those occupations must register annually and comply with all applicable
recordkeeping requirements. On October 31, 2005, TTB issued Treasury
decision T.D.TTB-36 (70 FR 62238) which implemented this provision of
the Act by amending the special (occupational) tax regulations in part
19 and other affected parts.
On August 10, 2005, the President signed into law the Safe,
Accountable, Efficient Transportation Equity Act: A Legacy for Users,
Public Law 109-59, 119 Stat. 1144. Section 11125 of this act repeals
the special (occupational) tax applicable to proprietors of distilled
spirits plants. This provision will become effective on July 1, 2008.
The special (occupational) tax regulations proposed in this notice
are located in proposed subpart H and are based upon the American Jobs
Creation Act of 2004. Thus, they provide for a suspension of the
special (occupational) tax through June 30, 2008. However, prior to the
effective date of section 11125 of the Safe, Accountable, Efficient
Transportation Equity Act, TTB intends to develop and issue regulations
for all parts in title 27 of the Code of Federal Regulations that are
affected by the special tax repeal provisions of that act. Therefore,
the regulatory text in the final rule associated with this notice of
proposed rulemaking will reflect the statutory provisions that are in
effect when that final rule is published.
Subpart I--Distilled Spirits Taxes
Under the current regulations, information regarding payment of the
distilled spirits taxes is found in two separate subparts, Subpart C,
Taxes, and Subpart P, Transfers and Withdrawals. Subpart C contains
much of the basic information about distilled spirits taxes, plus the
methods for calculating tax credits under the IRC at 26 U.S.C. 5010.
Information regarding determination of taxes and the filing of tax
returns is located in subpart P.
Logically, all information associated with distilled spirits taxes
should appear in the same subpart. Therefore, the proposed regulations
consolidate all of the information relating to distilled spirits taxes
currently found in subparts C and P plus several other miscellaneous
tax provisions currently located in other subparts into a new proposed
Subpart I, Distilled Spirits Taxes.
General sections. In addition to consolidating the tax information
currently found in subpart C and P, we have created several new general
sections within the proposed subpart I. These new sections discuss
issues such as deferred payment and prepayment of taxes, and the tax
credits provided under 26 U.S.C. 5010. These general sections are
intended to give the reader a brief introduction to some of the more
complex subject matter within proposed subpart I.
Gallonage taxes. In its comments on part 19, DISCUS recommends the
elimination of several sections of the current Subpart C regulations
that appear under the heading ``gallonage taxes.'' This includes
Sec. Sec. 19.21, 19.22,

[[Page 26211]]

19.23, 19.24, 19.25, and 19.26. DISCUS states that these sections are
redundant with the IRC.
TTB agrees that many of these sections of regulations repeat
provisions of the IRC. However, as stated earlier in this notice, we
intend that the regulations in part 19 provide users with a
comprehensive and complete guide to the requirements for operating a
distilled spirits plant, and where appropriate, we will repeat certain
statutory requirements in the regulations. We do not wish to
unnecessarily require readers of these regulations to reference both
the IRC and the regulations when researching an issue. Therefore, we
propose to retain most of the information provided in current
Sec. Sec. 19.21, 19.22, 19.23, 19.24, 19.25, and 19.26 in proposed
Subpart I.
Inventory reserve account. In its markup of part 19, DISCUS also
proposes the deletion of Sec. 19.38, which provides for an inventory
reserve account. The inventory reserve account is one of the optional
methods that a proprietor may use for applying effective tax rates
under the IRC at 26 U.S.C. 5010. DISCUS offers no explanation for
deleting this section. In the proposed regulations, we retained this
section in order to provide industry members with another option in
determining the method for applying effective tax rates.
Subpart J--Claims
Under the current regulations in part 19, the subject of ``Claims''
is covered as a subcategory of subpart C, Taxes. In these proposed
regulations, we have relocated the regulations related to claims into a
new, separate subpart J. Most of the changes to the regulations in
proposed subpart J are relatively minor and are intended to improve the
language and thereby make the regulations easier to comprehend.
Under the current regulations governing claims, only distilled
spirits that were withdrawn from a domestic distilled spirits plant may
be returned to a distilled spirits plant and a claim filed. We propose
to amend the language of the regulations in proposed Subpart J, Claims,
and in Subpart Q, Return of Spirits to Bonded Premises and Voluntary
Destruction, to reflect the fact that imported bottled spirits that
were taxpaid or tax determined when imported into the United States may
be returned to a distilled spirits plant and a claim filed. This change
reflects an amendment to the law at 26 U.S.C. 5008(c), which became
effective on April 1, 1998.
Subpart K--Gauging
We propose to establish a new subpart K that will amend and
consolidate gauging instructions that are currently located in several
different subparts within part 19 at Sec. Sec. 19.84, 19.91, 19.92,
19.93, 19.319, and 19.503.
We believe that placing gauging issues within a single subpart will
assist the reader in locating gauging information that was formerly
located within administrative and miscellaneous subparts. We have also
restructured several of the sections relating to gauging to make them
easier to understand. We also propose to amend several of the
regulations relating to gauging.
Meters. Under the current regulations at Sec. 19.277(c), TTB may
authorize proprietors to use a meter for measuring quantities of
spirits for purposes other than tax determination. In order to receive
authorization to use a meter for this purpose, Sec. 19.277 requires
that the proprietor make an application to the appropriate TTB officer
that includes technical data about the meter such as make, model, and
the accuracy tolerance. TTB must then evaluate the data to determine
whether the meter is suitable for the intended use before approving its
use. The current regulations do not provide for the use of meters for
bulk tax determination gauges.
Under the proposed regulations at Sec. 19.284, TTB would allow for
the use of mass flow meters for both bulk tax determination gauges and
all other bulk gauges that must be performed at a distilled spirits
plant. Further, the proprietor's use of mass flow meters would not be
subject to prior approval by TTB. Instead, the proposed regulations
establish standards of accuracy that a mass flow meter must meet for
use in bulk tax determination gauges and a separate standard of
accuracy for all other bulk gauges. As proposed, a mass flow meter used
for tax determination gauges must be certified by the manufacturer or
other qualified person as accurate within a tolerance of 0.1%. A mass flow meter used for all other required gauges must
be certified by the manufacturer or other qualified person as accurate
within a tolerance of 0.5%.
In its comments on part 19, DISCUS recommends amending the current
regulation at Sec. 19.319(a) by deleting the requirement to use an
``approved meter'' for volume determinations in the production gauge.
We propose to change this requirement by substituting the term
``accurate mass flow meter'' for the term ``approved meter.'' Thus, the
volume determination on the production gauge can be made using an
``accurate mass flow meter.'' This change appears in the proposed
regulations at Sec. 19.289.
For several years, TTB has seen an increased interest in the use of
meters by proprietors of distilled spirits plants. Further,
manufacturers of meters have improved the accuracy of their mass flow
meters. The proposed regulations will give proprietors the opportunity
to take advantage of the improved performance of mass flow meters and
modernize operations at their plants without the need to seek prior
approval from TTB.
Spirits in receiving tanks. DISCUS recommends the deletion of a
sentence from the current regulation at Sec. 19.319(a) that states,
``Spirits in each receiving tank shall be gauged before reduction in
proof and both before and after each removal of spirits therefrom.'' We
did not adopt this recommendation because we need accurate measurements
of spirits removed from production, including a measurement of the
spirits before and after removal from the receiving tank. This
provision is found in the proposed regulations at Sec. 19.289(a).
Gauge record for packages filled. DISCUS also recommends the
deletion of the requirement for a gauge record for each lot of packages
filled, found in the current regulation at Sec. 19.319(d). We did not
adopt this recommendation. We continue to need this type of information
and we will continue to require a gauge record for each lot of packages
filled. This provision is now found in the proposed regulations at
Sec. 19.289(d).
Other industry proposals. DISCUS also recommends that gauges no
longer be required when spirits are filled into packages from storage
tanks and when spirits are transferred between operational accounts. We
did not adopt these changes in the proposed regulations. We believe
that these gauges are still an important means of accounting for
spirits within the plant.
The current regulation at Sec. 19.91(b) covers the gauging of
alcoholic flavoring materials when dumped. The regulation states that
when proof of the flavoring materials is determined from a label or the
manufacturer's statement, the proprietor must periodically test a
sufficient number of samples and record the results in the gauge
record. DISCUS recommends the elimination of the requirement to record
those results in a gauge record. TTB has adopted this recommendation in
the proposed regulations at Sec. 19.287. This is a relatively minor
gauging requirement,

[[Page 26212]]

and we see no reason to require a record for such gauges.
In its comment on Notice No. 870, Equistar Chemicals asks that the
requirement in the current regulations at Sec. 19.503 and Sec. 30.43
be clarified. The company states that the existing regulations appear
to require the establishment of a separate tare for each package
individually gauged. The term ``tare'' refers to the weight of an empty
package. They propose that TTB allow for an average tare in order to
facilitate packaging by reducing the time involved in recording a gauge
and tare for each package. We did not adopt this recommendation. TTB
requires an accurate gauge of spirits that are withdrawn from bonded
premises. A package (drum, barrel, or similar container; see Sec. 19.1
definition) is so large that the variance in tare can be significant.
This means that the proprietor must establish the actual tare of each
package to be withdrawn from bond. This requirement appears in the
proposed regulations at Sec. 19.288.
Subpart L--Production of Distilled Spirits
Under the current regulations in part 19, production of distilled
spirits is covered at subpart J. In the regulations proposed by this
notice, production issues will be covered in proposed subpart L. In its
comments on part 19, DISCUS recommends several changes affecting the
regulations that govern production of distilled spirits. Below is a
summary of the recommended changes and TTB's evaluation of those
recommendations. Also discussed is a proposed change to a regulation
based on an amendment to the IRC at section 5222(b)(2).
Notices. The current regulation at Sec. 19.311 requires a
proprietor to file a notice on Form 5110.34 with the appropriate TTB
officer prior to commencing, resuming, or suspending production
operations. DISCUS recommends that the proprietor simply file a
letterhead notice for such actions. This recommendation is reasonable
because the filing of a letterhead notice accomplishes the same
objective as the filing of a form. We adopted this recommendation in
the proposed regulations at Sec. 19.292.
Suspension of reports. DISCUS recommends that during periods when
production operations are suspended, the regulations should not require
proprietors to file reports of production under current subpart W. This
recommendation is reasonable because TTB does not need to receive
reports of no activity, and we adopted this recommendation in the
proposed regulations at Sec. Sec. 19.292(c) and 19.632.
Record of fermenting material. DISCUS recommends amendment of the
current regulation at Sec. 19.314 by the deletion of the requirement
to maintain a record of fermenting material removed from or used on
bonded premises for other purposes. We did not adopt this
recommendation. The IRC at 26 U.S.C. 5207(a)(1)(A) specifically
requires that the proprietor maintain records of the receipt of
materials intended for use in the production of distilled spirits, and
the use thereof.
Unfinished spirits. The current regulation at Sec. 19.316
discusses the requirements for a continuous distillation system and
redistillation of unfinished spirits. DISCUS recommends amendment of
this section of regulation by the deletion of the requirement to
determine the quantity and proof of unfinished spirits produced from
distilling materials. We did not adopt this recommendation because this
type of record is required by the IRC at 26 U.S.C. 5207(a)(1)(C).
Entry gauge. DISCUS recommends amendment of the current regulation
at Sec. 19.321 by the insertion of language that would allow the
production gauge to be used as the entry gauge when spirits are
deposited for storage or processing at the same plant and entered for
redistillation at the same plant. This is a reasonable recommendation
because a single gauge will be sufficient as the production gauge and
the entry gauge and we adopted this recommendation in the proposed
regulation at Sec. 19.306.
Record of tests. DISCUS also recommends that the current regulation
at Sec. 19.326 be amended by deleting a requirement to maintain a
record of tests for the spirits content of chemicals produced by the
production process. We did not adopt this recommendation. The
proprietor is required by this section of regulations to test chemicals
for spirits content. We believe that it is reasonable that the
proprietor keep a record of such tests in order to document that the
spirits content of chemicals removed from the premises does not exceed
the 10 percent by volume limit imposed by the proposed regulation at
Sec. 19.308.
Production inventories. DISCUS recommends amendment of the current
regulation at Sec. 19.329 by changing the requirement to conduct an
inventory from a quarterly to an annual basis. We did not adopt this
recommendation. For inventories that involve bulk liquids in tanks, one
inventory per year is not adequate to accurately keep track of
quantities on hand and detect losses in a timely manner. The shorter
time period between inventories makes it easier for both TTB and a
proprietor to reconcile any discrepancies and thereby protect the
revenue. This requirement has been retained in the proposed regulations
at Sec. 19.312.
Receipts of beer. The current regulation at Sec. 19.312 provides
that fermented material to be used in the production of spirits may
include beer if it is produced at a brewery contiguous to the distilled
spirits plant. Thus, under current regulations beer may only be
received at a distilled spirits plant from a brewery that is contiguous
to the plant. However, in 1997, Public Law 105-34 amended the IRC at 26
U.S.C. 5222(b)(2) by removing the requirement that beer may only be
received from contiguous brewery premises. Instead, 26 U.S.C.
5222(b)(2) now provides that fermented material to be used in the
production of distilled spirits may include beer conveyed without
payment of tax from brewery premises and beer which has been lawfully
removed from brewery premises upon determination of tax. This provision
has been incorporated into the proposed regulations at Sec. 19.296.
Subpart M--Storage of Distilled Spirits
Under the current regulations in part 19, the storage of distilled
spirits is covered at subpart L. In these proposed regulations, issues
related to the storage of distilled spirits will be covered under
subpart M.
In its comments on part 19, DISCUS recommends several changes to
the regulations that govern the storage of distilled spirits. Below is
a summary of the recommended changes and TTB's evaluation of those
recommendations.
Tanks. The current regulation at Sec. 19.342(b) states that if
``spirits or wines are being deposited in a partially filled tank in
storage on bonded premises, simultaneous withdrawals may not be made
therefrom unless the flow of spirits or wines into and out of the tank
is being measured by meters or other devices approved by the
appropriate TTB officer which permit a determination of the quantity
being deposited and the quantity being removed.'' DISCUS recommends
that this subparagraph be deleted. We agree, and we have deleted this
subparagraph from the proposed regulations because we consider this to
be a common-sense issue rather than an issue that needs to be spelled
out in the regulations. In addition, we believe that the requirement to
conduct proper gauging is sufficiently covered in the proposed Subpart
K, Gauging.
Filling packages from tanks. The current regulation at Sec. 19.344
states that

[[Page 26213]]

spirits or wines in a tank must be gauged before and after filling
packages from the tank on bonded premises. DISCUS recommends that this
section of regulations be deleted. We disagree with this
recommendation. This type of gauge is needed in order to properly
account for spirits in the storage account and thereby protect the
revenue.
Packages dumped for mingling. The current regulation at Sec.
19.347 states that when packages are dumped for mingling, the
proprietor must record such mingling on a tank record or tank summary
record. DISCUS recommends that this section be eliminated. We disagree
because the mingling of spirits needs to be documented on a record in
order to properly account for spirits in the storage account and
thereby protect the revenue.
Mingling spirits or wines held in tanks. The current regulation at
Sec. 19.349 states that when spirits of less than 190[deg] of proof or
wines are mingled in a tank, the proprietor must perform a gauge and
record the gauge on the tank record. DISCUS recommends that this
section be deleted. We disagree because the result of such mingling
needs to be gauged and documented on a record in order to account for
spirits in the storage account.
Storage inventories. The current regulation at Sec. 19.353
requires each warehouseman to take a physical inventory of all spirits
and wines in tanks at the close of each calendar quarter. DISCUS
recommends that this requirement be changed to an annual inventory. We
did not adopt this recommendation. One inventory per year is not
adequate to accurately keep track of the quantity of spirits and wines
on hand and detect losses in a timely manner. The shorter time period
between inventories makes it easier for both TTB and a proprietor to
reconcile any discrepancies and thereby protect the revenue.
Subpart N--Processing of Distilled Spirits
Under the current regulations, processing operations other than
denaturation and manufacture of articles is covered at subpart M. In
these proposed regulations, the processing of distilled spirits will be
covered under proposed subpart N. Denaturation of spirits and
manufacture of articles will be covered under proposed subpart O.
In its comments on part 19, DISCUS recommends several changes to
the regulations that govern the processing of distilled spirits. Below
is a summary of its recommended changes and TTB's evaluation of those
recommendations.
Receipt of spirits. DISCUS recommends amendment of the current
regulation at Sec. 19.372(b) by adding a sentence allowing the
shipper's gauge for bulk spirits to be used as the receiving gauge. We
did not adopt this proposal. This suggested change would eliminate the
receiving gauge for transfers in bond of bulk spirits and there would
be no basis for determining whether a loss of spirits occurred during
the shipment, thereby posing a jeopardy to the revenue.
Bottling tanks. The current regulation at Sec. 19.382 requires
that spirits be bottled from bottling tanks. However, TTB can authorize
bottling from original packages or special containers if the proprietor
files a notice with TTB explaining such need. DISCUS recommends that
language be inserted into this section that would allow liqueurs to be
bottled from a tank truck or tote without our prior approval. TTB has
previously approved several requests for the bottling of liqueurs
directly from tank trucks or totes because this is a reasonable method
for handling products such as liqueurs and we adopted this
recommendation in the proposed regulation at Sec. 19.352.
Alcohol content and fill. The current regulation at Sec. 19.386
requires that proprietors conduct proof and fill checks of bottled
spirits at regular intervals and record the results of those tests.
These tests are conducted to ensure that the actual proof and fill of
bottled spirits agree with the alcohol content and quantity stated on
the label. DISCUS recommends that proprietors no longer be required to
record the results of those tests as required by Sec. 19.386(c). We
did not adopt this recommendation in the proposed regulations. We
believe that the recording of the proof and fill checks is important
because it documents whether the proprietor is properly conducting the
tests as required by the regulation.
Completion of bottling. The current regulation at Sec. 19.387
requires that when the contents of a bottling tank are not completely
bottled at the end of the day, the proprietor must make entries on the
bottling and packaging record covering the total quantity bottled that
day. DISCUS recommends that this requirement be deleted from the
regulations. We did not adopt this recommendation. The bottling and
packaging record represents a record of bottling and packaging activity
at the plant and the record should reflect the bottling and packaging
activity that takes place on a daily basis.
Bottles on the bottling line at the end of the work day. In its
comments on part 19, DISCUS states that when the bottling of a
particular product run is not completed by the end of the day and is to
be resumed on the following work day, Sec. 19.388(a)(1) requires
removal of all bottles on the line and packing them in cases that must
be sealed. DISCUS recommends that TTB allow proprietors to keep filled
bottles on the line at the end of the work day, if the same sized
product will be produced on the next bottling shift. DISCUS states that
proprietors can save substantial amounts of money if this proposal is
adopted in the regulations. After careful consideration, we believe
that this proposal is reasonable because it will save both time and
expense for proprietors without jeopardizing the revenue. Therefore, we
are proposing this change in the proposed regulation at Sec.
19.358(b).
Remnants. The current regulation at Sec. 19.389 covers remnant
bottles that remain after the completion of bottling. Remnants are the
few bottles that may remain after completion of bottling. This
regulation requires that notations be made on the bottling record
regarding remnant bottles. In their proposal, DISCUS recommends that we
delete some of the recordkeeping provisions that relate to remnant
bottles. Their suggestion is reasonable because it will eliminate
paperwork for the proprietor without jeopardizing the revenue. We are
proposing this change in the proposed regulation at Sec. 19.359.
Filling packages. The current regulation at Sec. 19.390 requires
that spirits filled into packages on processing premises be gauged and
the results recorded on a package gauge record. DISCUS recommends that
this requirement be eliminated. We did not adopt this recommendation
because without such a gauge, there would be no record of the amount of
spirits filled into packages.
Daily summary record. The current regulation at Sec. 19.400
requires that a daily summary record of bottling and packaging be
prepared as required by Sec. 19.751. DISCUS recommends that this
section be deleted. While no specific reason was given, this
recommendation to delete Sec. 19.400 appears to be part of the general
proposal by DISCUS to eliminate all daily records. We did not adopt
this recommendation. Our reasons for maintaining daily records are
explained in our discussion of Subpart V, Records and Reports.
While we did not retain Sec. 19.400 as a separate section in the
proposed regulations, it has been combined with the current regulation
at Sec. 19.384, Preparation of bottling or packaging

[[Page 26214]]

record. The new combined section will now appear at Sec. 19.354.
Bulk inventories. The current regulation at Sec. 19.401 requires
that the proprietor conduct a physical inventory of bulk wine and
spirits in the processing account at the close of each calendar
quarter. DISCUS recommends that this requirement be changed to an
annual inventory. We did not adopt this recommendation. One inventory
per year is not adequate to accurately keep track of the quantity of
spirits and wines on hand and detect losses in a timely manner. The
shorter time period between inventories makes it easier for both TTB
and a proprietor to reconcile any discrepancies and thereby protect the
revenue.
Inventory of bottled and packaged spirits. The current regulation
at Sec. 19.402 requires that the proprietor conduct a physical
inventory of bottled and packaged spirits twice each year. DISCUS
recommends that this requirement be changed to once a year. We did not
adopt this recommendation. There is already an allowance in the current
regulation at Sec. 19.402 whereby the proprietor may request
permission to conduct a single inventory each year. TTB believes that a
single inventory may be adequate for some plants, but it is not
adequate for others. Approval to take a single inventory may be
obtained provided the proprietor maintains accurate records and an
annual inventory will not make protecting the revenue more difficult.
To require only one inventory per year in all cases in the regulations
would weaken TTB's control and protection of the revenue in those
plants where more than one inventory per year is desirable.
Variations in fill. The current regulation at Sec. 19.386 provides
criteria for slight variations in the alcohol content and the fill of
bottled distilled spirits that may occur during bottling operations.
Acceptable variations in alcohol content (proof) are well defined and
very specific in the regulation at Sec. 19.386(b). However, this is
not the case for variations in fill. As stated in Sec. 19.386(b), the
proprietor must rebottle, recondition, or relabel spirits if the bottle
contents do not agree with the label, ``except for such variation as
may occur in filling conducted in compliance with good commercial
practice with an overall objective of maintaining 100 percent fill for
spirits bottled.'' We believe that this criteria could be improved and
we propose to establish a standard whereby there must be approximately
the same number of overfills and underfills for each lot bottled and in
no case may the quantity in a bottle vary by more than plus or minus
two percent from the quantity stated on the label. This new
clarification appears in the proposed regulation at Sec. 19.356(b).
Subpart O--Denaturing Operations and Manufacture of Articles
Under the current regulations in part 19, denaturing operations are
covered under subpart N. In these proposed regulations, denaturing
operations will be covered under proposed subpart O. In their
individual responses to Notice No. 870, DISCUS and Equistar Chemicals
proposed changes to the regulations governing denaturation. Below is a
discussion of the recommended changes and TTB's evaluation of those
recommendations.
Gauge for denaturation. The current regulation at Sec. 19.454
states that the measurement of spirits and denaturants shall be made by
volume, weight, approved meter, or, when approved by the Director, by
other devices or methods. In its markup of part 19, submitted in
response to Notice No. 870, DISCUS recommends that the term
``approved'' meter be deleted. We believe it is important to still
require that distilled spirits plants use measurement devices that are
accurate, and although we propose deleting the word ``approved'' as
recommended by DISCUS, we are proposing to change the regulation to
allow for the use of an ``accurate mass flow meter'' in the proposed
regulation at Sec. 19.383. As discussed earlier in this notice, TTB
proposes to allow for the use of ``accurate mass flow meters,'' without
prior approval by TTB, if they meet certain criteria for accuracy.
Denatured spirits inventory. DISCUS recommends the amendment of the
regulation at Sec. 19.464 by changing the requirement to conduct an
inventory from quarterly to annually. We did not adopt this
recommendation in the proposed rule. The shorter time period between
inventories makes it easier for both TTB and a proprietor to reconcile
discrepancies and thereby protect the revenue.
Denaturation and article manufacture. In Notice No. 870, ATF
advised that under Sec. 19.454 gauging is required before and after
denaturation. This prevents a distilled spirits plant from conducting
denaturation and article manufacture in a single, unified process
because the proprietor must gauge the spirits after denaturation and
before making an article. In Notice No. 870, ATF proposed to amend the
current regulation at Sec. 19.454 to provide proprietors with greater
flexibility to conduct denaturation and article manufacture in a
single, unified process. ATF also proposed to provide a prescribed
method of computation to accurately determine the quantity of denatured
spirits used and produced.
Equistar Chemicals wrote in support of the proposal to allow for a
unified process for denaturation and article manufacture. However, the
company suggested that the regulations continue to allow for
measurements by volume, meter, or other approved methods, and it
suggested alternative language for Sec. 19.454. Equistar's suggestion
is included in these proposed regulations with some modification; i.e.,
we will not prescribe a weight calculation as the sole means for
determining the quantity of specially denatured alcohol produced when
denaturation and article manufacture occur in a single process. These
changes appear in the proposed regulations at Sec. 19.383.
Filling containers from tanks. In its comments on Notice No. 870,
Equistar recommends amendment of the current regulation at Sec.
19.462, Filling of containers from tanks. This regulation requires
companies to record a gauge measurement both before and after
withdrawing spirits from a tank. Equistar suggests that the regulations
eliminate the requirement for the first gauge measurement and simply
allow the second, after-withdrawal gauge measurement to serve as the
starting measurement for the second withdrawal. This proposal is
reasonable because a single gauge may serve both purposes, and we are
proposing to amend the regulations at Sec. 19.389 to reflect that
change.
Subpart P--Transfers, Receipts, and Withdrawals
Proposed subpart P will cover several issues, including transfers
in bond, receipts from customs custody, withdrawals without payment of
tax, withdrawal free of tax, samples of spirits, and securing of
conveyances. Sections of the current regulations related to withdrawal
on determination and payment of tax have been moved to proposed Subpart
I, Distilled Spirits Taxes. Below is a discussion of several changes to
the regulations that we are proposing in the new subpart P.
General. We propose to add a new ``General'' section to the
regulations that will identify the subject matter covered in the new
subpart P. This new section appears in the proposed regulations at
Sec. 19.401.
Consignee premises. The current regulation at Sec. 19.510,
Consignee premises, contains several references to Form 703. The Form
703 was formerly used for the transfer in bond of wine, but it is now
obsolete. References to the

[[Page 26215]]

Form 703 have been removed from the proposed regulations at Sec.
19.407, Consignee premises.
Receipt of Transfers in Bond by Consignees. The current regulation
at Sec. 19.510 requires that when spirits, denatured spirits, or wines
are received by transfer in bond, the consignee is required, among
other things, to examine the conveyance, check the seals for tampering,
gauge, and record the receipt of the shipment. TTB has always
interpreted this section to mean that when the shipment arrives at the
consignee premises or the carrier has completed its transportation of
the shipment, such as when a rail carrier delivers a tank car to a rail
siding on or adjacent to the plant premises, the transfer in bond is
complete and the consignee must gauge and record the shipment as
received.
However, during the course of some recent on-site field audits, TTB
has discovered a number of instances in which distilled spirits plant
proprietors failed to timely gauge and record the receipt of bulk
distilled spirits transferred in bond. Some proprietors have chosen to
apply an alternate interpretation to the term, ``received,'' as used in
the regulation, and they believe that they can delay required gauges
and recordkeeping until after testing and formally accepting title to
the spirits, which may take several weeks or longer after the date of
actual delivery. In other words, some industry members have decided
that the physical arrival of a shipment does not constitute receipt of
the shipment, and they believe that they may decide when the shipment
is ``received.''
TTB believes that the meaning of the current regulation is clear
and that the term ``received'' means that the shipment has physically
arrived at its destination. In fact, the language of the current
regulation also uses the phrase ``upon arrival at his premises''.
However, in order to further clarify the meaning of the regulation,
the proposed regulation at Sec. 19.407, which governs actions to be
taken by a consignee upon receipt of a shipment, has been amended to
emphasize the ``arrival'' of a shipment at the consignee's plant or at
a location which represents the final destination for the carrier.
Thus, it should be clear that shipments that physically arrive at the
consignee's plant or rail sidings at or near the consignee's plant have
been received and must be recorded as such. As proposed, the amended
regulation at Sec. 19.407 will use the following phrase to describe
the time when the shipment is received, ``[U]pon arrival of an in bond
shipment at the consignee's premises or at the destination point
specified in the carrier's transportation documents, the consignee must
* * *.'' TTB believes that this amended language will clarify the
current meaning of the regulation.
Determination of tare. The current regulation at Sec. 19.503
discusses determination of tare when packages are to be individually
gauged for withdrawal from bonded premises. In the proposed
regulations, this section has been moved to Subpart K, Gauging, and now
appears at Sec. 19.288.
Disposition of excess spirits. In the current regulation at Sec.
19.539, there are instructions for Government agencies regarding the
disposition of excess spirits that were withdrawn from a distilled
spirits plant free of tax. This section has been deleted from the
proposed regulations because these instructions are properly covered in
27 CFR 20.246 and 22.176.
Securing of Conveyances. The current regulation at Sec. 19.96
requires that securing devices used on conveyances in which spirits are
transferred in bond, or withdrawn free of tax or withdrawn without
payment of tax, require approval by the appropriate TTB officer before
use. However, securing devices that meet the criteria described in
Sec. 19.96 do not require prior approval by TTB. Currently, the
securing devices that do not require prior approval by TTB include cap
seals and ball-strap-type (railroad) seals. The proposed regulation at
Sec. 19.441 has been amended to also allow for the use of locking
security cables without prior approval by TTB.
Subpart Q--Return of Spirits to Bonded Premises and Voluntary
Destruction
Under the current regulations in part 19, issues relating to the
return of spirits to bonded premises and voluntary destruction are
covered under subpart U. In these proposed regulations, these subjects
will be covered in a new subpart Q. Below is a discussion of several
changes to the regulations that we are proposing in the new subpart Q.
Imported spirits. The Taxpayer Relief Act of 1997 amended the IRC
at 26 U.S.C. 5008(c)(1) by allowing a credit or refund of tax to be
granted for imported bottled spirits that are returned to a distilled
spirits plant. The proposed regulation at Sec. 19.452 provides that a
proprietor may return tax paid or tax determined spirits to bonded
premises that were tax paid upon importation through U.S. Customs and
Border Protection. As discussed earlier in this notice, conforming
changes were also made in Subpart J, Claims.
Returns to bond. The new subpart Q has been substantially revised
to make clearer the types of spirits, denatured spirits, and articles
that may be returned to bonded premises. In addition, we propose to
replace several sections of regulations with a chart for easier
reference and use. We have incorporated Sec. Sec. 19.683 through
19.686 of the current regulations into the proposed chart at Sec.
19.454.
Voluntary destructions. In its suggested changes to part 19, DISCUS
recommends that the section of regulations dealing with voluntary
destructions at Sec. 19.691 include a subparagraph that references the
filing of claims. We did not include this recommendation in the
proposed regulations because the filing of claims is already covered in
the new subpart J of the proposed regulations.
Subpart R--Losses and Shortages
Under the current regulations in part 19, losses and shortages are
covered in subpart Q. In the proposed regulations, these subjects will
be covered in a new subpart R. In its comments on part 19, DISCUS
recommends several changes affecting the regulations governing losses
and shortages. Below is a summary of the suggested DISCUS changes and
TTB's evaluation of those recommendations.
Losses in general. DISCUS recommends the elimination Sec. 19.561
of the current regulations because it is redundant with the statute.
TTB agrees that this section of the regulations repeats provisions
covered in the IRC. However, the regulations in part 19 are intended to
provide users with a comprehensive and complete guide to the
requirements for operating a distilled spirits plant. TTB does not
consider it appropriate to require readers of these regulations to
reference both the IRC and the regulations when seeking guidance on an
issue. Therefore, the information provided in the current regulations
at Sec. 19.561 will appear in the proposed regulations at Sec.
19.461.
Determination of losses in bond, loss of spirits from packages.
DISCUS recommends that the current regulations at Sec. Sec. 19.562 and
19.563 be moved to the claims subpart within part 19. We disagree with
this suggestion. These sections deal with the determination of losses
in bond and are appropriately located in the subpart for losses and
shortages.
Loss of spirits from packages. DISCUS recommends amendment of the
current regulation at Sec. 19.563 by replacing a reference to the
regulation at Sec. 19.561(b) with a reference to the IRC at 26 U.S.C.
5008(a)(1)(A). Apparently, they recommended this change because they
had earlier proposed to eliminate

[[Page 26216]]

Sec. 19.561 from the regulations altogether. Since we did not
eliminate Sec. 19.561, (now proposed Sec. 19.461), there is no need
to replace the reference to it with a reference to the statute.
Losses after tax determination. DISCUS recommends elimination of
Sec. 19.564, Losses after tax determination, because it is redundant
with the statute and other rules, and it recommends the transfer of
part of the text to Sec. 19.43, Claims relating to spirits lost after
tax determination. In the proposed regulations, we have retained this
section at Sec. 19.464; however, we have substantially shortened it,
and it now refers to subpart J where claims for losses after tax
determination are covered. TTB proposes to continue this provision
because it is inappropriate to require readers of these regulations to
reference both the IRC and the regulations when seeking guidance on an
issue.
Subpart S--Containers and Marks
Proposed subpart S covers requirements for containers and marks
that are covered in the current regulations at subpart R. In the new
subpart S, much of the information regarding containers and marks has
been rearranged and put into a more logical order. In addition, we
propose several amendments to the regulations governing containers and
marks.
Industrial versus nonindustrial. The current regulations in subpart
R list requirements that apply to spirits for ``industrial'' use and
separate requirements that apply to spirits for ``nonindustrial'' use.
However, the terms ``industrial'' use and ``nonindustrial'' use are not
explained within subpart R. The proposed regulations in subpart S
define those terms in a new section which appears at Sec. 19.472.
Tanks, pipelines. In its comments on part 19, DISCUS proposes that
the current regulations at Sec. 19.586, Tanks, and Sec. 19.587,
Pipelines, be deleted because they are redundant with other sections of
the regulations. We agree that they are redundant, and propose such
deletion in the proposed regulations.
Filling containers. In the current regulation at Sec. 19.582,
there is a limitation on filling containers during processing
operations. This regulation limits filling to containers of not more
than 10 gallons. We deleted this limitation in the proposed regulation
at Sec. 19.474 because we foresee instances where a processor may have
a need to fill containers in excess of 10 gallons. In addition, the
current regulation at Sec. 19.583, imposes a 10-gallon limitation for
the filling of containers with Specially Denatured Alcohol (SDA). We
are not aware of any reason for this limitation, and in the proposed
regulation at Sec. 19.475 we propose deleting the size reference
because SDA may be filled into containers with a larger capacity.
Marks on packages of tax-paid industrial spirits. In Notice No.
870, ATF proposed to amend the regulation in Sec. 19.605 by requiring
that proof, tare, and proof gallons be marked on packages of spirits
withdrawn on determination of tax. In its response to Notice No. 870,
DISCUS opposes this proposal because it would be burdensome on
proprietors that ship to manufacturers of nonbeverage products. DISCUS
also states that the information required in ATF's proposed Sec.
19.605 is already required under Sec. 19.749, Bottling and packaging
record, and Sec. 19.769, Package gauge record. After consideration of
the DISCUS comments, we did not include this proposal from Notice No.
870 in this new proposed rule.
Subpart T--Liquor Bottle, Label, and Closure Requirements
Under the current regulations in part 19, issues relating to liquor
bottles and label requirements are found in subpart S and issues
relating to closure requirements are found in subpart T. In the
proposed regulations, these subjects will be covered in the new subpart
T. Below is a summary of the changes that we propose to make in the new
regulations.
Scope. The current regulation at Sec. 19.631, Scope, states that
the regulations in Sec. Sec. 19.632 through 19.639 only apply to
bottles with a capacity of 200 ml or more unless it is specifically
stated that the section applies to bottles of less than 200 ml. In our
revision of the subpart, we deleted several sections of regulations,
and the only sections that remain apply to all bottle sizes. Therefore,
the ``scope'' section of the proposed regulations at Sec. 19.631 is no
longer needed and has been deleted.
Bottles authorized. The current regulation at Sec. 19.632 states
that liquor bottles, including bottles of less than 200 ml, must
conform to the standards of fill in 27 CFR part 5. This section was
rewritten and deletes the reference to 200 ml because there are no
special rules that apply to bottles of less than 200 ml. As proposed,
the new regulation at Sec. 19.511 simply states that all liquor
bottles for domestic purposes must conform to the standards of fill at
27 CFR part 5.
Distinctive liquor bottles. We have rewritten the current
regulation at Sec. 19.633 to remove the reference to bottle sizes less
than 200 ml. The requirements of this section apply to all bottle sizes
and now appears in the proposed regulations at Sec. 19.513.
Receipt and storage of liquor bottles. The current regulation at
Sec. 19.634 provides rules for the receipt and storage of liquor
bottles. We could find no consumer or revenue protection reason to
retain this section, and we deleted it from the proposed regulations.
Bottles to be used for display purposes. The current regulation at
Sec. 19.635 provides recordkeeping rules for those instances in which
liquor bottles are provided for display purposes. We could find no
reason to treat these bottles differently than others so we are
proposing to delete this provision from the proposed subpart. Records
of receipt and use of all liquor bottles are covered in the proposed
regulation at Sec. 19.603.
Bottles for testing purposes. We propose to delete the current
regulation at Sec. 19.636. As stated above, we could find no reason to
retain this as a separate section of regulations. Records of receipt
and use of liquor bottles are covered in the proposed regulation at
Sec. 19.603.
Bottles not constituting approved containers. We rewrote the
current regulation at Sec. 19.637 to remove the reference to bottle
sizes less than 200 ml because there are no special rules that apply to
bottles of less than 200 ml. This section applies to all bottle sizes
and now appears at proposed Sec. 19.512.
Disposition of stocks of liquor bottles. We deleted the current
regulation at Sec. 19.638 in the proposed regulations. We could find
no consumer or revenue protection reason to retain this as a separate
section. Records of receipt, use, and disposition of liquor bottles are
covered in the proposed regulation Sec. 19.603.
Use and resale of liquor bottles. We deleted the current regulation
at Sec. 19.639 in the proposed regulations. We could find no consumer
or revenue protection reason to retain this as a separate section.
Records of receipt, use, and disposition of liquor bottles are covered
in the proposed regulation Sec. 19.603.
Statements required on labels under an exemption from label
approval. The current regulation at Sec. 19.642 contains a general
requirement whereby labels that are exempt from label approval must
contain certain items of information. The regulations at Sec. Sec.
19.643 through 19.650 discuss those specific items of information.
Further, most of the text in

[[Page 26217]]

Sec. Sec. 19.643 through 19.650 mirrors text found in 27 CFR part 5.
In our proposed regulation at Sec. 19.517, we have merged most of
the information in the current regulations at Sec. Sec. 19.642 through
19.650 and created a section which lists the specific information that
must appear on a label exempt from label approval. Further, we propose
to no longer publish in one part of the regulations identical
provisions from other parts of the regulations. Thus, we propose
stating that the mandatory information under Sec. 19.517 must conform
to specific, cited sections of 27 CFR part 5 and Sec. 19.518 of part
19 without duplicating the actual text of those regulations in Sec.
19.517.
Closures. The current regulations at Sec. Sec. 19.661 and 19.662
contain the closure requirements that apply to each bottle or container
of spirits having a capacity of one gallon or less. Under the current
regulations, distilled spirits containers must have a closure that
leaves a portion of the closure on the container when opened. In
addition, the closure must be constructed in such a manner that it must
be broken to gain access to the contents. These regulations implement
the IRC at 26 U.S.C. 5301(d). DISCUS proposes that the closure
requirement at Sec. 19.662 be amended to allow for closures that are
removed completely if the closure shows when it has been subject to
tampering.
In our proposed regulation at Sec. 19.523, we require that the
container have a closure that must be broken to gain access to the
contents. However, we have deleted the requirement that a portion of
the closure remain on the container when opened. This particular
feature of the current regulation is not a requirement of the IRC at 26
U.S.C. 5301(d). Further, we have received several requests for an
alternate method or procedure from this particular requirement, and we
see no continued need for this feature on the closure.
Labels for export and Puerto Rico. In the current regulations at
Sec. Sec. 19.395 and 19.396, we discuss the label requirements that
apply to spirits for export and spirits for shipment to Puerto Rico.
These requirements have been incorporated into our proposed regulations
at Sec. Sec. 19.519 and 19.520.
Subpart U--Reserved
We propose to reserve subpart U for possible future use.
Subpart V--Records and Reports
The current regulations in part 19 require that the proprietor of a
distilled spirits plant maintain a comprehensive system of records
relating to operations at the plant. The primary aim of this records
system is to account for all taxable spirits and products that are
produced, received, stored, processed, and removed from the plant.
Further, the regulations require that the proprietor account for
taxable products by maintaining a system of records arranged into
separate accounts within each plant. Depending on the scope of
operations conducted at the plant, this records system may include a
production account, a storage account, a processing account, and a
denaturation account. In addition, there are a number of daily records
and summary records prescribed for activities occurring within each
account. These recordkeeping requirements are based on the IRC at 26
U.S.C. 5146, 5201, 5207, 5211, 5291, 5555, 5603, 6001, 6011, and 6061.
Under the current regulations, recordkeeping and report
requirements are covered in subpart W. In the proposed regulations,
these subjects will be covered in a new subpart V.
We are proposing several amendments to the regulations covering
recordkeeping and reporting requirements for distilled spirits plants.
Some of the proposed amendments are based on recommendations made by
DISCUS. Other proposed amendments are the result of TTB's internal
review of the current recordkeeping and report requirements for
distilled spirits plants.
DISCUS Recommendations. The following is a summary of the
recordkeeping changes proposed in the petition submitted by DISCUS.
Commercial records. DISCUS recommends an increased
reliance on the commercial records that are maintained by distilled
spirits plants as opposed to the detailed government records that are
currently required in subpart W. In its petition for the revision of
part 19, DISCUS asserts:

The Bureau's responsibility to protect the revenue can be
fulfilled by reliance on commercial records maintained by DSPs in
the ordinary course of business or summaries of such records,
typically computerized, which show ``what goes in'' and ``what goes
out'' of the plant.

Further, in its markup of part 19, DISCUS proposes the deletion of a
substantial number of the records currently required by subpart W.
Elimination of separate accounts. Closely related to its
proposal to increase the use of commercial records, DISCUS also
proposes the elimination of the three separate accounts currently
required in subpart W. DISCUS asserts:

Records of activities not impacting upon ``what goes in'' and
``what goes out'' are unnecessary and thus would not be required.
These include, inter alia, records of gauges, measurements of
product, and movements at each interim step of the plant's
operations.

In support of this proposal, DISCUS submitted numerous proposed
amendments to the recordkeeping requirements in subpart W involving the
elimination of many of the current recordkeeping requirements and
replacing those requirements with a recordkeeping system based on a
single DSP account for all spirits.
Daily versus monthly records. Under the current
recordkeeping regulations, a distilled spirits plant proprietor is
required to record each activity or transaction as it occurs, summarize
those activities on a daily basis, and then report those activities in
a monthly summary report. DISCUS proposes that DSPs no longer be
required to record information on a daily basis. Instead, they propose
that information be recorded on a monthly basis. In its petition,
DISCUS states:

Other unnecessary and burdensome recordkeeping regulations also
would be modified. For example, ordinary business records and
summaries used for Part 19 compliance would not be required to show
information on a daily basis, but instead generally on a monthly
basis.

DISCUS asserts that these changes would not have an adverse effect on
TTB's ability to audit operations at DSPs.
Format, storage, and reproduction. In regard to the
format, storage, and reproduction of records, DISCUS states:

Under this modernized regulatory scheme, proprietors no longer
would be required to maintain information in any prescribed format,
would be able to store records at any of the proprietor's
facilities, and would not need prior approval from the Bureau to
reproduce records.

DISCUS recommends that the regulations governing format, storage, and
reproduction of records at 27 CFR 19.721 and 19.723 be amended.
TTB's Proposed Changes to the Regulations. In response to the
recommendations made by DISCUS and based on TTB's analysis of the
current recordkeeping requirements, we propose several amendments to
the regulations in the new proposed subpart V.
Restructuring and plain language changes. One of the first
changes that we propose is to restructure and reorder much of the
information in subpart V. For example, recordkeeping information that
was contained within some of the longer sections within the subpart has
been divided-up into shorter, individual sections within the subpart.
We believe this change will make for easier reader

[[Page 26218]]

access. We have also incorporated plain language principles into our
rewriting of the subpart to make the revised regulations easier to read
and understand.
Commercial records. As a general principle, TTB agrees
with increased reliance on the commercial records maintained by a DSP,
as opposed to records that are specifically created to satisfy
government recordkeeping requirements. We also agree that the
proprietor's commercial records should contain most of the information
necessary to track the receipt and disposition of spirits as well as
certain key transactions within the plant. With this principle in mind,
we state in the proposed regulation at Sec. 19.572 that required
records may consist of documents created in the ordinary course of
business rather than records created to expressly to meet the
requirements of this part, if those documents:
(1) Contain all of the details that this part requires;
(2) Are consistent with the general standards of clarity and
accuracy; and
(3) Can be readily understood by TTB personnel.
Separate accounts. The current regulations require that a
proprietor maintain a system of records arranged into separate
accounts. This may include a production account, a storage account, a
processing account, and a denaturation account, as applicable. DISCUS
recommends that the recordkeeping regulations be substantially
abbreviated and provide for a single account at the DSP.
In our review of the IRC requirements regarding the ``records''
that must be maintained by a DSP under 26 U.S.C. 5207, we find that a
DSP must keep records of ``production activities,'' ``storage
activities,'' ``denaturation activities,'' and ``processing
activities.'' Also, 26 U.S.C. 5207 provides a list of required records
that must be maintained for each of these activities. Thus, we modeled
the current DSP recordkeeping regulations after 26 U.S.C. 5207, and we
propose to continue to require that records be maintained with a
separate account for each activity.
Further, the requirement to maintain separate accounts within a DSP
is specifically addressed in the legislative history of the Trade
Agreements Act of 1979 (Pub. L. 96-39), which implemented the current
system for operating distilled spirits plants. The legislative history
of the Trade Agreements Act of 1979 states in part:

The new all-in-bond system will substantially simplify the
qualification and use of distilled spirits plant premises, by
eliminating the requirement that separate facilities, for the
various distilling operations be established and maintained within a
plant. Since the tax under the all-in-bond system will be determined
at the conclusion of the distilled spirits operations, there is no
longer any need for these physical delineation and separation
requirements. Under the all-in-bond system, these separate
activities will be accounted for only by recordkeeping accounts such
as for production, storage, processing and finished goods. Tanks,
vats, rooms or buildings may be used for multiple purposes, with the
type and identification of the spirits being maintained by the
appropriate records.

Thus, the legislative history of the Trade Agreements Act of 1979
clearly shows that while Congress established the all-in-bond system
with its efficiencies, Congress intended to maintain a system of
separate recordkeeping accounts for the different operations within a
distilled spirits plants.
Based on the language of the IRC and the legislative history of the
Trade Agreements Act of 1979, we propose to continue the requirement to
establish separate accounts within the DSP. However, we also propose to
eliminate any current recordkeeping requirements and items of
information that are not necessary for the protection of the revenue or
that do not aid in the tracking of spirits for consumer protection
purposes.
Daily versus monthly records. As discussed earlier, DISCUS
recommends that proprietors no longer be required to show information
in their records on a daily basis. Instead, DISCUS proposes that
information be shown on a monthly basis. After careful consideration,
we decided against making this proposal. TTB would be unable to audit
activities at a plant if only monthly summaries of activities are
available. To continue to audit activities at the plants, TTB needs
access to the daily transaction records. Thus, daily records must
continue to be maintained.
Format, storage, and reproduction. The proposed
regulations do not require that records be maintained in any particular
format or media. Required records may be kept on paper, on microfilm or
microfiche, or on a computer or other electronic media. The only
requirement is that records must be readily retrievable in hard-copy
format for review by TTB officers as necessary. Further, we have
eliminated the requirement at Sec. 19.725 to obtain TTB approval to
reproduce required records.
Computer-generated reports and forms. Over the past
several years, TTB has approved several alternate methods or procedures
that allow companies to submit computer-generated paper reports and
forms. DISCUS recommends that this option be extended to all DSPs. TTB
has no objection to receiving computer-generated reports and
transaction forms. Accordingly, the proposed regulation at Sec. 19.634
states that TTB will accept both computer-generated reports of
operations and transaction forms that are made using a computer printer
on plain white paper and that match the TTB report or form. Further,
use of these reports and forms will not have to be pre-approved by TTB
if they conform to the following standards:
(1) The computer-generated report or form must approximate the
physical layout of the corresponding TTB report or form, although the
typeface may vary;
(2) The text on the computer-generated report or form and each line
entry must exactly match the official TTB report or form; and
(3) Each penalty of perjury statement specified for the TTB report
or form must be produced in its entirety.
Electronic submission of forms. Closely related to the
subject of computer-generated reports is the matter of electronic
submission of forms and electronic signatures. We addressed this issue
in a separate rulemaking action. On October 10, 2003, TTB issued
Treasury decision T.D. TTB-5 (68 FR 58600, October 10, 2003) in which
we allow for the submission of certain forms to TTB electronically
through a TTB-approved electronic document receiving system. We believe
that by providing this option to submit certain forms electronically,
we can substantially reduce the costs associated with submitting and
maintaining paper documents.
Location of records. Formerly, the IRC at 26 U.S.C. 5207
required that records be kept on the premises of the distilled spirits
plant where the operations covered by the records are conducted. This
section of law was amended in 1997 by Public Law 105-34 and IRC section
5207 no longer requires that records be maintained at the plant.
Accordingly, the proposed regulation at Sec. 19.573 allows required
records to be maintained at either the distilled spirits plant where
operations or transactions occur or a central recordkeeping location.
However, when records are to be kept at a central recordkeeping
location, the proposed regulations at Sec. 19.574 will require that
they be made available at the plant premises during inspections and
audits.
Transfer record for shipments from customs custody. Notice
No. 870 advised that the transfer record for spirits being received
from customs

[[Page 26219]]

custody is mentioned in Sec. 19.770 in a way that implies that the
transfer record would be prepared under Sec. 19.770. However, 27 CFR
27.138 prescribes the information for the transfer record covering such
transfers, and that information is different in several ways from the
information required for domestic transfers by Sec. 19.770. Notice No.
870 proposed to amend Sec. 19.770 to clarify that the record required
for transfer of spirits from customs custody must be prepared in
accordance with Sec. 27.138.
DISCUS does not comment on this proposal, and we incorporated this
proposed change into the new, proposed regulation at Sec. 19.621(c).
Miscellaneous changes. In its part 19 mark-up, DISCUS
proposes the elimination of Sec. 19.775, Record of securing devices,
and Sec. 19.776, Record of scale tests. We agree with this
recommendation, and these sections have been deleted from the proposed
regulations. In addition, we propose to eliminate Sec. 19.726,
Authorized abbreviations to identify spirits. We see no need to
prescribe the abbreviations used by proprietors on forms or records.
Reports. Currently, distilled spirits plant proprietors
submit monthly reports of operations. These reports include: Monthly
Report of Production Operations, TTB F 5110.40; Monthly Report of
Storage Operations, TTB F 5110.11; Monthly Report of Processing
Operation, TTB F 5110.28; and Monthly Report of Processing (Denaturing)
Operations, TTB F 5110.43. DISCUS recommends that the monthly reports
be changed to quarterly reports and also suggested that three of the
reports be merged into a single report.
We disagree with this recommendation. Our Office of Field
Operations (FO) relies on monthly submission of detailed information
for its pre-audit analysis and monitoring of plant operations. FO finds
that having separate reports, rather than a merged report, is in the
best interests of protecting the revenue because its staff is better
able to assess specific operations within the distilled spirits plant
and identify specific operations for particular attention during an
audit. In addition, TTB recently simplified the submission of monthly
report data with the implementation of TTB Pay.gov, and this
simplification should address some of the concerns raised by DISCUS.
Subpart W--Production of Vinegar by the Vaporizing Process
Under the current regulations, production of vinegar by the
vaporizing process is covered at subpart X. In these proposed
regulations, we cover the production of vinegar under proposed subpart
W. DISCUS does not recommend any changes to the regulations in this
subpart, and we did not make any substantive changes to these
regulations.
Subpart X--Distilled Spirits for Fuel Use
Under the current regulations, distilled spirits for fuel use is
covered in subpart Y. In these proposed regulations, this subject will
be covered under a new subpart X. Proposed subpart X will cover the
requirements for establishing and operating a distilled spirits plant
that will produce, process, store, use, or distribute distilled spirits
exclusively for fuel use.
DISCUS does not propose any changes to this subpart. However, TTB
proposes to make several changes to the regulations in subpart X.
Similar to the changes made in other subparts, we have rearranged the
information in subpart X into a more logical order. Also, we combined
some sections to provide more clarity, added new sections, and
renumbered the regulations within this subpart.
Definitions. We amended the definitions that appear in the current
regulations at Sec. 19.911, Meaning of terms, by deleting or replacing
terms that no longer apply. We also deleted several terms that are
defined in the proposed regulations at Sec. 19.1, Definitions. The
definitions for this subpart appear in the proposed regulations at
Sec. 19.662.
Letterhead applications. In the proposed regulations, we now
include an allowance for letterhead applications and letterhead notices
for changes affecting permits.
Bonds. In the proposed regulations at Sec. Sec. 19.699 and 19.700,
we provide information that explains bonds and sureties in more detail.
We also provide an improved explanation of how the amount of the bond
must be computed.
Bonds for some small plants. The IRC, at 26 U.S.C. 5181(c)(3),
provides that no bond is required for an ``eligible distilled spirits
plant'' and that such plants may nonetheless receive shipments of
spirits ``in bond'' under 26 U.S.C. 5212. An ``eligible distilled
spirits plant'' is defined in 26 U.S.C. 5181(c)(4) as ``a plant which
is used to produce distilled spirits exclusively for fuel use and the
production from which does not exceed 10,000 proof gallons per year.''
This definition requires a plant to produce distilled spirits in order
to be an ``eligible distilled spirits plant.''
Although the Bureau formerly interpreted 26 U.S.C. 5181(a)(1) to
require that all alcohol fuel plants must produce distilled spirits,
this interpretation has been amended, and the Bureau now holds that a
person may establish an alcohol fuel plant solely for the receipt and
processing of distilled spirits for fuel use. Nevertheless, such a
plant does not meet the definition of ``eligible distilled spirits
plant'' quoted above. Therefore, a plant that would only receive and
process distilled spirits and has no production capability must have a
bond, regardless of size in order to be eligible to receive spirits
``in bond'' under 26 U.S.C. 5212. The proposed regulations at
Sec. Sec. 19.673, 19.699, and 19.700 will now provide for the bonding
of small alcohol fuel plants that do not produce distilled spirits for
fuel use.
Importing spirits. TTB allows persons qualified as an alcohol fuel
producer under the 26 U.S.C. 5181 to receive imported alcohol from
customs custody. However, such importations are not covered in the
current regulations in subpart Y. In the proposed regulations, we added
a new section at Sec. 19.742 that covers the transfer of spirits from
customs custody to an alcohol fuel plant. This new section incorporates
the procedures for importation of spirits that were discussed in Notice
No. 870 and Industry Circular 80-6, ``Distilled Spirits for Fuel Use''.
Application for transfer of spirits in bond. 26 U.S.C. 5212
provides for the transfer in bond of bulk distilled spirits between
bonded premises without payment of tax. In addition, 26 U.S.C.
5005(c)(1) provides that the consignee proprietor of a distilled
spirits plant is liable for the tax on all distilled spirits that are
in transit to the consignee's premises from the time of removal from
the consignor's premises pursuant to an application made by the
consignee of the shipment.
Based upon the provision within IRC section 5005(c)(1), which
assigns liability for the shipment to the consignee based upon an
application made by the consignee, distilled spirits plant proprietors
qualified under 26 U.S.C 5171 are required to file an Application for
Transfer of Spirits and/or Denatured Spirits in Bond on TTB F 5110.16
and receive authorization from TTB prior to the transfer of spirits in
bond. This requirement appears in the current regulations at Sec.
19.506.
The application by the consignee proprietor on TTB F 5100.16 is
filed in triplicate with TTB's Director, National Revenue Center. If
the application is approved, the Director of our National Revenue
Center will complete Part II on all copies of the form, retain one copy
of the form, and return the remaining

[[Page 26220]]

copies to the applicant. The applicant will deliver one of the approved
copies to the consignor and retain one copy for his files. The approved
application remains in effect until the bond terminates or where there
is less than a maximum bond, the approved application will terminate
when the penal sum of the bond is changed.
TTB's current regulations governing alcohol fuel plants do not
require that the consignee proprietor submit an application to receive
spirits in bond on form TTB F 5100.16, Application for Transfer of
Spirits and/or Denatured Spirits in Bond. This appears to be an
oversight in the current regulations and represents a jeopardy to the
revenue because the law at 26 U.S.C. 5005(c)(1) assigns tax liability
for the shipment to the consignee only when the spirits are shipped
``pursuant to an application made by him.''
Therefore, we propose to amend the regulations governing transfers
in bond involving alcohol fuel plants and require that the proprietor
of an alcohol fuel plant who wishes to receive spirits by transfer in
bond must file an application with TTB on form TTB F 5100.16 and
receive approval from TTB prior to the transfer. This requirement
appears in the proposed regulations at Sec. Sec. 19.403, 19.405,
19.406, 19.733, 19.734, and 19.735.
Authorized materials. The listing of materials authorized for
rendering spirits unfit for beverage use is found in the current
regulations at Sec. 19.1005. This listing has been updated to include
several additional denaturants and is located in the proposed
regulations at Sec. 19.746, Authorized materials.
Subpart Y--Paperwork Reduction Act
The Office of Management and Budget (OMB) assigns control numbers
to our information collection requirements. Subpart Y is a listing of
those sections of the proposed 27 CFR part 19 regulations that impose
an information collection requirement along with the assigned OMB
control number.

II. Derivation Table for Proposed Part 19

The following table shows the derivation of the new sections of
regulations. It is cross-referenced between the new section numbers in
the proposed 27 CFR part 19 regulations contained in this notice and
the old section numbers in the current part 19 regulations.

------------------------------------------------------------------------
Are derived from current section:
Requirements of proposed section:
------------------------------------------------------------------------
19.0................................ 19.1
------------------------------------------------------------------------
Subpart A
------------------------------------------------------------------------
19.1................................ 19.11
19.2................................ 19.2
19.3................................ 19.3
19.4................................ 19.57
19.5................................ 19.58
------------------------------------------------------------------------
Subpart B
------------------------------------------------------------------------
19.11............................... 19.81
19.12............................... 19.86
19.13............................... 19.75
19.14............................... 19.4
19.15............................... 19.61
19.16............................... 19.724
19.17............................... 19.82
19.18............................... 19.83
19.19............................... 19.79
19.20............................... 19.77
19.26............................... 19.62
19.27............................... 19.62
19.28............................... 19.73
19.29............................... 19.70, 19.74
19.31............................... 19.63
19.32............................... 19.65
19.33............................... 19.66
19.34............................... 19.71
19.35............................... 19.71
19.36............................... 19.67
19.37............................... 19.67
19.38............................... 19.78
19.45............................... 19.100
------------------------------------------------------------------------
Subpart C
------------------------------------------------------------------------
19.51............................... New
19.52............................... 19.131
19.53............................... 19.132
19.54............................... 19.133
19.55............................... 19.68, 19.72
19.56............................... 19.134
19.58............................... 19.97
19.59............................... 19.98
19.60............................... 19.99
------------------------------------------------------------------------
Subpart D
------------------------------------------------------------------------
19.71............................... 19.151
19.72............................... 19.151
19.73............................... 19.152
19.74............................... 19.168
19.75............................... 19.166
19.76............................... 19.153
19.77............................... 19.170, 19.324
19.78............................... 19.156
19.79............................... 19.169
19.80............................... 19.154
19.81............................... 19.155
19.91............................... 19.157
19.92............................... 19.158
19.93............................... 19.167
19.94............................... 19.165
19.95............................... 19.159
19.96............................... 19.161
19.97............................... 19.162
19.98............................... 19.160
19.99............................... 19.163
------------------------------------------------------------------------
Subpart E
------------------------------------------------------------------------
19.111.............................. New
19.112.............................. 19.180
19.113.............................. 19.182
19.114.............................. 19.184
19.115.............................. 19.185
19.116.............................. 19.186, 19.187
19.117.............................. 19.188
19.118.............................. 19.189
19.119.............................. 19.190
19.120.............................. 19.191
19.121.............................. 19.192
19.122.............................. 19.193
19.123.............................. 19.153(b)
19.126.............................. 19.180
19.127.............................. 19.181
19.128.............................. 19.182
19.129.............................. 19.183
19.130.............................. 19.184
19.131.............................. 19.185
19.132.............................. 19.186, 19.187
19.133.............................. 19.188
19.134.............................. 19.189
19.135.............................. 19.191
19.141.............................. 19.201
19.142.............................. 19.202
19.143.............................. 19.203 through 19.206
19.144.............................. 19.207
19.147.............................. 19.211
------------------------------------------------------------------------
Subpart F
------------------------------------------------------------------------
19.151.............................. 19.231, 19.232
19.152.............................. 19.231
19.153.............................. 19.233
19.154.............................. 19.234
19.155.............................. 19.235
19.156.............................. 19.236
19.157.............................. 19.237
19.161.............................. 19.231, 19.232
19.162.............................. 19.241
19.163.............................. 19.242
19.164.............................. 19.243
19.165.............................. 19.244
19.166.............................. 19.245
19.167.............................. 19.246
19.168.............................. 19.247, 19.248
19.169.............................. 19.248
19.170.............................. 19.249
19.171.............................. 19.250
19.172.............................. 19.251
19.173.............................. 19.252
------------------------------------------------------------------------
Subpart G
------------------------------------------------------------------------
19.181.............................. New
19.182.............................. 19.273
19.183.............................. 19.273
19.184.............................. 19.273
19.185.............................. 19.273
19.186.............................. 19.276
19.187.............................. 19.274
19.188.............................. 19.277
19.189.............................. 19.278
19.190.............................. 19.279
19.191.............................. 19.280
19.192.............................. 19.281
19.193.............................. 19.282
------------------------------------------------------------------------
Subpart H
------------------------------------------------------------------------
19.201.............................. 19.49(a)
19.202.............................. 19.50
19.203.............................. 19.50
19.204.............................. 19.49
19.205.............................. 19.49(c) and (d)

[[Page 26221]]

19.206.............................. 19.49(b)(2)
19.207.............................. 19.51
19.208.............................. 19.51
19.209.............................. 19.51
19.210.............................. 19.52
19.211.............................. 19.53
19.212.............................. 19.54
19.214.............................. 19.54
------------------------------------------------------------------------
Subpart I
------------------------------------------------------------------------
19.221.............................. New
19.222.............................. 19.21 through 19.23
19.223.............................. 19.24
19.225.............................. 19.25, 19.515, 19.526
19.226.............................. 19.517
19.227.............................. 19.515
19.229.............................. New
19.230.............................. 19.515(b), 19.522(b)
19.231.............................. 19.516
19.233.............................. 19.522(c), 19.523(b)
19.234.............................. 19.522(a), 19.523(a)
19.235.............................. 19.522, 19.523
19.236.............................. 19.523
19.237.............................. 19.523
19.238.............................. 19.525
19.239.............................. 19.519
19.240.............................. 19.524
19.242.............................. 19.520
19.243.............................. 19.521
19.245.............................. New
19.246.............................. 19.34
19.247.............................. 19.35
19.248.............................. 19.36
19.249.............................. 19.37
19.250.............................. 19.38
19.253.............................. 19.31
19.254.............................. 19.32
19.256.............................. 19.26
19.257.............................. 19.518
19.258.............................. 19.486
------------------------------------------------------------------------
Subpart J
------------------------------------------------------------------------
19.261.............................. New
19.262.............................. 19.44
19.263.............................. 19.41
19.264.............................. 19.42
19.265.............................. 19.43
19.266.............................. 19.45
19.267.............................. 19.46
19.268.............................. 19.76
19.269.............................. 19.487
------------------------------------------------------------------------
Subpart K
------------------------------------------------------------------------
19.281.............................. New
19.282.............................. 19.84
19.283.............................. 19.92
19.284.............................. 19.91, 19.92(a), 19.93
19.285.............................. 19.92(a)
19.286.............................. 19.91(a)
19.287.............................. 19.91(b)
19.288.............................. 19.503
19.289.............................. 19.319
------------------------------------------------------------------------
Subpart L
------------------------------------------------------------------------
19.291.............................. New
19.292.............................. 19.311
19.293.............................. 19.312
19.294.............................. 19.314
19.295.............................. 19.315
19.296.............................. 19.312
19.297.............................. 19.313
19.301.............................. 19.316
19.302.............................. 19.317
19.303.............................. 19.318
19.304.............................. 19.319
19.305.............................. 19.320
19.306.............................. 19.321
19.307.............................. 19.322
19.308.............................. 19.326
19.309.............................. 19.327
19.310.............................. 19.328
19.312.............................. 19.329
19.314.............................. 19.331
19.315.............................. 19.332
19.316.............................. 19.333
------------------------------------------------------------------------
Subpart M
------------------------------------------------------------------------
19.321.............................. 19.341
19.322.............................. 19.342
19.324.............................. 19.344
19.325.............................. 19.345
19.326.............................. 19.346
19.327.............................. 19.347
19.328.............................. 19.348
19.329.............................. 19.349
19.331.............................. 19.343
19.333.............................. 19.353
------------------------------------------------------------------------
Subpart N
------------------------------------------------------------------------
19.341.............................. 19.371
19.342.............................. 19.372
19.343.............................. 19.373
19.344.............................. 19.374
19.346.............................. 19.376
19.348.............................. 19.378
19.351.............................. 19.381
19.352.............................. 19.382
19.353.............................. 19.383
19.354.............................. 19.384, 19.400
19.355.............................. 19.385
19.356.............................. 19.386
19.357.............................. 19.387
19.358.............................. 19.388
19.359.............................. 19.389
19.360.............................. 19.390
19.361.............................. 19.391
19.362.............................. 19.392
19.363.............................. 19.393
19.364.............................. 19.394
19.365.............................. 19.397
19.366.............................. 19.398
19.371.............................. 19.401
19.372.............................. 19.402
------------------------------------------------------------------------
Subpart O
------------------------------------------------------------------------
19.381.............................. 19.451
19.382.............................. 19.452
19.383.............................. 19.454
19.384.............................. 19.451, 19.456
19.385.............................. 19.455
19.386.............................. 19.457
19.387.............................. 19.453
19.388.............................. 19.461
19.389.............................. 19.462
19.390.............................. 19.463
19.391.............................. 19.459
19.392.............................. 19.460
19.393.............................. 19.458
19.394.............................. 19.464
19.395.............................. 19.471
19.396.............................. 19.451
------------------------------------------------------------------------
Subpart P
------------------------------------------------------------------------
19.401.............................. New
19.402.............................. 19.505
19.403.............................. 19.506
19.404.............................. 19.507
19.405.............................. 19.508
19.406.............................. 19.509
19.407.............................. 19.510
19.409.............................. 19.481
19.410.............................. 19.482
19.411.............................. 19.483
19.414.............................. 19.484
19.415.............................. 19.485
19.418.............................. 19.531
19.419.............................. 19.532
19.420.............................. 19.533
19.421.............................. 19.534
19.424.............................. 19.536
19.425.............................. 19.537
19.426.............................. 19.538
19.427.............................. 19.540
19.428.............................. 19.541
19.431.............................. 19.502
19.434.............................. 19.701
19.435.............................. 19.702
19.436.............................. 19.703
19.437.............................. 19.704
19.441.............................. 19.96
------------------------------------------------------------------------
Subpart Q
------------------------------------------------------------------------
19.451.............................. New
19.452.............................. 19.681, 19.682
19.453.............................. New
19.454.............................. 19.683 through 19.686
19,455.............................. 19.687
19.457.............................. 19.688
19.459.............................. 19.691
------------------------------------------------------------------------
Subpart R
------------------------------------------------------------------------
19.461.............................. 19.561
19.462.............................. 19.562
19.463.............................. 19.563
19.464.............................. 19.564
19.465.............................. 19.565
------------------------------------------------------------------------
Subpart S
------------------------------------------------------------------------
19.471.............................. New and 19.581
19.472.............................. New
19.473.............................. 19.581
19.474.............................. 19.582
19.475.............................. 19.583
19.476.............................. 19.584
19.477.............................. 19.585
19.478.............................. 19.588
19.479.............................. 19.589
19.482.............................. 19.592
19.483.............................. 19.595
19.484.............................. 19.596(a) and (c)
19.485.............................. 19.593
19.486.............................. 19.599
19.487.............................. 19.597
19.488.............................. 19.596(b) and (c)
19.489.............................. 19.607
19.490.............................. 19.594
19.491.............................. 19.601
19.492.............................. 19.602
19.493.............................. 19.604

[[Page 26222]]

19.494.............................. 19.605
19.495.............................. 19.606
19.496.............................. 19.608
19.497.............................. 19.610
19.498.............................. 19.611
19.499.............................. 19.612
------------------------------------------------------------------------
Subpart T
------------------------------------------------------------------------
19.511.............................. 19.632
19.512.............................. 19.637
19.513.............................. 19.633
19.516.............................. 19.641
19.517.............................. 19.642 through 19.650
19.518.............................. 19.645
19.519.............................. 19.395
19.520.............................. 19.396
19.523.............................. 19.661, 19.662
19.525.............................. 19.663
------------------------------------------------------------------------
Subpart U--Reserved
------------------------------------------------------------------------
Subpart V
------------------------------------------------------------------------
19.571.............................. 19.721
19.572.............................. 19.721, 19.731
19.573.............................. 19.723(a)
19.574.............................. 19.723(a) and (b)
19.575.............................. 19.723(c)
19.576.............................. 19.723(b)
19.577.............................. 19.721(c), 19.723(c)
19.578.............................. 19.721(d)
19.580.............................. 19.731
19.581.............................. 19.731(b), 19.732
19.582.............................. 19.722
19.584.............................. 19.736
19.585.............................. 19.736
19.586.............................. 19.736
19.590.............................. 19.740
19.591.............................. 19.741
19.592.............................. 19.742
19.593.............................. 19.743
19.596.............................. 19.746
19.597.............................. 19.747
19.598.............................. 19.748
19.599.............................. 19.749
19.600.............................. 19.750
19.601.............................. 19.751
19.602.............................. 19.748(b)
19.603.............................. 19.747
19.604.............................. 19.747
19.606.............................. 19.752
19.607.............................. 19.753
19.611.............................. 19.761
19.612.............................. 19.762
19.613.............................. 19.763
19.614.............................. 19.764
19.615.............................. 19.765
19.616.............................. 19.766
19.617.............................. 19.767
19.618.............................. 19.768
19.619.............................. 19.769
19.620.............................. 19.770
19.621.............................. 19.770
19.622.............................. 19.773
19.623.............................. 19.774
19.624.............................. 19.778
19.625.............................. 19.779
19.626.............................. 19.780
19.627.............................. New
19.631.............................. 19.791
19.632.............................. 19.792
19.634.............................. New
------------------------------------------------------------------------
Subpart W
------------------------------------------------------------------------
19.641.............................. 19.821
19.643.............................. 19.822
19.644.............................. 19.823
19.645.............................. 19.824
19.646.............................. 19.825
19.647.............................. 19.826
19.648.............................. 19.827
19.649.............................. 19.828
19.650.............................. 19.829
19.651.............................. 19.830
------------------------------------------------------------------------
Subpart X
------------------------------------------------------------------------
19.661.............................. New and 19.901
19.662.............................. 19.907
19.663.............................. 19.901, 19.902
19.665.............................. 19.903
19.666.............................. 19.903
19.667.............................. 19.904
19.669.............................. 19.905
19.670.............................. 19.906
19.672.............................. New
19.673.............................. 19.910, 19.912, 19.913, 19.918
19.674.............................. 19.913
19.675.............................. 19.910, 19.914, 19.918
19.676.............................. 19.910, 19.915 through 19.918
19.677.............................. 19.916
19.678.............................. 19.911
19.679.............................. 19.910
19.680.............................. 19.910
19.683.............................. 19.919
19.684.............................. 19.920
19.685.............................. 19.921
19.686.............................. 19.922
19.687.............................. 19.923
19.688.............................. 19.924
19.689.............................. 19.925
19.690.............................. 19.926
19.692.............................. 19.930
19.693.............................. 19.930
19.695.............................. 19.945
19.697.............................. 19.950
19.699.............................. 19.955, 19.958, 19.959
19.700.............................. 19.956, 19.957
19.703.............................. 19.965
19.704.............................. 19.966, 19.967
19.706.............................. 19.970
19.709.............................. 19.980
19.710.............................. 19.981
19.714.............................. 19.982
19.715.............................. 19.982
19.716.............................. 19.987
19.717.............................. 19.982
19.718.............................. 19.982, 19.984, 19.985, 19.986
19.719.............................. 19.983
19.720.............................. 19.988
19.722.............................. 19.990
19.723.............................. 19.990
19.724.............................. 19.990
19.726.............................. 19.1002
19.727.............................. 19.995
19.728.............................. 19.996
19.729.............................. 19.997
19.733.............................. 19.998
19.734.............................. 19.999
19.735.............................. 19.1000
19.736.............................. 19.1001
19.739.............................. 19.998
19.742.............................. New
19.746.............................. 19.1005
19.747.............................. 19.1006
19.749.............................. 19.1007
19.752.............................. 19.1008
------------------------------------------------------------------------
Subpart Y
------------------------------------------------------------------------
19.761.............................. 19.1010
------------------------------------------------------------------------

III. Public Participation

Comments Invited

TTB requests comments on the proposed amendments to our regulations
discussed in this notice from anyone interested. Please submit your
comments by the closing date shown above in this notice. Your comments
must include this notice number (Notice No. 83) and your name and
mailing address. Your comments must be legible and written in English
in language acceptable for public disclosure. We do not acknowledge
receipt of comments, and we consider all comments as originals.

Submitting Comments

You may submit comments on this notice by one of the following
methods:
Federal e-Rulemaking Portal: You may send comments via the
online comment form posted with this notice within Docket No. TTB-2008-
0004 on ``Regulations.gov,'' the Federal e-rulemaking portal, at http://www.regulations.gov. A direct link to that docket is available under
Notice No. 83 on the TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml. Supplemental files may be attached to
comments submitted via Regulations.gov. For complete instructions on
how to use Regulations.gov, visit the site and click on ``User Guide''
under ``How to Use this Site.''
Postal Mail: You may send written comments to the
Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and
Trade Bureau, P.O. Box 14412, Washington, DC 20044-4412.
Hand Delivery/Courier in lieu of Mail: You may hand
deliver comments to the Alcohol and Tobacco Tax and Trade Bureau, 1310
G Street, NW., Suite 200-E, Washington, DC 20005.
If you are commenting on behalf of an association, business, or
other entity, your comment must include the entity's name as well as
your name and position

[[Page 26223]]

title. If you comment via http://www.regulations.gov, please enter the
entity's name in the ``Organization'' blank of the comment form. If you
comment via mail, please submit your entity's comment on letterhead.
You may also write to the Administrator before the comment closing
date to ask for a public hearing. The Administrator reserves the right
to determine whether to hold a public hearing.

Confidentiality

All submitted comments and attachments are part of the public
record and subject to disclosure. Do not enclose any material in your
comments that you consider to be confidential or inappropriate for
public disclosure.

Public Disclosure

We will post, and you may view, copies of this notice and any
comments we receive about this proposal within Docket No. TTB-2008-0004
on the Federal e-rulemaking portal, Regulations.gov, at http://www.regulations.gov. A direct link to that docket is available on the
TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml
under Notice No. 83. You may also reach the relevant docket through the
Regulations.gov search page at http://www.regulations.gov. For
instructions on how to use Regulations.gov, visit the site and click on
``User Guide'' under ``How to Use this Site.''
All posted comments will display the commenter's name, organization
(if any), city, and State, and, in the case of mailed comments, all
address information, including e-mail addresses. We may omit voluminous
attachments or material that we consider unsuitable for posting.
You also may view copies of this notice and any comments we receive
about this proposal by appointment at the TTB Information Resource
Center, 1310 G Street, NW., Washington, DC 20220. You may also obtain
copies at 20 cents per 8.5 x 11-inch page. Contact our information
specialist at the above address or by telephone at 202-927-2400 to
schedule an appointment or to request copies of comments or other
materials.

IV. Regulatory Analyses and Notices

Paperwork Reduction Act

The collections of information contained in the regulations
proposed by this notice have been previously reviewed and approved by
the Office of Management and Budget in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507) under control numbers: 1513-
0013, 1513-0014, 1513-0020, 1513-0030, 1513-0038, 1513-0039, 1513-0040,
1513-0041, 1513-0044, 1513-0045, 1513-0046, 1513-0047, 1513-0048, 1513-
0049, 1513-0051, 1513-0052, 1513-0056, 1513-0080, 1513-0081, 1513-0083,
1513-0088, and 1513-0113. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a valid control number assigned by OMB.

Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., provides that
whenever a Federal agency proposes regulations that may have a
significant economic impact on a substantial number of small entities,
the agency must prepare a regulatory flexibility analysis.
The provisions of the Regulatory Flexibility Act relating to an
initial and final regulatory flexibility analysis (5 U.S.C. 603 and
604) are not applicable to notices of proposed rulemaking when a final
rule would not have a significant economic impact on a substantial
number of small entities. This proposed rulemaking proposes to restate
existing regulations in plain language, to make certain variations
currently granted to individual plants available to all plants, and to
adopt certain suggestions made by industry associations to reduce the
burdens of regulatory compliance. This proposed rulemaking proposes to
reduce the burden on members of the distilled spirits industry,
including small businesses. Accordingly, it is hereby certified that a
final rule, if promulgated, will not have a significant economic impact
on a substantial number of small entities and a regulatory flexibility
analysis is not required.
We have submitted a copy of this proposed rule to the Chief Counsel
for Advocacy of the Small Business Administration in accordance with 26
U.S.C. 7805(f).

Executive Order 12866

We have determined that this notice of proposed rulemaking is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required.

Executive Order 13132

Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires Federal agencies to ensure ``meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications.'' We certify that this
proposed rule does not have federalism implications. This proposed rule
will not have substantial direct effects on the States, on the
relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various levels of
Government.

V. Drafting Information

This notice was written by Daniel J. Hiland of the Regulations and
Rulings Division, along with several other employees of the Alcohol and
Tobacco Tax and Trade Bureau.

List of Subjects in 27 CFR Part 19

Administrative practice and procedure, Alcohol and alcoholic
beverages, Authority delegations (Government agencies), Caribbean Basin
initiative, Chemicals, Claims, Customs duties and inspection,
Electronic funds transfers, Excise taxes, Exports, Gasohol, Imports,
Labeling, Liquors, Packaging and containers, Puerto Rico, Reporting and
recordkeeping requirements, Research, Security measures, Spices and
flavorings, Stills, Surety bonds, Transportation, Vinegar, Virgin
Islands, Warehouses, Wine.

VII. Authority and Issuance

For the reasons explained in the preamble, TTB proposes to amend
chapter I of title 27 of the Code of Federal Regulations as follows:

PART 19--DISTILLED SPIRITS PLANTS

Par. 1. Title 27 Code of Federal Regulations part 19 is revised to
read as follows:

PART 19--DISTILLED SPIRITS PLANTS

Sec.
19.0 Scope.
Subpart A--General Provisions
19.1 Definitions.
19.2 Territorial extent of these regulations.
19.3 Related regulations.
19.4 Recovery and reuse of denatured spirits in manufacturing
processes.
19.5 Manufacturing products unfit for beverage use.
Subpart B--Administrative and Miscellaneous Provisions
19.11 Right of entry and examination.
19.12 Furnishing facilities and assistance.
19.13 Assignment of officers and supervision of operations.
19.14 Delegation of the Administrator's authorities to the
appropriate TTB officer.
19.15 Forms prescribed.

[[Page 26224]]

19.16 Modified forms.
19.17 Detention of containers.
19.18 Samples for the United States.
19.19 Discontinuance of storage facilities.
19.20 Installation of meters, tanks, and other apparatus.

Alternate Methods or Procedures and Experimental Operations

19.26 Alternate methods or procedures.
19.27 Application for and use of alternative method or procedure.
19.28 Emergency alternate methods or procedures.
19.29 Exemptions for national defense and disasters.
19.31 Pilot operations.
19.32 Experimental distilled spirits plants.
19.33 Application to establish experimental plants.
19.34 Experimental or research operations by scientific institutions
and colleges of learning.
19.35 Application by scientific institutions and colleges of
learning for experimental or research operations.
19.36 Spirits produced in industrial processes.
19.37 Application for industrial processes waiver.
19.38 Approval of required documents.

``Penalty of Perjury'' Declaration

19.45 Execution under penalty of perjury.
Subpart C--Restrictions on Production, Location, and Use of Plants
19.51 Home production of distilled spirits prohibited.

Rules for Location and Use of a DSP

19.52 Restrictions on location of plants.
19.53 Continuity of plant premises.
19.54 Use of distilled spirits plant premises.
19.55 Other businesses.
19.56 Bonded warehouses not on premises qualified for production of
spirits.

Conveyance of Spirits or Wines on Plant Premises

19.58 Taxpaid spirits or wines on bonded premises.
19.59 Conveyance of untaxpaid spirits or wines within a distilled
spirits plant.
19.60 Spirits in customs custody.
Subpart D--Registration of a Distilled Spirits Plant and Obtaining a
Permit
19.71 Registration and permits in general.

Requirements for Registering a Plant

19.72 General requirements for registration.
19.73 Information required in application for registration.
19.74 Description of the plant.
19.75 Major equipment.
19.76 Statement of plant security.
19.77 Statement of production procedure.
19.78 Power of attorney.
19.79 Registry of stills.
19.80 Approved notice of registration.
19.81 Maintenance of registration file.

Requirements for an Operating Permit Under the IRC

19.91 Operating permit.
19.92 Information required in application for operating permit.
19.93 Applicant organization documents.
19.94 Trade names.
19.95 Issuance of operating permits.
19.96 Denial of permit.
19.97 Correction of permit.
19.98 Duration of permit.
19.99 Suspension or revocation of permit.
Subpart E--Changes to Registrations and Permits
19.111 Scope.

Rules for Amending a Registration

19.112 General rules for amending a registration.
19.113 Change in name of proprietor.
19.114 Changes in stockholders or persons with interest.
19.115 Change in officers, directors, members or managers.
19.116 Change in proprietorship.
19.117 Partnerships.
19.118 Change in location.
19.119 Change in premises.
19.120 Change in operations.
19.121 Change in production procedure.
19.122 Change in construction or use of buildings and equipment.
19.123 Statement of plant security.

Rules for Amending an Operating Permit

19.126 General rules for amending an operating permit.
19.127 Automatic termination of permits.
19.128 Change in name of proprietor.
19.129 Change in trade name.
19.130 Changes in stockholders or persons with interest.
19.131 Changes in officers, directors, members or managers.
19.132 Change in proprietorship.
19.133 Partnerships.
19.134 Change in location.
19.135 Change in operations.

Alternation of Plant Proprietors

19.141 Procedures for alternation of proprietors.

Conduct of Alternate Operations at a Plant

19.142 Alternate use of premises and equipment for customs purposes.
19.143 Alternation for other purposes.
19.144 Alternation of distilled spirits plant and volatile fruit-
flavor concentrate plant premises.

Discontinuance of Operations

19.147 Notice of discontinuance of operations.
Subpart F--Bonds and Consents of Surety

Bonding Requirements for a DSP

19.151 General.
19.152 Types of bonds.
19.153 Bond guaranteed by a corporate surety.
19.154 Bond guaranteed by deposit of securities.
19.155 Consent of surety bond terms--consent of surety.
19.156 Power of attorney for surety.
19.157 Disapproval of bonds and consents of surety.

Requirements for Operations and Withdrawal Bonds

19.161 Operations bond.
19.162 Operations bond for distilled spirits plant and adjacent
bonded wine cellar.
19.163 Area operations bond.
19.164 Withdrawal bond.
19.165 Unit bonds.
19.166 Required penal sums.
19.167 Increase of bond coverage.
19.168 Superseding bonds.
19.169 Effect of failure to furnish a superseding bond.
19.170 Termination of bonds.
19.171 Surety notice of relief from bond liability.
19.172 Relief of surety from bond liability.
19.173 Release of pledged securities.
Subpart G--Construction, Equipment, and Security Requirements
19.181 General.

Tank Requirements

19.182 Tanks--general requirements.
19.183 Scale tanks.
19.184 Scale tank minimum graduations.
19.185 Testing scale tanks for accuracy.

Package Scale and Pipeline Requirements

19.186 Package scales.
19.187 Pipelines.

Measuring and Proofing Equipment Requirements

19.188 Measuring devices and proofing instruments.

Other Plant Requirements

19.189 Identification of structures, areas, apparatus, and
equipment.
19.190 Office facilities for TTB use.
19.191 Signs.
19.192 Security.
19.193 Breaking Government locks.
Subpart H--Special (Occupational) Tax
19.201 Liability for special (occupational) tax.
19.202 Special (occupational) tax rates.
19.203 Eligibility for the reduced rate.
19.204 Exemption for alcohol fuel producers.
19.205 Locations subject to tax.
19.206 Liability as a wholesale or retail dealer.
19.207 Special tax returns.
19.208 Multiple locations and multiple tax classes.
19.209 Signing special tax returns.
19.210 Employer identification number.
19.211 Issuance, distribution, and examination of special tax
stamps.
19.212 Change in name.
19.213 Change in proprietorship.
19.214 Change in location.
Subpart I--Distilled Spirits Taxes
19.221 Scope.

Basic Provisions of Tax Law Affecting Spirits

19.222 Basic tax law provisions.
19.223 Persons liable for tax.

[[Page 26225]]

Requirements for Gauging and Tax Determination

19.225 Requirement to gauge and tax determine spirits.
19.226 Gauges for tax determination.
19.227 Determination of the tax.

Rules for Deferred Payment and Prepayment of Taxes

19.229 Deferred payment and prepayment of taxes.
19.230 Conditions requiring prepayment of taxes.
19.231 Accounting for bond coverage.

Requirements for Filing Tax Returns

19.233 Filing prepayment returns.
19.234 Filing deferred payment returns.
19.235 Deferred payment return periods--quarterly and semimonthly.
19.236 Due dates for returns.
19.237 Special rule for semimonthly filers for the month of
September.
19.238 Payment by mail.
19.239 Form of payment.
19.240 Payment of tax by electronic fund transfer.

Requirements for Employer Identification Numbers

19.242 Employer identification number.
19.243 Application for employer identification number.

Effective Tax Rates

19.245 Tax credits under 26 U.S.C. 5010.
19.246 Computing the effective tax rate for a product.
19.247 Use of effective (actual) tax rates.
19.248 Standard effective tax rate.
19.249 Average effective tax rate.
19.250 Inventory reserve account.

Assessment of Taxes by TTB

19.253 Assessment of tax on spirits not accounted for or reported.
19.254 Assessment of tax for losses or unauthorized removals.

Additional Tax Provisions

19.256 Tax on wine.
19.257 Imported spirits.
19.258 Additional tax on nonbeverage spirits.
Subpart J--Claims
19.261 Scope.

Requirements for Filing Claims

19.262 General requirements for filing claims.
19.263 Claims on spirits, denatured spirits, articles, or wines lost
or destroyed in bond--specific requirements.
19.264 Claims on spirits returned to bonded premises--specific
requirements.
19.265 Claims relating to spirits lost after tax determination.

Rules Regarding Credits, Abatement, Remission, or Refund

19.266 Claims for credit of tax.
19.267 Adjustments for credited tax.
19.268 Allowance of remission, abatement, credit, or refund of tax.

Rules for Puerto Rican and Virgin Islands Spirits

19.269 Puerto Rican and Virgin Islands spirits.
Subpart K--Gauging
19.281 Scope.
19.282 General requirements for gauging and measuring equipment.

Required Gauges

19.283 When gauges are required.
19.284 Quantity determination of bulk spirits.
19.285 Proof determination of distilled spirits.
19.286 Gauging of spirits in bottles.
19.287 Gauging of alcoholic flavoring materials.
19.288 Determination of tare.
19.289 Production gauge.
Subpart L--Production of Distilled Spirits
19.291 General.

Notification of TTB When Beginning or Suspending Production Operations

19.292 Notice of operations.

Rules for Receipt, Use, and Disposal of Materials

19.293 Receipt of materials.
19.294 Removal of fermenting material.
19.295 Removal or destruction of distilling material.
19.296 Fermented materials.
19.297 Use of materials in production of spirits.

Rules for Production of Spirits

19.301 Distillation.
19.302 Treatment during production.
19.303 Addition of caramel to rum or brandy and addition of oak
chips to spirits.
19.304 Production gauge.
19.305 Identification of spirits.
19.306 Entry.
19.307 Distillates containing extraneous substances.

Rules for Chemical By-Products

19.308 Spirits content of chemicals produced.
19.309 Disposition of chemicals.
19.310 Wash water.

Production Inventories

19.312 Physical inventories.

Rules for Redistillation

19.314 General.
19.315 Receipts for redistillation.
19.316 Redistillation.
Subpart M--Storage of Distilled Spirits
19.321 General.

Receipt and Storage of Spirits and Wines

19.322 Receipt and storage of bulk spirits and wines.

Rules for Filling and Changing Packages

19.324 Filling of packages from tanks.
19.325 Change of packages.

Rules for Mingling or Blending Spirits

19.326 Mingling or blending of spirits for further storage.
19.327 Packages dumped for mingling.
19.328 Determining age of mingled spirits.
19.329 Mingled spirits or wines held in tanks.

Use of Oak Chips and Caramel

19.331 Use of oak chips in spirits and caramel in brandy and rum.

Storage Inventories

19.333 Physical inventories.
Subpart N--Processing of Distilled Spirits
19.341 General.

Rules for Receipt and Use of Spirits, Wines, and Alcoholic Flavoring
Materials

19.342 Receipt of spirits, wines, and alcoholic flavoring materials
for processing.
19.343 Use of spirits, wines, and alcoholic flavoring materials.
19.344 Manufacture of nonbeverage products, intermediate products,
or eligible flavors.

Obscuration Determination

19.346 Determining obscuration.

Filing Formulas With TTB

19.348 Formula requirements.

Rules for Bottling, Packaging, and Removal of Products

19.351 Removals from processing.
19.352 Bottling tanks.
19.353 Bottling tank gauge.
19.354 Bottling or packaging records.
19.355 Labels describing the spirits.
19.356 Alcohol content and fill.
19.357 Completion of bottling.
19.358 Cases.
19.359 Remnants.
19.360 Filling packages.
19.361 Removals by bulk conveyances or pipelines.
19.362 Rebottling.
19.363 Reclosing and relabeling.
19.364 Bottled-in-bond spirits.
19.365 Spirits not originally intended for export.
19.366 Alcohol.

Requirements for Processing Inventories

19.371 Inventories of wines and bulk spirits in processing.
19.372 Physical inventories of bottled and packaged spirits.
Subpart O--Denaturing Operations and Manufacture of Articles
19.381 General.
19.382 Formulas.

Rules for Denaturing Spirits and Testing Denaturants

19.383 Gauge for denaturation.
19.384 Adding denaturants to spirits.
19.385 Making alcohol or water solutions of denaturants.
19.386 Adjusting pH of denatured spirits.
19.387 Ensuring the quality of denaturants.

[[Page 26226]]

Rules for Storing Denatured Spirits and Filling Containers

19.388 Storing denatured spirits.
19.389 Filling containers from tanks.
19.390 Container marking requirements.

Rules for Mixing and Converting Denatured Spirits

19.391 Mixing denatured spirits.
19.392 Converting denatured alcohol to a different formula.

Rules for Restoration and Redenaturation, Inventories, and Manufacture
of Articles; Records Required

19.393 Restoration and redenaturation of recovered denatured spirits
and recovered articles.
19.394 Inventory of denatured spirits.
19.395 Manufacture of articles.
19.396 Required records.
Subpart P--Transfers, Receipts, and Withdrawals
19.401 Authorized transactions.

Transfers Between Bonded Premises

19.402 Authorized transfers in bond.
19.403 Application to receive spirits in bond.
19.404 Termination of application.
19.405 Consignor for in-bond shipments.
19.406 Reconsignment of in-bond shipments.
19.407 Consignee premises.

Receipt of Spirits From Customs Custody

19.409 General.
19.410 Age and fill date.
19.411 Recording gauge.

Marking Requirements for Imported Spirits

19.414 Marks on containers of imported spirits.
19.415 Marks on containers of Puerto Rican and Virgin Islands
spirits.

Spirits Withdrawn Without Payment of Tax

19.418 Authorized withdrawals without payment of tax.
19.419 Withdrawals of wine spirits for use in wine production.
19.420 Withdrawals of spirits without payment of tax for
experimental or research use.
19.421 Withdrawals of spirits for use in production of nonbeverage
wine and nonbeverage wine products.

Spirits Withdrawn Free of Tax

19.424 Authorized withdrawals free of tax.
19.425 Withdrawal of spirits free of tax.
19.426 Withdrawal of spirits by the United States.
19.427 Removal of denatured spirits and articles.
19.428 Reconsignment.

Spirits Withdrawn on Production Gauge

19.431 Withdrawal of spirits on production gauge.

Rules for Taking Sample of Spirits

19.434 Spirits withdrawn from bonded premises.
19.435 Samples used on bonded premises.
19.436 Taxpayment of samples.
19.437 Labels.

Securing Conveyances

19.441 Securing of conveyances.
Subpart Q--Return of Spirits to Bonded Premises and Voluntary
Destruction
19.451 Scope.

Conditions for Return of Spirits to Bond

19.452 Return of taxpaid spirits to bonded premises for destruction,
denaturation, redistillation, reconditioning, or rebottling.
19.453 Return of bottled spirits for relabeling or reclosing.
19.454 Other authorized returns to bonded premises.
19.455 Return of spirits withdrawn for export with benefit of
drawback.
19.457 Receipt of spirits abandoned to the United States.

Rules for Voluntary Destructions

19.459 Voluntary destruction.
Subpart R--Losses and Shortages
19.461 Losses and shortages in general.
19.462 Determination of losses in bond.
19.463 Loss of spirits from packages.
19.464 Losses after tax determination.
19.465 Shortages of bottled spirits.
Subpart S--Containers and Marks
19.471 General.
19.472 Need to determine use of spirits: industrial or
nonindustrial.

Requirements for Containers

19.473 Authorized containers.
19.474 Spirits for nonindustrial use.
19.475 Spirits for industrial use.
19.476 Packages.
19.477 Use of bulk conveyances.
19.478 Construction requirements for bulk conveyances.
19.479 Restrictions on dispositions of bulk spirits.

Marking Requirements for Spirits

19.482 General.
19.483 Specifications for marks.
19.484 Marks on packages filled in production or storage.
19.485 Package identification numbers in production and storage.
19.486 Change of packages in storage.
19.487 Kind of spirits.
19.488 Marks on packages filled in processing.
19.489 Marks on cases filled in processing.
19.490 Numbering of packages and cases filled in processing.
19.491 Marks on containers of specially denatured spirits.
19.492 Marks on containers of completely denatured alcohol.
19.493 Caution label for completely denatured alcohol.
19.494 Additional marks on portable containers.
19.495 Marks on bulk conveyances.
19.496 Cases of industrial alcohol.
19.497 Obliteration of marks.
19.498 Relabeling and reclosing off bonded premises.
19.499 Authorized abbreviations to identify marks.
Subpart T--Liquor Bottle, Label, and Closure Requirements

Authorized Liquor Bottles

19.511 Bottles authorized.
19.512 Bottles not constituting approved containers.
19.513 Distinctive liquor bottles.

Labeling Requirements

19.516 Certificate of label approval or exemption.
19.517 Statements required on labels under an exemption from label
approval.
19.518 Name and address of bottler.
19.519 Labels for export spirits.
19.520 Spirits for shipment to Puerto Rico.

Closure Requirements

19.523 Affixing closures.
19.525 Reclosing.
Subpart U--[Reserved]
Subpart V--Records and Reports

General Rules for Records

19.571 Records in general.
19.572 Format of records.
19.573 Location of required records.
19.574 Availability of records.
19.575 Retention of records.
19.576 Preservation of records.
19.577 Documents that are not records.
19.578 Financial records and books of account.
19.580 Time for making entries in records.
19.581 Details of daily records.
19.582 Conversion from metric to U.S. units.

Production Records

19.584 Materials for the production of distilled spirits.
19.585 Production and withdrawal records.
19.586 Byproduct spirits production record.

Storage Records

19.590 Storage operations.
19.591 Package summary records.
19.592 Tank record of wine and spirits of less than 190 degrees of
proof.
19.593 Tank summary record for spirits of 190 degrees or more of
proof.

Processing Records

19.596 Processing records in general.
19.597 Manufacturing records.
19.598 Dump/batch records.
19.599 Bottling and packaging record.
19.600 Alcohol content and fill test record.
19.601 Finished products records.
19.602 Redistillation record.
19.603 Liquor bottle record.
19.604 Rebottling, relabeling, and reclosing records.

Denaturation and Article Manufacture Records

19.606 Denaturation records.
19.607 Article manufacture records.

Tax Records

19.611 Records of tax determination in general.
19.612 Summary record of tax determinations.
19.613 Average effective tax rate records.

[[Page 26227]]

19.614 Inventory reserve records.
19.615 Standard effective tax rate records.

Other Required Records

19.616 Record of samples.
19.617 Destruction record.
19.618 Gauge record.
19.619 Package gauge record.
19.620 Transfer record--consignor's responsibility.
19.621 Transfer record--consignee's responsibility.
19.622 Daily record of wholesale liquor dealer and taxpaid storeroom
operations.
19.623 Record of inventories.
19.624 Removal of Puerto Rican and Virgin Islands spirits and rum
imported from all other areas.
19.625 Shipping record for spirits and specially denatured spirits
withdrawn free of tax.
19.626 Record of distilled spirits shipped to manufacturers of
nonbeverage products.
19.627 Alternating premises record.

Filing Forms and Reports

19.631 Submission of transaction forms.
19.632 Submission of monthly reports.
19.634 Computer-generated reports and transaction forms.
Subpart W--Production of Vinegar by the Vaporizing Process

Vinegar Plants in General

19.641 Application.

Qualification, Construction, and Equipment Requirements for Vinegar
Plants

19.643 Qualification requirements.
19.644 Changes after original qualification.
19.645 Notice of permanent discontinuance of business.
19.646 Construction and equipment requirements.

Rules for Operating Vinegar Plants

19.647 Authorized operations.
19.648 Conduct of operations.
19.649 Restrictions on alcohol content.

Required Records for Vinegar Plants

19.650 Daily records.

Liability for Distilled Spirits Tax

19.651 Liability for distilled spirits tax.
Subpart X--Distilled Spirits for Fuel Use
19.661 Scope.

General

19.662 Definitions.
19.663 Application of other provisions.
19.665 Alternate methods or procedures.
19.666 Application for and use of an alternate method or procedure.
19.667 Emergency variations from requirements.

Liability for Taxes

19.669 Distilled spirits taxes.
19.670 Special (occupational) tax.

Obtaining a Permit

19.672 Types of plants.
19.673 Small plant permit applications.
19.674 TTB action on small plant applications.
19.675 Medium plant permit applications.
19.676 Large plant permit applications.
19.677 Large plant applications--organizational documents.
19.678 Criteria for issuance of permit.
19.679 Duration of permit.
19.680 Registration of stills.

Changes to Permit Information

19.683 Changes affecting permit applications.
19.684 Automatic termination of permits.
19.685 Change in type of alcohol fuel plant.
19.686 Change in name of proprietor.
19.687 Changes in officers, directors, members, managers, or
principal persons.
19.688 Change in proprietorship.
19.689 Continuing partnerships.
19.690 Change in location.

Alternating Proprietorship

19.692 Qualifying for alternating proprietorship.
19.693 Operating requirements for alternating proprietorships.

Discontinuance of Business and Permit Suspension or Revocation

19.695 Notice of permanent discontinuance.
19.697 Permit suspension or revocation.

Bonds

19.699 General bond requirements.
19.700 Amount of bond.

Requirements for Construction, Equipment, and Security

19.703 Construction and equipment.
19.704 Security.

TTB Rights and Authorities

19.706 Supervision of operations.

Accounting for Spirits

19.709 Gauging.
19.710 Inventory of spirits.

Recordkeeping

19.714 General requirements for records.
19.715 Format of records.
19.716 Maintenance and retention of records.
19.717 Time for making entries in records.
19.718 Required records.
19.719 Spirits made unfit for beverage use in the production
process.

Reports

19.720 Reports.

Redistillation

19.722 General rules for redistillation of spirits or fuel alcohol.
19.723 Effect of redistillation on plant size and bond amount.
19.724 Records of redistillation.

Rules for Use, Withdrawal, and Transfer of Spirits

19.726 Prohibited uses, transfers, and withdrawals.
19.727 Use on premises.
19.728 Withdrawal of spirits.
19.729 Withdrawal of fuel alcohol.

Transfer of Spirits Between Alcohol Fuel Plants

19.733 Authorized transfers between alcohol fuel plants.
19.734 Consignor for in-bond shipments.
19.735 Reconsignment while in transit.
19.736 Consignee for in-bond shipments.

Transfer of Spirits to and From Distilled Spirits Plants

19.739 Authorized transfers to or from distilled spirits plants.

Receipt of Spirits From Customs Custody

19.742 Authorized transfers from customs custody.

Materials for Making Spirits Unfit for Beverage Use

19.746 Authorized materials.
19.747 Other materials.

Rules for Taking Samples

19.749 Samples.

Marking Requirements

19.752 Marks.
Subpart Y--Paperwork Reduction Act
19.761 OMB control numbers assigned under the Paperwork Reduction
Act.

Authority: 19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-5006,
5008, 5010, 5041, 5061, 5062, 5066, 5081, 5101, 5111-5113, 5142,
5143, 5146, 5148, 5171-5173, 5175, 5176, 5178-5181, 5201-5204, 5206,
5207, 5211-5215, 5221-5223, 5231, 5232, 5235, 5236, 5241-5243, 5271,
5273, 5301, 5311-5313, 5362, 5370, 5373, 5501-5505, 5551-5555, 5559,
5561, 5562, 5601, 5612, 5682, 6001, 6065, 6109, 6302, 6311, 6676,
6806, 7011, 7510, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.

Sec. 19.0 Scope.

This part concerns the operation of distilled spirits plants in the
United States. Topics covered in this part include: Permits and
registration procedures; bond requirements; payment of taxes; filing of
claims; production, storage, and processing operations; and maintenance
of records.

Subpart A--General Provisions

Sec. 19.1 Definitions.

As used in this part, the following terms shall have the meanings
indicated unless either the context in which they are used requires a
different meaning, or a different definition is prescribed for a
particular subpart, section, or portion of this part:
Accurate mass flow meter. A mass flow meter for making volume
determinations of bulk distilled spirits. A mass flow meter used for
tax determination of bulk spirits must be certified by the manufacturer
or other qualified person as accurate within a tolerance of +/-0.1%. A
mass flow meter used for all other required volume

[[Page 26228]]

determinations of bulk spirits must be certified by the manufacturer or
other qualified person as accurate within a tolerance of +/-0.5%.
Administrator. The Administrator of the Alcohol and Tobacco Tax and
Trade Bureau, the Department of the Treasury, Washington, DC., or a
delegate or designee of the Administrator.
Alcoholic flavoring materials. Any nonbeverage product on which
drawback has been or will be claimed under 26 U.S.C. 5131-5134, and any
flavor imported free of tax which is unfit for beverage purposes. This
term includes eligible flavors but does not include flavorings or
flavoring extracts manufactured on the bonded premises of a distilled
spirits plant as an intermediate product.
Application for registration. The application for registration of a
distilled spirits plant that is required by 26 U.S.C. 5171(c).
Appropriate TTB officer. An officer or employee of the Alcohol and
Tobacco Tax and Trade Bureau (TTB) authorized to perform any functions
relating to the administration or enforcement of this part by TTB Order
1135.19, Delegation of the Administrator's Authorities in 27 CFR part
19, Distilled Spirits Plants.
Article. A product containing denatured spirits, which was
manufactured under this part or part 20 of this chapter.
Bank. Any commercial bank.
Banking day. Any day that a bank is open to the public to carry on
substantially all of its banking functions.
Basic permit. The document that authorizes a person to engage in a
designated business or activity under the Federal Alcohol
Administration Act.
Bond. A bond is a formal guarantee for payment of monies due to
TTB, including taxes imposed by 26 U.S.C. Chapter 51, and any related
fines, penalties or interest that the proprietor of a distilled spirits
plant may incur, up to an amount specified by the bond (the bond
``penal sum'').
Bonded premises. The premises of a distilled spirits plant, or part
thereof, as described in the application for registration, on which the
conduct of distilled spirits operations defined in 26 U.S.C. 5002 is
authorized.
Bottler. A proprietor of a distilled spirits plant qualified under
this part as a processor who bottles distilled spirits.
Bulk container. Any container approved by TTB having a capacity in
excess of one wine gallon.
Bulk conveyance. A tank car, tank truck, tank ship, tank barge, or
a compartment of any such conveyance, or any other container approved
by the Administrator for the conveyance of comparable quantities of
spirits, including denatured spirits and wines.
Bulk distilled spirits. Distilled spirits in a container having a
capacity in excess of one wine gallon.
Business day. Any day, other than a Saturday, a Sunday, or a legal
holiday (which includes any holiday in the District of Columbia and any
statewide holiday in the particular State in which the claim, report,
or return, as the case may be, is required to be filed, or the act is
required to be performed).
Calendar quarter and quarterly. These terms refer to the three-
month periods ending on March 31, June 30, September 30, or December
31.
Carrier. Any person, company, corporation, or organization,
including a proprietor, owner, consignor, consignee, or bailee, who
transports distilled spirits, denatured spirits, or wine in any manner
for himself or others.
CFR. The Code of Federal Regulations.
Commercial bank. A bank, whether or not a member of the Federal
Reserve system, which has access to the Federal Reserve Communications
System or Fedwire (a communications network that allows Federal Reserve
system member banks to effect a transfer of funds for their customers
(or other commercial banks) to the Treasury Account at the Federal
Reserve Bank of New York).
Container. A receptacle, vessel, or form of bottle, can, package,
tank or pipeline (where specifically included) used or capable of being
used to contain, store, transfer, convey, remove, or withdraw spirits
and denatured spirits.
Denaturant or denaturing material. Any material authorized by part
21 of this chapter for addition to spirits in the production of
denatured spirits.
Denatured spirits. Spirits to which denaturants have been added as
provided in part 21 of this chapter.
Director of the service center. A director of an internal revenue
service center.
Distilled spirits operations. Any authorized distilling,
warehousing, or processing operation conducted on the bonded premises
of a plant qualified under this part.
Distilled spirits plant. An establishment which is qualified under
this part to conduct distilled spirits operations.
Distiller. Any person who:
(1) Produces distilled spirits from any source or substance;
(2) Brews or makes mash, wort, or wash fit for distillation or for
the production of distilled spirits (other than making or using of
mash, wort, or wash in the authorized production of wine or beer, or in
the production of vinegar by fermentation);
(3) By any process separates alcoholic spirits from any fermented
substance; or
(4) Making or keeping mash, wort, or wash, has a still in his
possession or use.
Distilling material. Any fermented or other alcoholic substance
capable of, or intended for use in, the original distillation or other
original processing of spirits.
District director. A district director of the Internal Revenue
Service.
Effective tax rate. The net tax rate, after reduction for any
credit allowable under 26 U.S.C. 5010 for wine and flavor content, at
which the tax imposed on distilled spirits by 26 U.S.C. 5001 or 7652 is
paid or determined.
Electronic fund transfer or EFT. Any transfer of funds effected by
the proprietor's commercial bank, either directly or through a
correspondent banking relationship, via the Federal Reserve
Communications System or Fedwire to the Treasury Account at the Federal
Reserve Bank of New York.
Eligible flavor. A flavor which:
(1) Is of a type that is eligible for drawback of tax under 26
U.S.C. 5134;
(2) Was not manufactured on the premises of a distilled spirits
plant; and
(3) Was not subjected to distillation on distilled spirits plant
premises such that the flavor does not remain in the finished product.
Eligible wine. Wine on which tax would be imposed by paragraph (1),
(2), or (3) of 26 U.S.C. 5041(b) but for its removal to distilled
spirits plant premises and which has not been subject to distillation
at a distilled spirits plant after receipt in bond.
Export or exportation. A separation of goods from the mass of goods
belonging to the United States with the intention of uniting them with
the goods belonging to a foreign country or any possession of the
United States, including the Commonwealth of Puerto Rico, the U.S.
Virgin Islands, American Samoa, and Guam.
Fermenting material. Any material that will be subject to a process
of fermentation in order to produce distilling material.
Fiduciary. A guardian, trustee, executor, administrator, receiver,
conservator, or any person acting in any fiduciary capacity for any
person.
Fiscal year. The period October 1st of one calendar year through
September 30th of the following calendar year.
Gallon or wine gallon. The liquid measure equivalent to the volume
of 231 cubic inches.

[[Page 26229]]

General premises. Any business office, service facility, or other
part of the premises described in the notice of registration other than
bonded premises.
In bond. When used to describe spirits, denatured spirits,
articles, or wine, this term refers to spirits, denatured spirits,
articles, or wine held under bond to secure the payment of the taxes
imposed by 26 U.S.C. Chapter 51, and on which those taxes have not been
determined. The term also refers to such spirits, denatured spirits,
articles, or wine on the bonded premises of a distilled spirits plant,
and such spirits, denatured spirits, or wines that are in transit
between bonded premises (including, in the case of wine, bonded wine
cellar premises). In addition, the term refers to spirits in transit
from customs custody to bonded premises, and spirits withdrawn without
payment of tax under 26 U.S.C. 5214, and with respect to which relief
from liability has not occurred under 26 U.S.C. 5005(e)(2).
Industrial use. When used with reference to spirits, the meaning
given to the term in Sec. 19.472.
Intermediate product. Any product manufactured according to an
approved formula under part 5 of this chapter, intended not for sale as
such but for use in the manufacture of a distilled spirits product.
IRC. The Internal Revenue Code of 1986, as amended.
Kind. Except as provided in Sec. 19.597, when used with reference
to spirits, this term means class and type as prescribed in part 5 of
this chapter. When used with reference to wines, this term means the
class and type of wine as prescribed in part 4 of this chapter.
Letterhead application. A letter on a company's letterhead or other
piece of paper that clearly shows the company name from a company
representative with signature authority. A letterhead application is
subject to TTB approval prior to any change requested in the letter.
Letterhead notice. A letter on a company's letterhead or other
piece of paper that clearly shows the company name from a company
representative with signature authority. A letterhead notice does not
require approval by TTB prior to the change.
Liquor bottle. A bottle made of glass or earthenware, or of other
suitable material approved by the Food and Drug Administration, which
has been designed or is intended for use as a container for distilled
spirits for sale for beverage purposes and which has been determined by
the Administrator to adequately protect the revenue.
Liter. A metric unit of capacity equal to 1,000 cubic centimeters
or 1,000 milliliters (ml) of alcoholic beverage, and equivalent to
33.814 fluid ounces.
Lot identification number. The package identification number
described in 27 CFR 19.485.
Mash, wort, wash. Any fermented material capable of, or intended
for, use as a distilling material.
National Revenue Center: TTB's National Revenue Center, in
Cincinnati, Ohio.
Nonindustrial use. When used with reference to spirits, the meaning
given to the term in Sec. 19.472.
Operating permit. The document issued pursuant to 26 U.S.C.
5171(d), that authorizes a person to engage in the business or
operation described in the document.
Package. A cask or barrel or similar wooden container, or a drum or
similar metal container.
Package identification number. The lot identification number
described in 27 CFR 19.595.
Person. An individual, trust, estate, partnership, association,
company, corporation, limited liability company, limited liability
partnership, or other entity recognized by law as a person.
Plant or distilled spirits plant. An establishment qualified under
this part for distilling, warehousing, processing, or any combination
thereof.
Plant number. The number assigned to a distilled spirits plant by
TTB.
Processor. Except as otherwise provided in 26 U.S.C. 5002(a)(6),
any person qualified under this part who manufactures, mixes, bottles,
or otherwise processes distilled spirits or denatured spirits or who
manufactures any article.
Proof. The ethyl alcohol content of a liquid at 60 degrees
Fahrenheit, stated as twice the percentage of ethyl alcohol by volume.
Proof gallon. A gallon of liquid at 60 degrees Fahrenheit which
contains 50 percent by volume of ethyl alcohol having a specific
gravity of 0.7939 at 60 degrees Fahrenheit referred to water at 60
degrees Fahrenheit as unity, or the alcoholic equivalent thereof.
Proof of distillation. The composite proof of the spirits when the
production gauge is made, or, if the spirits are reduced in proof prior
to the production gauge, the proof of the spirits prior to that
reduction, unless the spirits are subsequently redistilled at a higher
proof than the proof prior to reduction.
Proprietor. The person qualified under this part to operate a
distilled spirits plant.
Reconditioning. The dumping of distilled spirits products in bond
after their bottling or packaging, for filtration, clarification,
stabilization, reformulation, or other purposes, other than
destruction, denaturation, redistillation, or rebottling.
Recovered article. An article containing specially denatured
spirits salvaged without all of its original ingredients, or an article
containing completely denatured alcohol salvaged without all of the
denaturants for completely denatured alcohol, as provided in part 20 of
this chapter.
Season. The period from January 1st through June 30th (spring
season) or the period from July 1st through December 31st (fall
season).
Secretary. The Secretary of the Treasury or his delegate or
designee.
Service center. An Internal Revenue Service Center in any of the
Internal Revenue regions.
Spirits or distilled spirits. The substance known as ethyl alcohol,
ethanol, or spirits of wine in any form (including all dilutions and
mixtures thereof, from whatever source or by whatever process produced)
but not denatured spirits unless specifically stated. The term does not
include mixtures of distilled spirits and wine, bottled at 48[deg]
proof or less, if the mixture contains more than 50 percent wine on a
proof gallon basis.
Spirits residues. Residues, containing distilled spirits, of a
manufacturing process related to the production of an article under
part 20 of this chapter.
Tax-determined or determined. When used with reference to any
distilled spirits to be withdrawn from bond on determination of tax,
that the taxable quantity of spirits has been established.
Taxpaid. When used with reference to distilled spirits, all
applicable taxes imposed by law on those spirits have been determined
or paid as provided by law.
This chapter. Chapter I, Title 27, Code of Federal Regulations (27
CFR chapter I).
Transfer in bond. The removal of spirits, denatured spirits and
wines from one bonded premises to another bonded premises.
Treasury Account. The General Account of the Department of the
Treasury at the Federal Reserve Bank of New York.
TTB. The Alcohol and Tobacco Tax and Trade Bureau of the Department
of the Treasury.
TTB bond. The internal revenue bond as prescribed in 26 U.S.C.
Chapter 51.
TTB officer. An officer or employee of TTB authorized to perform
any function relating to the administration or enforcement of the
provisions of this part.

[[Page 26230]]

Unfinished spirits. Spirits in the production system prior to
production gauge.
U.S.C. The United States Code.
Warehouseman. A proprietor of a distilled spirits plant qualified
under this part to store bulk distilled spirits.
We. TTB and TTB officers.
Wine gallon. The liquid measure equivalent to the volume of 231
cubic inches.
Wine spirits. Spirits authorized for use in wine production by 26
U.S.C. 5373.

Sec. 19.2 Territorial extent of these regulations.

This part applies to all States of the United States and the
District of Columbia.

Sec. 19.3 Related regulations.

Other regulations relating to distilled spirits and distilled
spirits plants are listed below:

27 CFR part 1--Basic Permit Requirements Under the Federal Alcohol
Administration Act, Nonindustrial Use of Distilled Spirits and Wine,
Bulk Sales and Bottling of Distilled Spirits.
27 CFR part 4--Labeling and Advertising of Wine.
27 CFR part 5--Labeling and Advertising of Distilled Spirits.
27 CFR part 16--Alcoholic Beverage Health Warning Statement.
27 CFR part 17--Drawback on Taxpaid Distilled Spirits Used in
Manufacturing Nonbeverage Products.
27 CFR part 20--Distribution and Use of Denatured Alcohol and Rum.
27 CFR part 21--Formulas for Denatured Alcohol and Rum.
27 CFR part 22--Distribution and Use of Tax-Free Alcohol.
27 CFR part 24--Wine.
27 CFR part 25--Beer.
27 CFR part 26--Liquors and Articles from Puerto Rico and the Virgin
Islands.
27 CFR part 27--Importation of Distilled Spirits, Wines, and Beer.
27 CFR part 28--Exportation of Alcohol.
27 CFR part 29--Stills and Miscellaneous Regulations.
27 CFR part 30--Gauging Manual.
27 CFR part 31--Alcohol Beverage Dealers.
27 CFR part 71--Rules of Practice in Permit Proceedings.
31 CFR part 225--Acceptance of Bonds Secured by Government
Obligations in Lieu of Bonds with Sureties.

Sec. 19.4 Recovery and reuse of denatured spirits in manufacturing
processes.

Certain activities involving distilled spirits are not covered by
this part. Instead, manufacturers who engage in any of the activities
listed below are required to comply with the regulations in part 20 of
this chapter relating to the use and recovery of spirits or denatured
spirits. Those activities are:
(a) Use of denatured spirits, or articles or substances containing
denatured spirits, in a process wherein any part or all of the spirits,
including denatured spirits, are recovered;
(b) Use of denatured spirits in the production of chemicals which
do not contain spirits but which are used on the permit premises in the
manufacture of other chemicals resulting in spirits as a by-product; or
(c) Use of chemicals or substances which do not contain spirits or
denatured spirits (but which were manufactured with specially denatured
spirits) in a process resulting in spirits as a by-product.

(26 U.S.C. 5273)

Sec. 19.5 Manufacturing products unfit for beverage use.

(a) General. Except as provided in paragraph (b) of this section,
apothecaries, pharmacists, or manufacturers who manufacture or compound
any of the following products using tax paid or tax determined
distilled spirits are not required to register and qualify as a
distilled spirits plant (processor):
(1) Medicines, medicinal preparations, food products, flavors,
flavoring extracts, and perfume, conforming to the standards for
approval of nonbeverage drawback products found in Sec. Sec. 17.131-
17.137 of this chapter, whether or not drawback is actually claimed on
those products. Except as provided in paragraph (c) of this section, a
formula does not need to be submitted if drawback is not desired;
(2) Patented and proprietary medicines that are unfit for use for
beverage purposes;
(3) Toilet, medicinal, and antiseptic preparations and solutions
that are unfit for use for beverage purposes;
(4) Laboratory reagents, stains, and dyes that are unfit for use
for beverage purposes; and
(5) Flavoring extracts, syrups, and concentrates that are unfit for
use for beverage purposes.
(b) Exception for beverage products. Products identified in part 17
of this chapter as being fit for beverage use are alcoholic beverages.
Bitters, patent medicines, and similar alcoholic preparations that are
fit for beverage purposes, although held out as having certain
medicinal properties, are also alcoholic beverages. These products are
subject to the provisions of this part and must be manufactured on the
bonded premises of a distilled spirits plant.
(c) Submission of formulas and samples. When requested by the
appropriate TTB officer or when the manufacturer wishes to ascertain
whether a product is unfit for beverage use, the manufacturer will
submit the formula and a sample of the product to the appropriate TTB
officer for examination. TTB will determine whether the product is
unfit for beverage use and whether manufacture of the product is exempt
from qualification requirements.
(d) Change of formula. If TTB finds that a product manufactured
under paragraph (a) of this section is being used for beverage
purposes, or for mixing with beverage spirits other than by a
processor, TTB will notify the manufacturer to stop manufacturing the
product until the formula is changed to make the product unfit for
beverage use and the change is approved by the appropriate TTB officer.
However, the provisions of this paragraph will not prohibit products
which are unfit for beverage use from use in small quantities for
flavoring drinks at the time of serving for immediate consumption.

(26 U.S.C. 5002, 5171)

Subpart B--Administrative and Miscellaneous Provisions

Sec. 19.11 Right of entry and examination.

A TTB officer may enter any distilled spirits plant, any other
premises where distilled spirits operations are carried on, or any
structure or place used in connection with distilled spirits
operations, at any time of day or night. A TTB officer may examine
materials, equipment, and facilities, and make any gauges and
inventories. Whenever a TTB officer states his or her name and office
and demands admittance but is not admitted into the premises or place,
the TTB officer is authorized to use all necessary force to gain entry.

(26 U.S.C. 5203)

Sec. 19.12 Furnishing facilities and assistance.

The proprietor is required to provide TTB officers with the
necessary facilities and assistance in order to gauge spirits in any
container, or to examine any apparatus, equipment, containers, or
materials, at the distilled spirits plant. Also, when requested by a
TTB officer, the proprietor must:
(a) Open any doors and open for examination any containers on the
plant premises; and
(b) Provide the exact locations (including the number of containers
at each location) of all packages and similar portable approved
containers within a given lot and the locations (that is, buildings,
rooms, or areas) where spirits in cases are stored.

(26 U.S.C. 5202, 5203)

[[Page 26231]]

Sec. 19.13 Assignment of officers and supervision of operations.

(a) General. TTB may assign TTB officers to a distilled spirits
plant and utilize controls, such as Government locks and seals, if TTB
decides that those measures are necessary to effectively supervise the
operations. If TTB decides that such supervision is necessary:
(1) The proprietor must obtain approval of the plant's hours of
operations from the appropriate TTB officer;
(2) TTB may require the proprietor to submit a schedule of
operations to a TTB officer; and
(3) TTB may require the proprietor to delay any distilled spirits
operation until the proprietor can conduct it in the presence of a TTB
officer.
(b) Notification of supervision. If TTB determines that supervision
of plant operations is necessary, TTB will notify the proprietor of the
extent to which TTB intends to supervise those operations. If TTB
determines later that TTB supervision is no longer necessary, the
appropriate TTB officer will notify the proprietor of that fact.

(26 U.S.C. 5201, 5202, 5553)

Sec. 19.14 Delegation of the Administrator's authorities to the
appropriate TTB officer.

Most of the regulatory authorities of the Administrator contained
in this part are delegated to appropriate TTB officers. These TTB
officers are specified in TTB Order 1135.19, Delegation of the
Administrator's Authorities in 27 CFR Part 19, Distilled Spirits.
Interested persons may obtain a copy of this order by accessing the TTB
Web site (http://www.ttb.gov) or by mailing a request to the Alcohol
and Tobacco Tax and Trade Bureau, National Revenue Center, 550 Main
Street, Room 1516, Cincinnati, OH 45202.

Sec. 19.15 Forms prescribed.

(a) TTB prescribes and makes available all forms required by this
part. Persons completing forms must furnish all of the information
required by each form, as indicated by the headings and instructions on
the form or as required by these regulations. Each form must be filed
in accordance with this part and the instructions for the form.
(b) Persons may request forms from the TTB National Revenue Center,
550 Main Street, Suite 8002, Cincinnati, Ohio 45202, or by accessing
them on the TTB Web site (http://www.ttb.gov).

(26 U.S.C. 5207)

Sec. 19.16 Modified forms.

If a proprietor wishes to modify a form prescribed by these
regulations, the proprietor must submit an application for approval of
an alternate method or procedure (see Sec. Sec. 19.26 and 19.27) to
the appropriate TTB officer. The proprietor may not use a modified form
until TTB approves the application. The application to modify a form
must be accompanied by:
(a) A copy of each proposed form with typical entries; and
(b) A statement explaining the need to use a modified form.

(26 U.S.C. 5207)

Sec. 19.17 Detention of containers.

(a) General. A TTB officer may detain any container containing, or
supposed to contain, spirits when the appropriate TTB officer believes
that the required tax on those spirits has not been paid or determined
that the removal of the container is in violation of law or the
provisions of this part. The appropriate TTB officer will hold the
container at a safe place until it is determined whether the detained
property is subject to forfeiture.
(b) Limitation. A detention under paragraph (a) of this section may
not exceed 72 hours without process of law or intervention of the
appropriate TTB officer. However, the detained container may be kept on
the premises beyond the 72-hour period without process of law or
intervention if the person possessing the container immediately before
its detention executes a waiver of this 72-hour limitation on detention
of the container.

(26 U.S.C. 5311)

Sec. 19.18 Samples for the United States.

TTB officers are authorized to take samples of spirits, denatured
spirits, articles, wines, or other materials from a distilled spirits
plant for analysis, testing, or to determine whether the product
complies with the law and regulations. When TTB removes a sample from a
plant, TTB will give the proprietor a receipt for the sample.

(26 U.S.C. 5201, 5203, 5214, 5362)

Sec. 19.19 Discontinuance of storage facilities.

If TTB determines that a proprietor's bonded storage facility for
spirits is unsafe or unfit for use, or causes excessive waste or loss
of spirits, TTB can require that the proprietor discontinue using the
facility. Further, TTB can require the transfer of the spirits stored
in the facility to another storage facility. The transfer will take
place at such time and under such supervision as TTB may require, and
will be at the expense of the owner or warehouseman of the spirits. If
the owner or warehouseman fails to transfer the spirits within the
prescribed time or to pay the expense of the transfer, as ascertained
and determined by the appropriate TTB officer, the spirits may be
seized and sold. TTB will first apply the proceeds of such sale to the
payment of the taxes due on the spirits and then to the cost and
expense of the sale and removal, and the remaining balance, if any,
will be paid over to the owner or warehouseman.

(26 U.S.C. 5236)

Sec. 19.20 Installation of meters, tanks, and other apparatus.

The appropriate TTB officer may require the proprietor to install
meters, tanks, pipes, or any other apparatus at the proprietor's plant
if that officer decides that the equipment is necessary for the
protection of the revenue. If the proprietor refuses or fails to
install any such apparatus when instructed to do so, the proprietor
will not be permitted to conduct business as a distilled spirits plant.

(26 U.S.C. 5552)

Alternate Methods or Procedures and Experimental Operations

Sec. 19.26 Alternate methods or procedures.

(a) General. The appropriate TTB officer may approve the use of an
alternate method or procedure that varies from the regulatory
requirements in this part if the proprietor shows good cause for its
use and the alternate method or procedure:
(1) Is not contrary to law;
(2) Will not have the effect of waiving an existing regulatory
requirement;
(3) Is consistent with the purpose and effect of the method or
procedure prescribed in this part;
(4) Provides equal security to the revenue; and
(5) Will not cause an increase in cost to the Government and will
not hinder TTB's administration of this part.
(b) Exceptions. TTB will not authorize the use of an alternate
method or procedure relating to the giving of any bond, or to the
assessment, payment, or collection of tax.

(26 U.S.C. 5552, 5556)

Sec. 19.27 Application for and use of alternate method or procedure.

(a) Application. If a proprietor wishes to use an alternate method
or procedure as described in Sec. 19.26, the proprietor must submit a
written letterhead application to the appropriate TTB officer for
approval. The application

[[Page 26232]]

must identify the method or procedure specified in the regulation, must
describe the proposed alternate method or procedure in detail, and must
explain why the alternate method or procedure is needed.
(b) Approval and use. The proprietor may not use an alternate
method or procedure until the appropriate TTB officer has in writing
approved the proprietor's application. During the period that the
proprietor is authorized to use the alternate method or procedure, the
proprietor must comply with any conditions imposed on its use by TTB.
TTB may withdraw the approval to use the alternate method or procedure
if TTB finds that the revenue is jeopardized, that the alternate method
or procedure hinders effective administration of the laws or
regulations, that the proprietor has violated any of the conditions
imposed by TTB, or that the circumstances that gave rise to the need
for the alternate method or procedure no longer exist.
(c) Retention. The proprietor must retain each alternate method or
procedure approval as part of the proprietor's records and must make
the approval available for examination by TTB officers upon request.

(26 U.S.C. 5552, 5556)

Sec. 19.28 Emergency variations from requirements.

(a) Application. A proprietor may request emergency approval of the
use of a method or procedure relating to construction, equipment, and
methods of operation that represents a variance from the requirements
of this part. When a proprietor wishes to use an emergency method or
procedure, the proprietor must submit a written letterhead application
to the appropriate TTB officer for approval; the proprietor may send
the application via regular mail, e-mail, or facsimile transmission.
The application must describe the proposed emergency method or
procedure and the emergency situation it will address. For purposes of
this section, an emergency is considered to exist only if it results
from a weather or other natural event or from an accident or other
event not involving an intentional act on the part of the proprietor.
(b) Approval. The appropriate TTB officer may approve in writing
the use of an emergency method or procedure if the proprietor
demonstrates that an emergency exists and the proposed method or
procedure:
(1) Is not contrary to law;
(2) Is necessary to address the emergency situation;
(3) Will afford the same security and protection to the revenue as
intended by the regulations; and
(4) Will not hinder the effective administration of this subpart.
(c) Terms of emergency method or procedure approval and use.
(1) The proprietor may not use an emergency method or procedure
until the application has been approved by TTB except when the
emergency method or procedure requires immediate implementation to
correct a situation that threatens life or property. In a situation
involving a threat to life or property, the proprietor may implement
the corrective action while concurrently notifying the appropriate TTB
officer by telephone of the action and filing the required written
application. Use of the emergency method or procedure must conform to
any conditions specified in the approval.
(2) The proprietor must retain the emergency method or procedure
approval as part of the proprietor's records and must make the approval
available for examination by TTB officers upon request.
(3) The emergency method or procedure will automatically terminate
when the situation that created the emergency no longer exists. TTB may
withdraw the approval to use the emergency method or procedure if TTB
finds that the revenue is jeopardized, that the emergency method or
procedure hinders effective administration of the laws or regulations,
or that the proprietor has failed to follow any of the conditions
specified in the approval. When use of the emergency method or
procedure terminates, the proprietor must revert to full compliance
with all applicable regulations.

(26 U.S.C. 5178, 5556)

Sec. 19.29 Exemptions for national defense and disasters.

Whenever TTB finds it is necessary to meet the requirements of
national defense or necessary or desirable by reason of disaster, TTB
may temporarily exempt the proprietor from any provisions of the
internal revenue laws and the provisions of this part relating to
distilled spirits, except those requiring the payment of tax.

(26 U.S.C. 5561, 5562)

Sec. 19.31 Pilot operations.

Except for the filing of any bond or the payment of any tax
provided for in 26 U.S.C. Chapter 51, TTB may waive any regulatory
provision in this part for temporary pilot or experimental operations
for the purpose of facilitating the development and testing of improved
methods of governmental supervision (necessary for the protection of
the revenue) over plants. For this purpose, the appropriate TTB officer
may, with the approval of the proprietor thereof, designate any plant
for such operations. Any waiver granted under this section must be in
writing and signed by the appropriate TTB officer. The waiver will
identify the provisions of law and/or regulations waived and the period
of time during which the waiver will be effective. The appropriate TTB
officer may terminate the waiver if he or she determines that the
waiver jeopardizes the revenue.

(26 U.S.C. 5554)

Sec. 19.32 Experimental distilled spirits plants.

(a) General. The appropriate TTB officer may authorize the
establishment and operation of experimental plants for specific and
limited periods of time solely for experimentation in, or development
of:
(1) Sources of materials from which spirits may be produced;
(2) Processes by which spirits may be produced or refined; or
(3) Industrial uses of spirits.
(b) Waiver. The appropriate TTB officer may waive any provision of
26 U.S.C. Chapter 51 (other than 26 U.S.C. 5312) and of this part
(other than Sec. 19.33) to the extent necessary to effectuate the
purposes of 26 U.S.C. 5312(b) as outlined in paragraph (a) of this
section. However, TTB will not waive the payment of any tax on spirits
removed from an experimental plant.
(c) Applicability of special tax. An experimental distilled spirits
plant established under this section is subject to the registration
requirement for special (occupational) tax prescribed under subpart H
of this part.

(26 U.S.C. 5312)

Sec. 19.33 Application to establish experimental plants.

(a) Application requirements. Any person who wishes to establish an
experimental plant for the purposes specified in Sec. 19.32 must
submit a written application to the appropriate TTB officer and obtain
approval of the proposed experimental plant. The application must:
(1) State the nature, extent, and purpose of the operations to be
conducted;
(2) Describe the operations and equipment;
(3) Describe the location of the plant (including the proximity to
other premises or operations subject to the provisions of 26 U.S.C.
Chapter 51); and

[[Page 26233]]

(4) Describe the security measures to be provided.
(b) Bond. The applicant must file a bond with the application in
such form and penal sum as required by the appropriate TTB officer.
(c) Approval of application. Before approving the application, the
appropriate TTB officer may require that the applicant submit
additional information if necessary. TTB will not approve the
application and permit operations until the plant conforms to the
specifications stated in the application and the applicant complies
with provisions of 26 U.S.C. Chapter 51 and with any provisions in this
part that are not specifically waived.

(26 U.S.C. 5312)

Sec. 19.34 Experimental or research operations by scientific
institutions and colleges of learning.

(a) General. The appropriate TTB officer may authorize any
scientific university, college of learning, or institution of
scientific research to produce, receive, blend, treat, test, and store
spirits, without payment of tax, for experimental or research use but
not for consumption (other than in organoleptic tests) or sale, in
quantities as may be reasonably necessary for those purposes.
(b) Waiver. For purposes of this section, the appropriate TTB
officer may waive any provision of 26 U.S.C. Chapter 51 (other than 26
U.S.C. 5312) or this part (other than this section and Sec. 19.35) to
the extent necessary to effect the purposes of 26 U.S.C. 5312(a).
However, TTB will not waive the payment of any tax on distilled spirits
removed from any university, college, or institution.
(c) Applicability of special tax. A person conducting experimental
or research operations authorized under this section is subject to the
registration requirement for special (occupational) tax prescribed
under subpart H of this part.

(26 U.S.C. 5312)

Sec. 19.35 Application by scientific institutions and colleges of
learning for experimental or research operations.

(a) Application requirements. A university, college, or institution
that wants to conduct any of the experimental or research operations
mentioned in Sec. 19.34, must submit a written application to the
appropriate TTB officer and obtain approval for the proposed
operations. The application may be submitted on letterhead. The
application must:
(1) State the nature, extent, and purpose of the operations to be
conducted;
(2) Describe the operations and equipment;
(3) Describe the location where the operations will be conducted
(including identification of the building or buildings, or the portions
thereof to be used); and
(4) Describe the security measures to be provided.
(b) Bond. The applicant must file a bond with the application in
such form and amount as required by the appropriate TTB officer.
(c) Approval of application. Before approving the application, the
appropriate TTB officer may require that the applicant submit
additional information. The applicant may not commence operations until
authorized by the appropriate TTB officer.
(d) Records and reports. Any university, college, or institution
authorized to conduct experimental or research operations must maintain
records of the quantities of spirits produced, received, and used each
day and must make these records available for inspection by TTB
officers. Universities, colleges, or institutions authorized to conduct
experimental or research operations are not required to submit reports
of operations to TTB unless specifically required by the appropriate
TTB officer.
(e) Discontinuance of operations. When operations authorized under
this section are discontinued, the university, college, or institution
must destroy all remaining spirits and notify the appropriate TTB
officer that operations are discontinued.

(26 U.S.C. 5312)

Sec. 19.36 Spirits produced in industrial processes.

(a) General. Except as otherwise provided in paragraph (b) of this
section, any person who produces distilled spirits in an industrial
process, including spirits produced as a byproduct in connection with
chemical or other processes, is considered to be a distiller and
therefore is required to qualify as a distilled spirits plant and is
subject to the registration requirement for special (occupational) tax
under the provisions of 26 U.S.C. Chapter 51 and this part.
(b) Waiver. TTB may waive application of any provision of 26 U.S.C.
Chapter 51, or of this part, involving the production of nonpotable
chemical mixtures containing spirits, including any provision relating
to qualification (except the registration requirement for special
[occupational] tax) if the mixture is produced:
(1) For transfer to the bonded premises of a distilled spirits
plant for completion of distilling; or
(2) As a by-product which would require expensive and complex
equipment for the recovery of spirits, and the mixture:
(i) Would be destroyed on the premises where produced; or
(ii) Would contain a minimum quantity of spirits, taking into
account the procedure employed, would not be subjected to further
operations solely for the purification or recovery of spirits, and
would be found by TTB to be as nonpotable and as difficult to recover
as completely denatured alcohol.

(26 U.S.C. 5201)

Sec. 19.37 Application for industrial processes waiver.

(a) Application for waiver. If the producer of a nonpotable
chemical mixture containing spirits, as described in Sec. 19.36,
wishes to obtain a waiver from the provisions of 26 U.S.C. Chapter 51,
or of this part, the producer must submit a written waiver application
to the appropriate TTB officer. The application must include the
following information, as applicable:
(1) The name and address of the producer;
(2) Chemical composition and source of the nonpotable mixture;
(3) Approximate percentages of chemicals and spirits in the
mixture;
(4) Method of operation proposed;
(5) Bonded premises where the mixture will be distilled; and
(6) Any other pertinent information required by the appropriate TTB
officer.
(b) Approval of waiver. The appropriate TTB officer may approve the
waiver if it will not jeopardize the revenue and will not hinder
supervision of the operations. Approval of the application may be
subject to such terms and conditions, and to the furnishing of any
bond, that the appropriate TTB officer determines is necessary.

(26 U.S.C. 5201)

Sec. 19.38 Approval of required documents.

Except as otherwise provided in this part, the appropriate TTB
officer is authorized to approve all documents, bonds, and consents of
surety required by this part.

(26 U.S.C. 5171, 5172, 5173, and 5551)

``Penalty of Perjury'' Declaration

Sec. 19.45 Execution under penalty of perjury.

(a) Declaration. When TTB requires under this part that a document
be executed under penalty of perjury, the document must contain the
following declaration:

[[Page 26234]]

I declare under the penalties of perjury that this [insert type
of document, such as report, or claim], including supporting
documents, has been examined by me and, to the best of my knowledge
and belief, is true, correct, and complete.

(b) Signing. The declaration in paragraph (a) of this section must
bear the signature and title of the proprietor or a duly authorized
representative.

(26 U.S.C. 6065)

Subpart C--Restrictions on Production, Location, and Use of Plants

Sec. 19.51 Home production of distilled spirits prohibited.

A person may not produce distilled spirits at home for personal
use. Except as otherwise provided by law, distilled spirits may only be
produced by a distilled spirits plant registered with TTB under the
provisions of 26 U.S.C. 5171. All distilled spirits produced in the
United States are subject to the tax imposed by 26 U.S.C. 5001.

(26 U.S.C. 5001, 5601, and 5602)

Rules for Location and Use of a DSP

Sec. 19.52 Restrictions on location of plants.

A person who intends to establish a distilled spirits plant may not
locate it in any of the following places:
(a) In any residence, shed, yard, or enclosure connected to a
residence;
(b) On any vessel or boat;
(c) Where beer or wine is produced;
(d) Where liquors are sold at retail; or
(e) Where any other business is conducted except as provided in
Sec. 19.54.

(26 U.S.C. 5178)

Sec. 19.53 Continuity of plant premises.

As a general rule, the premises of a distilled spirits plant must
be continuous except for separations by public waterways, roads, or
carrier rights-of-way. However, the appropriate TTB officer may approve
the registration of the plant where there are separations of the plant
premises and all parts of the plant are in the same general location
if:
(a) There is no jeopardy to revenue caused by the separation of
premises; and
(b) The separation of premises does not create administrative
problems for TTB.

(26 U.S.C. 5178)

Sec. 19.54 Use of distilled spirits plant premises.

(a) General. A person may not conduct any business or operation on
the premises of a distilled spirits plant unless the business or
operation is authorized by the notice of registration on file with TTB
or authorized under Sec. 19.55.
(b) Bonded premises. The proprietor must use the bonded premises of
a distilled spirits plant exclusively for distilled spirits operations.
The proprietor must store packaged spirits, cases of spirits, or
portable containers of spirits in a room or building on bonded
premises. TTB may approve another method of storage as an alternate
method or procedure. However, the proprietor must apply for, and
receive approval for another method of storage from the appropriate TTB
officer in accordance with Sec. 19.27 before using that method.
(c) General premises. General premises are any portion of the
distilled spirits plant described in the notice of registration other
than bonded premises. A person may not use the general premises of a
distilled spirits plant for any operation required under the provisions
of this part to be conducted on bonded premises.

(26 U.S.C. 5178)

Sec. 19.55 Other businesses.

(a) The appropriate TTB officer may authorize the conduct of a
business other than that of a distiller, warehouseman, or processor on
the premises of a distilled spirits plant if:
(1) The business is not prohibited by 26 U.S.C 5601(a)(6);
(2) The business will not jeopardize the revenue;
(3) The business will not hinder TTB's effective administration of
this part; and
(4) The business will not be contrary to law.
(b) A person who wishes to conduct another business at a distilled
spirits plant must apply for such authorization in accordance with
Sec. Sec. 19.73(b) or 19.120(b) and receive approval from the
appropriate TTB officer before operating the other business. The
approval will specify whether the other business may be conducted on
the bonded premises or on the general premises.

(26 U.S.C. 5178)

Sec. 19.56 Bonded warehouses not on premises qualified for production
of spirits.

(a) Criteria for establishment. As a general rule, if a person
intends to establish a bonded warehouse, other than one established on
the bonded premises of a distilled spirits plant qualified for the
production of spirits or contiguous to such premises, the proposed
warehouse must have a minimum capacity of 250,000 wine gallons of bulk
spirits and the need for such a warehouse must be clearly shown. TTB
may consider an application to establish a bonded warehouse with less
capacity provided a need is clearly shown.
(b) Application. The applicant must submit a separate written
request along with the application for registration explaining the need
for the bonded warehouse. TTB may approve the application for
registration if:
(1) The proposed location for the warehouse will not jeopardize the
revenue; and
(2) The applicant provides evidence showing sufficient need for
establishing such a warehouse.
(c) Special conditions. Based on the application and request, TTB
may limit the type of operations that may be conducted at the bonded
warehouse. The proprietor of a warehouse approved for a limited type of
operation may not expand or change the operation to include any other
type of operation without application to and approval of the
appropriate TTB officer.

(26 U.S.C. 5171 and 5178)

Conveyance of Spirits or Wines on Plant Premises

Sec. 19.58 Taxpaid spirits or wines on bonded premises.

The proprietor may move tax paid or tax determined spirits or wines
across bonded premises. However, tax paid or tax determined spirits or
wines may not be stored or allowed to remain on the bonded premises.
The proprietor must keep tax paid or tax determined spirits or wines
separate from spirits or wines on which tax has not been paid or
determined. Spirits returned to bonded premises under the provisions of
26 U.S.C. 5215 may remain on bonded premises.

(26 U.S.C. 5201 and 5612)

Sec. 19.59 Conveyance of untaxpaid spirits or wines within a
distilled spirits plant.

(a) The proprietor may move untaxpaid spirits or wines:
(1) Between different portions of the bonded premises at the same
distilled spirits plant or across any other premises of that plant;
(2) Over any public thoroughfare by uninterrupted transportation;
or
(3) Over a private roadway by uninterrupted transportation. The
owner or lessee of the private roadway must agree in writing to allow
TTB officers access to the roadway to perform their duties.
(b) The conveyance of untaxpaid spirits or wines under paragraph
(a) of this section is subject to the following conditions. The
proprietor:
(1) May not store or allow the untaxpaid spirits or wines to remain
on

[[Page 26235]]

any premises other than the bonded premises;
(2) Must keep the untaxpaid spirits or wines separate from spirits
on which the tax has been paid or determined;
(3) Must submit to the appropriate TTB officer a description of the
means, route of the conveyance, and the areas of the distilled spirits
plant, public thoroughfare or roadways across which spirits or wines
will be conveyed, and a copy of any agreement with the owner or lessee
of a private roadway. The appropriate TTB officer must approve the
proposed means and route of conveyance and any agreement; and
(4) Must provide a consent of surety on the operations or unit bond
(TTB F 5000.18) extending the terms of the bond to cover the conveyance
of the spirits or wines.

(26 U.S.C. 5201 and 5601)

Sec. 19.60 Spirits in customs custody.

A proprietor may move distilled spirits that are in customs custody
across distilled spirits plant premises if the proprietor:
(a) Submits to the appropriate TTB officer a description of the
means and route of the conveyance and the areas of the distilled
spirits plant across which spirits will be conveyed and receives
approval from the appropriate TTB officer for the method of movement;
(b) Does not store or allow the spirits to remain on the premises
of the distilled spirits plant;
(c) Moves the spirits expeditiously, and keeps the spirits separate
and apart from other spirits on the premises; and
(d) Provides a consent of surety on the operations or unit bond
(TTB F 5000.18) extending the terms of the bond to cover the conveyance
of the spirits.

(26 U.S.C. 5201)

Subpart D--Registration of a Distilled Spirits Plant and Obtaining
a Permit

Sec. 19.71 Registration and permits in general.

Except as otherwise provided in this part, a person may only
conduct operations as a distiller, warehouseman, or processor of
distilled spirits on the bonded premises of a distilled spirits plant.
In order to establish a distilled spirits plant, a person must register
the plant with TTB and obtain an operating permit and/or a basic
permit. This subpart covers the requirements for registering a plant
and obtaining an operating permit under the IRC. Part 1 of this chapter
covers the requirements for obtaining a basic permit under the Federal
Alcohol Administration Act.

(26 U.S.C. 5171)

Requirements for Registering a Plant

Sec. 19.72 General requirements for registration.

(a) Establishment. A person who wishes to establish a distilled
spirits plant must intend to conduct operations as a distiller, as a
warehouseman, or both. A person cannot establish a distilled spirits
plant solely for the processing of spirits.
(b) Registration. Before beginning operations as a distilled
spirits plant, a person must submit an application for registration and
receive approval from TTB. The following rules apply to an application
for registration:
(1) The applicant must apply for registration on form TTB F
5110.41, Registration of Distilled Spirits Plant, and submit the
application to the appropriate TTB officer;
(2) TTB will consider all written statements, affidavits, and other
documents supporting the application as part of the application;
(3) If the appropriate TTB officer determines that the original
application for registration cannot be approved because it contains
incomplete or incorrect information, TTB may require that the applicant
file an additional form TTB F 5110.41, or submit other documentation to
complete or correct the original application; and
(4) The applicant must file any additional forms or submit any
other documentation within 60 days of the appropriate TTB officer's
request.

(26 U.S.C. 5171, 5172)

Sec. 19.73 Information required in application for registration.

(a) General. The application for registration on form TTB F
5110.41, Registration of Distilled Spirits Plant, must include the
following information:
(1) The serial number;
(2) The name, principal business address, and location of the
distilled spirits plant if different from the applicant's business
address;
(3) The operations that will be conducted;
(4) The purpose for filing the application;
(5) A statement describing the type of business organization and
the persons involved in the business in accordance with Sec. 19.93.
However, if any of this information is already on file with the
appropriate TTB officer, the applicant may advise TTB that the
information on file is part of the application for registration;
(6) A list of any operating permits, basic permits, operations
bonds, withdrawal bonds, and/or unit bonds, including the amount of any
bond(s) and the name of the surety on the bond;
(7) In the case of a corporation, a list of the offices and
officers authorized by the articles of incorporation or the board of
directors to sign or act on behalf of the corporation;
(8) A description of the plant in accordance with Sec. 19.74;
(9) A list of major equipment in accordance with Sec. 19.75;
(10) A statement of the maximum number of proof gallons that will
be produced in the distillery during a period of 15 days, stored on the
bonded premises, and in transit to the bonded premises. This statement
is not required if the operations or unit bond is in the maximum
amount;
(11) A statement that accounting records will be maintained in
accordance with generally accepted accounting principles;
(12) A statement of plant security measures in accordance with
Sec. 19.76;
(13) The following information if the applicant intends to operate
as a distiller:
(i) Total proof gallons of spirits that can be produced daily;
(ii) A statement of production procedures in accordance with Sec.
19.77; and
(iii) A statement as to whether spirits will be redistilled;
(14) The following information if the applicant intends to operate
as a warehouseman:
(i) A description of the storage system; and
(ii) Total amount of bulk wine gallons that can be stored; and
(15) The following information if the applicant intends to operate
as a processor:
(i) A statement whether spirits will or will not be bottled,
denatured, redistilled, and whether articles will be manufactured; and
(ii) A description of the storage system for spirits bottled and
cased or otherwise packaged and placed in approved containers for
removal from bonded premises.
(b) Other business. If the applicant intends to conduct any other
business on the distilled spirits plant premises as authorized under
Sec. 19.55, the following information must be submitted with the
application:
(1) A description of the business;
(2) A list of buildings and equipment that will be used; and
(3) A statement of the relationship of the business to the
distilled spirits operations at the plant.
(c) Additional information. The applicant must furnish any
additional information needed by TTB to determine if the application
for registration should be approved.

[[Page 26236]]

(26 U.S.C. 5171, 5172, 6001)

Sec. 19.74 Description of the plant.

As required by Sec. 19.73(a)(8), the application for registration
must include a description of the distilled spirits plant. This
information must:
(a) Describe each tract of land covering the distilled spirits
plant;
(b) Clearly distinguish between the bonded premises and any general
premises;
(c) Provide directions and distances in enough detail to enable the
appropriate TTB officer to readily determine the boundaries of the
plant;
(d) Describe each building and outside tank that will be used for
production, storage, and processing of spirits and for denaturing
spirits, articles, or wines. The description must include the location,
size, construction, and arrangement with reference to each by a
designated number or letter; and
(e) Specify when only a room or floor of a building will be used
for plant operations and provide the location and description of the
building, floor, and room.

(26 U.S.C. 5172)

Sec. 19.75 Major equipment.

As required by Sec. 19.73(a)(9), the application for registration
must include a list of the major plant equipment. If the equipment is
set up and used for the production, storage, or processing of distilled
spirits, wine, denatured spirits, or articles, the list must provide
the following information:
(a) The serial number and capacity of each tank in the plant. The
list does not need to include any bulk containers having a capacity of
less than 101 wine gallons on the plant premises if those containers do
not meet the criteria of a tank under Sec. 19.182 (perks, small totes,
etc.);
(b) The serial number, kind, capacity, and intended use of each
still in the plant. The capacity is the estimated maximum proof gallons
of spirits capable of being produced every 24 hours, or for column
stills a statement of the diameter of the base and number of plates;
and
(c) The serial number of each condenser.

(26 U.S.C. 5172, 5179)

Sec. 19.76 Statement of plant security.

As required by Sec. 19.73(a)(12), the application for registration
must include a statement of plant security. This statement must include
the following information:
(a) A general description of plant security, including methods used
to secure buildings or plant operations located within a portion of a
building and outdoor tanks;
(b) A statement regarding the use of guard personnel;
(c) A statement regarding the use of any electronic or mechanical
alarm system;
(d) A statement certifying that locks used will meet the
requirements of Sec. 19.192(f); and
(e) A list of persons, by their position and title, who have the
responsibility for the custody and access to keys for the locks.

(26 U.S.C. 5171, 5172)

Sec. 19.77 Statement of production procedure.

(a) As required by Sec. 19.73(a)(13)(ii), the application for
registration must include a statement of the step-by-step production
procedure used to produce spirits from an original source. The
statement must begin with the treating, mashing, or fermenting of the
raw materials or substances and continue through each step of the
distilling, purifying, and refining procedure to the production gauge.
The statement must include the kind and approximate quantity of each
material or substance used in producing, purifying, or refining each
type of spirits that will be produced.
(b) If the applicant intends to redistill spirits in the production
account, the applicant must submit and receive approval for such
redistillation on form TTB F 5110.38, Formula for Distilled Spirits
under the Federal Alcohol Administration Act.

(26 U.S.C. 5172, 5201, 5222, 5223, 5555)

Sec. 19.78 Power of attorney.

An applicant or proprietor of a distilled spirits plant must
execute and submit to the appropriate TTB officer form TTB F 1534
(5000.8), Power of Attorney, for each person authorized to sign or to
act on behalf of the applicant or proprietor unless the authority has
been granted in the application for registration.

(26 U.S.C. 5172)

Sec. 19.79 Registry of stills.

Section 29.55 of this chapter requires that every person having
possession, custody, or control of a still or distilling apparatus must
register the still or distilling apparatus. When a person lists a still
or distilling apparatus with the application for registration as
required by Sec. 19.75(b) and receives approval of the registration,
that person has fulfilled the requirement to register the still or
distilling apparatus. See Sec. 29.55 of this chapter for additional
provisions regarding stills and distilling apparatus.

(26 U.S.C. 5172, 5179)

Sec. 19.80 Approved notice of registration.

A person may not operate a distilled spirits plant unless a valid
notice of registration has been approved by TTB authorizing the
businesses and operations to be conducted at such plant. When approved
by the appropriate TTB officer, the application for registration
constitutes the notice of registration of the distilled spirits plant.
A distilled spirits plant will not be registered or reregistered under
this subpart until the applicant has complied with all requirements of
law and regulations relating to the qualification of the business or
operations in which the applicant intends to engage. In any instance
where a person is required to have a bond or permit and the bond or
permit becomes invalid, then the notice of registration also becomes
invalid. Another application for registration must be filed and a new
notice of registration approved by TTB before the business or operation
at such plant may be resumed. Reregistration of a plant is not required
when a new bond or a strengthening bond is filed in accordance with
Sec. Sec. 19.167 or 19.168.

(26 U.S.C. 5171, 5172)

Sec. 19.81 Maintenance of registration file.

The proprietor must maintain the registration documents on the
plant premises in a loose-leaf file that is current, complete, and
readily available for inspection by the appropriate TTB officer.

(26 U.S.C. 5172)

Requirements for an Operating Permit Under the IRC

Sec. 19.91 Operating permit.

(a) Except as provided in paragraph (b) of this section, a person
must obtain an operating permit under the IRC in order to:
(1) Distill for industrial use;
(2) Warehouse spirits for industrial use;
(3) Denature spirits;
(4) Warehouse spirits (without bottling) for non-industrial use;
(5) Bottle or package spirits for industrial use;
(6) Manufacture articles; or
(7) Engage in any other distilling, warehousing, or processing
operation not required to be covered by a basic permit under the
Federal Alcohol Administration Act (49 Stat. 978; 27 U.S.C. 203, 204).
(b) Exception. The requirement to obtain an operating permit does
not apply to an agency of a State, or

[[Page 26237]]

political subdivision of a State, or an officer or employee of, and
acting for, such an agency.

(26 U.S.C. 5171, 5271)

Sec. 19.92 Information required in application for operating permit.

(a) In order to obtain an operating permit, a person must complete
an application on form TTB F 5110.25, Application for Operating Permit
Under 26 U.S.C. 5171(d). TTB will consider all written statements,
affidavits and other documents submitted in support of the application
as part of the application.
(b) The application on form TTB F 5110.25 must include the
following information:
(1) The name and principal address of the business;
(2) The address of the plant if different from the business
address;
(3) A description of the operation(s) to be conducted;
(4) A statement of the business organization and the persons
involved in the business as required under Sec. 19.93; and
(5) A list of trade names as required under Sec. 19.94.
(c) A TTB officer may request that any person listed under Sec.
19.93(a)(1)(ii), Sec. 19.93(a)(3)(iii), Sec. 19.93(b)(1) and Sec.
19.93(b)(2) submit to TTB a statement as to whether that person has
ever:
(1) Been convicted of a felony or misdemeanor under Federal or
State law, other than a misdemeanor conviction for a traffic violation;
(2) Been arrested or charged with any violation of State or Federal
law, other than an arrest or charge for a misdemeanor traffic
violation; or
(3) Applied for, held, or been connected with a permit issued under
Federal law to manufacture, distribute, sell or use spirits or products
containing spirits, or held any financial interest in any business
covered by any such permit, and if so, give the permit number,
classification, period of operation and details regarding any denial,
suspension, revocation or other termination.
(d) If any of the information required in paragraphs (b)(4) or
(c)(3) of this section is on file with the appropriate TTB officer, the
applicant may, by incorporation by reference, state that the
information is made a part of the application for an operating permit.
(e) The applicant must provide any additional information that the
appropriate TTB officer may request in order to determine whether the
application should be approved.

(26 U.S.C. 5171, 5271)

Sec. 19.93 Applicant organization documents.

(a) Supporting information. Sections 19.73(a)(5) and 19.92(a)(4)
require that the application for registration and the application for
an operating permit include information about the business organization
of the applicant. The applicant must provide the following information
as applicable:
(1) If the applicant is a corporation--
(i) The corporate charter or other documentation that provides
proof of corporate existence or incorporation;
(ii) Names and addresses of directors and officers;
(iii) Certified minutes, or extracts of board of directors
meetings, that authorize specific individuals to sign for the
corporation; and
(iv) A statement showing the number of shares of each class of
stock or other evidence of ownership, authorized and outstanding, and
the voting rights of the respective owners or holders.
(2) If the applicant is a partnership, a copy of the articles of
partnership or association, or certificate of partnership or
association if required to be filed by any State, county, or
municipality.
(3) If the applicant is a limited liability company or limited
liability partnership--
(i) A copy of the articles of organization;
(ii) A copy of the operating agreement; and
(iii) The names and addresses of all members and managers.
(b) Statement of interest.
(1) Sole proprietorships and general partnerships. In the case of
an individual owner or a general partnership, the applicant must
provide the name and address of each person having an interest in the
business and a statement indicating whether the interest appears in the
name of the interested person or in the name of another person.
(2) Limited liability entities. In the case of a corporation,
limited liability partnership, limited liability company, or other
legal entity in which some or all of the owners have limited personal
liability for the activities of the entity, the applicant must provide
the following information about persons having an interest in the
business:
(i) The names and addresses of the 10 persons that have the largest
ownership or other interest in each of the classes of ownership of the
applicant and the nature and amount of ownership or other interest of
each person.
(ii) The name of the person in whose name the interest appears. If
the corporation is wholly owned or controlled by another corporation,
the appropriate TTB officer may request the same information regarding
ownership for the parent corporation.

(26 U.S.C. 5172, 5271)

Sec. 19.94 Trade names.

(a) Operating permits. The applicant must include a list of any
trade names used in the operation of the plant with form TTB F 5110.25,
Application for Operating Permit Under 26 U.S.C. 5171(d). The applicant
must show the operations for which the trade name will be used and
identify the offices where the trade name is registered. The applicant
must also submit copies of any certificate or other document filed or
issued for each trade name.
(b) Basic permits. If the applicant is required to have a basic
permit under the Federal Alcohol Administration Act (49 Stat. 978; 27
U.S.C. 203, 204) for distilling, warehousing, or processing operations,
then the applicant must follow the regulations under that Act for the
approval and use of trade names.

(26 U.S.C. 5271)

Sec. 19.95 Issuance of operating permits.

TTB will issue only one operating permit for a distilled spirits
plant. The permit will designate the operations that are authorized at
the plant. The proprietor must post the permit at the distilled spirits
plant and have it available for inspection by appropriate TTB officers.

(26 U.S.C. 5171, 5271)

Sec. 19.96 Denial of permit.

TTB will conduct proceedings for the denial of an application for
an operating permit in accordance with the procedures set forth in part
71 of this chapter if the appropriate TTB officer has reason to believe
that:
(a) The applicant (including, in the case of a corporation, any
officer, director, or principal stockholder, and, in the case of a
partnership, a partner) is, by reason of business experience, financial
standing, or trade connections, not likely to maintain operations in
compliance with 26 U.S.C. Chapter 51, or the regulations issued
thereunder;
(b) The applicant failed to disclose any material information
required, or has made a false statement as to any material fact in
connection with the application; or
(c) The premises where the applicant proposes to conduct the
operations are not adequate to protect the revenue.

(26 U.S.C. 5271)

Sec. 19.97 Correction of permit.

If requested by the appropriate TTB officer, a proprietor must
immediately return for correction any operating

[[Page 26238]]

permit that contains an error.

(26 U.S.C. 5271)

Sec. 19.98 Duration of permit.

The proprietor may conduct the operations authorized by the
operating permit on a continuing basis unless:
(a) The proprietor voluntarily surrenders the permit;
(b) TTB suspends or revokes the permit pursuant to Sec. 19.99; or
(c) The permit is automatically terminated under its own terms or
in accordance with Sec. 19.127.

(26 U.S.C. 5271)

Sec. 19.99 Suspension or revocation of permit.

TTB will conduct proceedings for the revocation or suspension of an
operating permit in accordance with the procedures set forth in part 71
of this chapter if the appropriate TTB officer has a reason to believe
that the proprietor or any person associated with the operating permit:
(a) Has not complied in good faith with the provisions of 26 U.S.C.
Chapter 51, or the regulations issued thereunder;
(b) Has violated the conditions of the permit;
(c) Has made a false statement as to any material fact in the
application for the permit;
(d) Has failed to disclose any required material information;
(e) Has violated or conspired to violate any law of the United
States relating to intoxicating liquor;
(f) Has been convicted either of any offense under Title 26,
U.S.C., punishable as a felony, or of any conspiracy to commit such an
offense; or
(g) Has not engaged in any of the operations authorized by the
permit for a period of more than 2 years.

(26 U.S.C. 5271)

Subpart E--Changes to Registrations and Permits

Sec. 19.111 Scope.

This subpart explains the requirements for amending a distilled
spirits plant registration and, if applicable, an operating permit. For
information regarding amendments to a basic permit issued under the
Federal Alcohol Administration Act, see part 1 of this chapter.

(26 U.S.C. 5171)

Rules for Amending a Registration

Sec. 19.112 General rules for amending a registration.

If there is a change in any of the information in the proprietor's
current, approved notice of registration, the proprietor must amend the
registration within 30 days of the change unless another time period is
specified in this subpart. To amend a registration the proprietor must
submit in writing to the appropriate TTB officer any information
necessary to make the registration file current and accurate.
(a) TTB F 5110.41. Except when a letterhead application or
letterhead notice procedure is allowed under this subpart, the
proprietor must submit an amended form TTB F 5110.41, Registration of
Distilled Spirits Plant, for changes that affect the registration. If
the changes affect only parts or pages of the registration the
proprietor only needs to submit the necessary pages or information that
will make the registration file current.
(b) Letterhead Applications. For certain changes specified in this
subpart the proprietor may submit a letterhead application for a change
instead of an amended form TTB F 5110.41. The letterhead application
must identify the distilled spirits plant to which the change applies
and clearly identify the change. Any change is subject to TTB approval.
The appropriate TTB officer may, at any time, require that the
proprietor submit an amended application on form TTB F 5110.41 if
administrative difficulties occur as a result of the letterhead
application.
(c) Letterhead Notices. For certain changes specified in this
subpart only a letterhead notice is required. The letterhead notice
must identify the distilled spirits plant to which the change applies
and clearly identify the change. A letterhead notice does not require
approval by TTB. The appropriate TTB officer may, at any time, require
that the proprietor submit an amended application on form TTB F 5110.41
if administrative difficulties occur as a result of the letterhead
notice.

(26 U.S.C. 5171, 5172)

Sec. 19.113 Change in name of proprietor.

If the name of the of the proprietor changes, the proprietor may
not conduct operations under the new name before TTB approves the
amended registration. The proprietor must file either an amended form
TTB F 5110.41, Registration of Distilled Spirits Plant, or a letterhead
application to reflect the change. However, the proprietor does not
have to file a new bond or consent of surety.

(26 U.S.C. 5172, 5271)

Sec. 19.114 Changes in stockholders or persons with interest.

The proprietor must notify TTB of any changes in the list of
stockholders or persons with interest that was filed with TTB as
required by Sec. 19.93. If the change results in a change of control,
the proprietor must file form TTB F 5110.41, Registration of Distilled
Spirits Plant, within 30 days of the change. If the change does not
cause a change of control the proprietor:
(a) May file a letterhead notice to amend the registration;
(b) May file the amended notice on May 1 of each year rather than
within 30 days of the change, or on any other date that the appropriate
TTB Officer may approve; and
(c) Must incorporate all changes submitted by letterhead notice in
the next form TTB F 5110.41 filed.

(26 U.S.C. 5172, 5271)

Sec. 19.115 Change in officers, directors, members or managers.

(a) General. If there is a change in the list of officers,
directors, members or managers that the proprietor filed as required by
Sec. 19.93 the following rules apply:
(1) The proprietor must file an amended form TTB F 5110.41,
Registration of Distilled Spirits Plant, or a letterhead notice to
reflect the change;
(2) The proprietor must provide the name and address of each new
officer, director, member or manager; and
(3) The proprietor must incorporate all changes submitted by
letterhead notice in the next form TTB F 5110.41 filed.
(b) Waiver. The appropriate TTB officer may waive the requirement
to amend the registration if the change only relates to corporate
officers listed on the original or current registration who are no
longer connected with the operations covered by the registration.

(26 U.S.C. 5171, 5172)

Sec. 19.116 Change in proprietorship.

(a) General. If there is a change in proprietorship at a distilled
spirits plant, the following requirements apply to the outgoing
proprietor and to the incoming (successor) proprietor.
(1) Outgoing proprietor. An outgoing proprietor must comply with
the requirements of Sec. 19.147. An outgoing proprietor may transfer
spirits to its successor in accordance with Sec. 19.141.
(2) Incoming proprietor. A successor to the proprietorship of a
plant that holds a registration:
(i) Must file form TTB F 5110.41, Registration of Distilled Spirits
Plant, and receive from TTB an approved notice of registration of the
plant;
(ii) Must file the required bonds; and
(iii) May adopt the approved formulas of its predecessor in
accordance with Sec. 5.28 and Sec. 20.63 of this chapter.

[[Page 26239]]

(b) Fiduciary. If the successor to the proprietorship of a plant is
an administrator, executor, receiver, trustee, assignee or other
fiduciary, the successor must comply with the provisions of paragraph
(a)(2) of this section. The following rules also apply in this case:
(1) The fiduciary may furnish a consent of surety to extend the
terms of the predecessor's bond instead of filing a new bond;
(2) The fiduciary may incorporate by reference in the application
for registration on form TTB F 5110.41 any information contained in the
predecessor's application for registration that is still current;
(3) The successor must furnish a certified copy of the order of the
court or other pertinent document showing the successor's qualification
as fiduciary; and
(4) The effective date of the qualifying documents that the
fiduciary files will be the date of the court order, the date specified
in the order whereby the fiduciary assumes control, or if there is no
court order, the date that the fiduciary assumed control.

(26 U.S.C. 5172)

Sec. 19.117 Partnerships.

(a) If there is a death or insolvency of a partner in the business
registered under this part, the surviving partner or partners may
continue to operate under the notice of registration if:
(1) The partnership is not terminated under the laws of the
particular state but continues until the winding up of the partnership
affairs is complete;
(2) The surviving partner or partners have exclusive right to the
control and possession of the partnership assets for purposes of
liquidation and settlement; and
(3) A consent of surety is filed where the surety and the surviving
partner or partners agree to remain liable on the operations or unit
bond.
(b) If the surviving partner or partners acquire the business upon
settlement of the partnership, the surviving partner or partners must
file as an incoming proprietor and receive an approved notice of
registration of the plant in accordance with Sec. 19.116(a).

(26 U.S.C. 5172)

Sec. 19.118 Change in location.

If the location of the plant changes, the proprietor must:
(a) File form TTB F 5110.41, Registration of Distilled Spirits
Plant, to amend the registration;
(b) File a new bond or a consent of surety on form TTB F 5000.18;
and
(c) Not begin operations at the new location prior to approval of
the amended registration.

(26 U.S.C. 5172, 5271, 5173)

Sec. 19.119 Change in premises.

If the proprietor intends to extend or curtail any part of the
plant premises, except under alternate operations that are covered by
Sec. 19.142 and Sec. 19.143, the proprietor must file form TTB F
5110.41, Registration of Distilled Spirits Plant, to amend the
registration. The proprietor must not extend or curtail any premises or
equipment before the amended registration is approved.

(26 U.S.C. 5172)

Sec. 19.120 Change in operations.

(a) If the proprietor wishes to conduct additional operations
involving spirits, other than those approved on the current
registration, the proprietor must:
(1) File form TTB F 5110.41, Registration of Distilled Spirits
Plant, to amend the registration; and
(2) Not engage in the additional operations prior to approval of
the amended registration.
(b) If the proprietor wishes to engage in another business that is
authorized under Sec. 19.55 the proprietor must:
(1) File form TTB 5110.41 to amend the registration;
(2) Include the information required under Sec. 19.73(b); and
(3) Not engage in the other business until approval of the amended
registration is received.

(26 U.S.C. 5171, 5172, 5271)

Sec. 19.121 Change in production procedure.

If the proprietor plans to produce a new product or make a change
to the production procedure that will affect the designation of the
product or substantially affect the character of the product, the
proprietor must:
(a) File form TTB F 5110.41, Registration of Distilled Spirits
Plant, to amend the registration;
(b) Provide a new statement of production procedure as described in
Sec. 19.77; and
(c) Receive approval of the amended registration before
implementing the change in the production procedure.

(26 U.S.C. 5172)

Sec. 19.122 Change in construction or use of buildings and equipment.

(a) The proprietor must submit a letterhead notice before making
any material change in the construction or use of buildings or
equipment at the plant other than changes covered by Sec. 19.119,
Sec. 19.142 and Sec. 19.143. The proprietor must:
(1) Describe the proposed change in detail;
(2) Keep a copy of the letterhead notice on file with the current
notice of registration; and
(3) Incorporate the change in the next amendment to the
registration submitted on form TTB F 5110.41, Registration of Distilled
Spirits Plant, unless the appropriate TTB officer requires immediate
submission of an amended form TTB F 5110.41.
(b) The proprietor may make emergency changes in construction or
use of buildings and equipment without prior letterhead notice.
However, the proprietor must promptly report any emergency change to
the appropriate TTB officer.

(26 U.S.C. 5172)

Sec. 19.123 Statement of plant security.

If the proprietor makes changes to the personnel listed, or
procedures contained in, the statement of plant security filed under
Sec. 19.76, the proprietor must:
(a) File a form TTB F 5110.41, Registration of Distilled Spirits
Plant, or a letterhead application to amend the registration, in the
case of any change in the description of plant security, employment of
guard personnel, use of electronic or mechanical alarm system, or
certification of required locks required under Sec. 19.76 (a) through
(d);
(b) File a letterhead notice for any change in personnel who have
custody and access to keys for the required locks as provided under
Sec. 19.76(e); and
(c) Incorporate any changes filed by letterhead notice in the next
amendment to the registration on form TTB F 5110.41 submitted, unless
the appropriate TTB officer requires an immediate submission of form
TTB F 5110.41.

(26 U.S.C. 5171, 5172)

Rules for Amending an Operating Permit

Sec. 19.126 General rules for amending an operating permit.

(a) When and how to amend. If there is a change in any of the
information that the proprietor provided as part of the current
approved application for an operating permit, the proprietor must amend
the operating permit by submitting written documentation in accordance
with this section to the appropriate TTB officer in writing within 30
days of the change unless another time period is specified in this
subpart.
(1) TTB F 5110.25. Except when a letterhead application or
letterhead notice procedure is allowed under this

[[Page 26240]]

subpart, the proprietor must amend the operating permit by submitting
an amended form TTB F 5110.25, Application for Operating Permit Under
5171(d). If the changes only affect parts or pages of the application
for an operating permit the proprietor only needs to submit the
necessary pages or information that will make the permit file current.
(2) Letterhead applications. For certain changes specified in this
subpart, the proprietor may submit a letterhead application instead of
an amended form TTB F 5110.25. The letterhead application must identify
the distilled spirits plant for which the application applies. The
letterhead application change is subject to TTB approval. The
appropriate TTB officer may, at any time, require that the proprietor
submit an amended application on form TTB F 5110.25 if administrative
difficulties occur as a result of the letterhead application.
(3) Letterhead notices. For certain changes noted in this subpart
only a letterhead notice is required. A letterhead notice does not
require approval by TTB. The appropriate TTB officer may, at any time,
require that the proprietor submit amended application on form TTB F
5110.25 if administrative difficulties occur as a result of the
letterhead notice.
(b) FAA permits. If there are changes that affect a basic permit
issued under the Federal Alcohol Administration Act, the proprietor
must amend the basic permit in accordance with the procedures set forth
in part 1 of this chapter.

(26 U.S.C. 5171, 5172)

Sec. 19.127 Automatic termination of permits.

(a) Operating Permits. An operating permit is not transferable. The
proprietor's operating permit will automatically terminate in the
following circumstances:
(1) If the operations that are authorized by the permit are leased,
sold or transferred;
(2) If the company is dissolved on a certain date by an event
specified in the laws of the State where the company operates; or
(3) In the case of a corporation, if actual or legal control of the
corporation changes, directly or indirectly, whether by reason of
change in stock ownership or control, by operation of law, or in any
other manner, the permit will terminate 30 days after the change in
control. However, if an application for a new permit covering the
operations is made within this 30 day period, then the operating permit
may remain in effect until TTB takes final action upon the new
application. TTB's final action on the new application will
automatically terminate the outstanding permit.
(b) Basic Permits. For provisions related to the automatic
termination of an FAA Act basic permit, see part 1 of this chapter.

(26 U.S.C. 5271)

Sec. 19.128 Change in name of proprietor.

If the name of the proprietor changes, the proprietor must file a
letterhead application to amend the operating permit. The proprietor
may not conduct operations under the new name before TTB approves the
amended operating permit. However, the proprietor does not have to file
a new bond or consent of surety.

(26 U.S.C. 5172, 5271)

Sec. 19.129 Change in trade name.

If the proprietor intends to change or add a trade name that will
be used in the operation of the plant, the proprietor must file a
letterhead application to amend the operating permit. The proprietor
may not conduct operations under the new trade name before TTB approves
the amended operating permit. However, the proprietor will not be
required to file a new bond or consent of surety.

(26 U.S.C. 5271)

Sec. 19.130 Changes in stockholders or persons with interest.

The proprietor must notify TTB of any changes in the list of
stockholders or persons with interest that was filed with TTB as
required by Sec. 19.93(b). If the change results in a change of
control, the proprietor must file form TTB F 5110.25, Application for
Operating Permit Under 5171(d), within 30 days of the change. If the
change does not cause a change in control the proprietor:
(a) May file a letterhead notice to amend the operating permit;
(b) May file the amended notice the May 1st following the change in
control year rather than within 30 days of the change, or on any other
date that the appropriate TTB Officer may approve; and
(c) Must incorporate all changes submitted by letterhead notice in
the next form TTB F 5110.25 filed.

(26 U.S.C. 5172, 5271)

Sec. 19.131 Changes in officers, directors, members or managers.

(a) General. If there is a change in the list of officers,
directors, members or managers that the proprietor filed as required by
Sec. 19.93, the proprietor must:
(1) File form TTB F 5110.25 Application for Operating Permit Under
5171(d) or a letterhead notice to amend the operating permit;
(2) Provide the name and address for each new officer, director,
member or manager; and
(3) Incorporate all changes submitted by letterhead notice in the
next TTB F 5110.25 filed.
(b) Waiver. The appropriate TTB officer may waive the requirement
to amend the operating permit if the changes relate to corporate
officers listed on the original or current permit who are no longer
connected with the operations covered by the permit.

(26 U.S.C. 5172, 26 U.S.C. 5171)

Sec. 19.132 Change in proprietorship.

(a) General. If there is a change in proprietorship at a distilled
spirits plant that holds an operating permit, the following
requirements apply to the outgoing proprietor and to the incoming
(successor) proprietor.
(1) Outgoing proprietor. An outgoing proprietor must comply with
the requirements of Sec. 19.147. An outgoing proprietor may transfer
spirits to its successor an accordance with Sec. 19.141.
(2) Successor proprietor. A successor to the proprietorship of a
plant that holds an operating permit:
(i) Must file form TTB 5110.25 Application for Operating Permit
Under 5171(d) and obtain an operating permit;
(ii) Must file the required bonds; and
(iii) May adopt the approved formulas of its predecessor in
accordance with Sec. 5.28 and Sec. 20.63 of this chapter.
(b) Fiduciary. If the successor to the proprietorship of a plant is
an administrator, executor, receiver, trustee, assignee or other
fiduciary, the successor must comply with the provisions of paragraph
(a)(2) of this section. The following rules also apply in this case:
(1) The fiduciary may furnish a consent of surety to extend the
terms of the predecessor's bond instead of filing a new bond;
(2) The fiduciary may incorporate by reference in the Application
for Operating Permit Under 5171(d) on form TTB F 5110.25 any
information contained in the predecessor's application that is still
current;
(3) The successor must furnish a certified copy of the order of the
court or other pertinent document showing the successor's qualification
as fiduciary; and
(4) The effective date of the qualifying documents that the
fiduciary files will be the date of the court order, the date specified
in the order whereby the fiduciary assumes control, or if there is no
court order, the date that the fiduciary assumed control.

[[Page 26241]]

(26 U.S.C. 5172)

Sec. 19.133 Partnerships.

(a) If there is a death or insolvency of a partner in a company
that holds an operating permit under this part, the surviving partner
or partners may continue to operate under the operating permit if:
(1) The partnership is not terminated under the laws of the
particular state but continues until the winding up of the partnership
affairs is complete;
(2) The surviving partner or partners have exclusive right to the
control and possession of the partnership assets for purposes of
liquidation and settlement; and
(3) A consent of surety is filed where the surety and the surviving
partner or partners agree to remain liable on the operations or unit
bond.
(b) If the surviving partner or partners acquire the business upon
settlement of the partnership, the surviving partner or partners must
file as an incoming proprietor and receive approval of the operating
permit as required under Sec. 19.132(a)(2).

(26 U.S.C. 5172)

Sec. 19.134 Change in location.

If the location of the plant changes, the proprietor must:
(a) File form TTB F 5110.25, Application for Operating Permit Under
5171(d), to amend the operating permit;
(b) File a new bond or a consent of surety on form TTB F 5000.18;
and
(c) Not begin operations at the new location prior to approval of
the amended operating permit.

(26 U.S.C. 5172, 5271, 5173)

Sec. 19.135 Change in operations.

If the proprietor wishes to conduct additional operations involving
spirits, other than those already approved on the current operating
permit, the proprietor must:
(a) File form TTB F 5110.25 Application for Operating Permit Under
5171(d) to amend the permit; and
(b) Not engage in the additional operation prior to approval of the
amended permit.

(26 U.S.C. 5171, 5172, 5271)

Alternation of Plant Proprietors

Sec. 19.141 Procedures for alternation of proprietors.

(a) General. A proprietor may alternate use of a distilled spirits
plant or part of the plant with one or more other proprietors. In order
to do so, each proprietor must separately file and receive approval of
the necessary registration, applications and bonds that are required by
subparts D and E of this part. Each proprietor must also conduct
operations and keep records in accordance with the regulations in this
part. Where operations by alternating proprietors will be limited to
parts of the plant, each proprietor must include the following in the
notice of registration:
(1) A description of the areas, rooms or buildings, or combination
of rooms or buildings that will alternate between proprietors;
(2) The method that the proprietor will use to separate the
alternated premises from any premises that will not be alternated; and
(3) Diagrams of the parts of the plant that will be alternated.
(b) Letterhead notice. After a proprietor receives approval to
alternate use of the premises with another proprietor, the alternating
proprietors must separately file letterhead notices each time they
intend to alternate use of the premises. The proprietors may file a
single notice if the notice is signed by each proprietor or an
authorized representative of each proprietor. The proprietors must
submit the letterhead notice to the appropriate TTB officer prior to
the first day that alternation is to take place. Proprietors must
include the following with the notice:
(1) The plant number and the name of the proprietor filing the
notice;
(2) Identification of the outgoing proprietor and incoming
proprietor (by name and plant number);
(3) The effective date and hour of the alternation;
(4) Identification of any applicable diagrams provided with the
registration of each proprietor filed under paragraph (a) of this
section, showing the portions of the premises involved in the
alternation;
(5) The purpose of the alternation;
(6) If distilling materials, unfinished or finished spirits,
denatured spirits, or wine will be transferred to the incoming
proprietor, a statement to that effect; and
(7) If denatured spirits or articles will be retained in the
processing account in locked tanks during the period of alternate
proprietorship, a statement to that effect.
(c) Alternation of production operations. In the case of an
outgoing proprietor who intends to alternate production operations with
another proprietor, the outgoing proprietor must:
(1) Completely process all distilling materials and unfinished
spirits in any bonded areas, rooms, or buildings that will alternate
unless the outgoing proprietor transfers them to the incoming
proprietor; and
(2) Mark and remove all finished spirits in the name in which they
were produced before a production gauge is made by the incoming
proprietor.
(d) Alternation of storage operations. In the case of an outgoing
proprietor who intends to alternate storage operations with another
proprietor, the outgoing proprietor must:
(1) Transfer in bond any spirits or wines in any bonded areas,
rooms, or buildings that will be alternated; and
(2) Execute a form TTB F 5000.18, Change of Bond (Consent of
Surety), to continue in effect the operations or unit bond whenever
operations of the areas, rooms, or buildings will be resumed by the
outgoing proprietor following suspension of operations by the other
proprietor.
(e) Alternation of processing operations. In the case of an
outgoing proprietor who intends to alternate processing operations with
another proprietor, the outgoing proprietor:
(1) Before the effective date and time of the alternation, must
process to completion and remove from the affected area all spirits,
denatured spirits, wines or articles located in any rooms, areas, or
buildings that will alternate, or must transfer these spirits, wines
and articles in bond to the incoming proprietor;
(2) Must execute a form TTB F 5000.18, Change of Bond (Consent of
Surety), to continue in effect the operations or unit bond whenever
operations of the areas, rooms, or buildings will be resumed by the
outgoing proprietor following suspension of operations by the other
proprietor; and
(3) May retain denatured spirits and articles in tanks locked with
approved locks if the outgoing proprietor maintains custody and control
of the locks and keys for the tanks. In this case, the outgoing
proprietor must obtain a consent of surety on form TTB F 5000.18 to
continue liability on the operations or unit bond for the tax on the
denatured spirits or articles that retained in the locked tanks.
(f) Records. Each alternating proprietor must maintain its own
records and submit its own reports. Records kept by an outgoing
proprietor for spirits, wines, and alcoholic flavoring materials may be
used by the incoming proprietor. All transfers of distilling materials,
unfinished spirits, spirits, denatured spirits, and wines must be
reflected in the records of each proprietor.

(26 U.S.C. 5172, 5271)

[[Page 26242]]

Conduct of Alternate Operations at a Plant

Sec. 19.142 Alternate use of premises and equipment for customs
purposes.

(a) General. The proprietor may extend or curtail the distilled
spirits plant premises or a part of those premises for temporary use by
Customs and Border Protection officers for customs purposes. If the
proprietor wishes to alternate the use of the premises for customs
purposes, that use must be approved by the port director of customs and
must be conducted in accordance with applicable customs laws and
regulations.
(b) Qualification. Before alternating the plant premises for
customs purposes, the proprietor must file and receive approval of the
necessary registration, application and bonds as required by this part.
The proprietor's application for registration must include the
following:
(1) A description of the areas, rooms or buildings, or combination
of rooms or buildings that will be alternated;
(2) A diagram of the parts of the plant that the proprietor will
use for the alternation; and
(3) The method that that the proprietor will use to separate the
alternated premises from any premises not subject to alternation.
(c) Letterhead notice. After the proprietor receives approval to
alternate premises for customs purposes, the proprietor must file a
letterhead notice with the appropriate TTB officer each time the
premises will be alternated. The notice must include the following
information:
(1) The name and plant number of the proprietor filing the notice;
(2) The date and hour the alternation will take place;
(3) Identification of any applicable diagrams provided with the
registration filed under paragraph (b) of this section, showing the
portions of the premises involved in the alternation;
(4) The purpose of the alternation;
(5) If the alternation is for gauging or processing distilled
spirits, a statement to that effect; and
(6) An indication of the class of temporary customs warehouse, if
applicable.
(d) Proprietor responsibilities. Prior to the start of alternation
for customs purposes, the proprietor must remove all spirits from the
premises or equipment that will be involved in the alternation.
However, upon release by customs, spirits in the process of being
transferred to bonded premises under 26 U.S.C. 5232, may remain on the
premises.
(e) Exceptions. The qualification requirements in paragraph (b) of
this section and the notice requirements in paragraph (c) of this
section will not apply where the proprietor solely intends to gauge
bulk distilled spirits for transfer from customs custody to TTB bond.
(f) Conveyance of spirits in customs custody. If the proprietor
intends to convey spirits in customs custody across the distilled
spirits plant premises the proprietor must comply with Sec. 19.60.

(26 U.S.C. 5172, 5178)

Sec. 19.143 Alternation for other purposes.

(a) General. The proprietor may temporarily extend or curtail the
distilled spirits plant premises to allow for several other types of
alternate uses. Premises may be alternately curtailed or extended to
allow bonded premises to be used temporarily as general premises, or to
allow general premises to be used as bonded premises. A curtailment or
extension of distilled spirits plant premises may also allow for the
use of the premises as:
(1) An adjacent bonded wine cellar;
(2) An adjacent taxpaid wine bottling house;
(3) An adjacent brewery; or
(4) Facilities for the manufacturer of eligible flavors.
(b) Qualifying documents. Before alternating the premises for a
purpose listed in paragraph (a) of this section, the proprietor must
file and receive approval of the necessary registration, application
forms and attachments that relate to the proposed alternate use.
Depending on the type of alternation involved, the proprietor must file
one or more of the following qualification documents:
(1) Registration. For all alternate uses of the distilled spirits
plant described in paragraph (a) of this section the proprietor must
file a form TTB F 5110.41, Registration of a Distilled Spirits Plant,
to cover the proposed alternation of premises.
(2) Diagram. For all alternate uses, the proprietor must provide a
special diagram, in duplicate, delineating the premises as they will
exist, both during extension and curtailment and clearly depicting all
buildings, floors, rooms, areas, equipment that are to be subject to
alternation, in their relative operating sequence.
(3) Bond. For all alternate uses, the proprietor must provide
evidence of an existing bond, consent of surety, or a new bond to cover
the proposed alternation of premises.
(4) Bonded wine cellar or taxpaid wine bottling house. If the
proprietor intends to alternate the premises or part of the premises as
a bonded wine cellar or taxpaid wine bottling house the proprietor must
also file form TTB F 5120.25, Application to Establish and Operate Wine
Premises.
(5) Brewery. If the proprietor intends to alternate the premises or
part of the premises for a brewery operation the proprietor must file
form TTB F 5130.10, Brewer's Notice.
(c) Separation of premises. The proprietor must separate the
distilled spirits plant premises from the alternate use premises in
accordance with the approved plan of alternation described in the
qualifying documents.
(d) Segregation of products. When the proprietor alternates
premises, the proprietor must segregate products as follows:
(1) Wine operations.
(i) Prior to alternation from distilled spirits plant premises to
wine premises, the proprietor must remove all distilled spirits,
denatured spirits, articles, and wine from the distilled spirits plant
premises that will be alternated. However, the proprietor may keep
spirits on the premises if they are being withdrawn for use in wine
production under Sec. 19.419, or for use in the production of
nonbeverage wine or wine products under Sec. 19.421. Further, the
proprietor may keep wine on the premises if it is to be transferred in
bond under Sec. 19.402(b)(2).
(ii) Prior to alternation from wine premises to distilled spirits
plant premises, the proprietor must remove all wine and spirits from
the wine premises that will be alternated. However, the proprietor may
keep wine on the premises if it is being transferred in bond under
Sec. 19.402(b)(1). Further, the proprietor may keep spirits on the
premises if they are being returned from bonded wine cellar premises to
distilled spirits plant bonded premises under Sec. 19.454.
(2) Brewery. Prior to alternation from distilled spirits plant
premises to operation of a brewery the proprietor must remove all
spirits, denatured spirits, articles and wine from the premises to be
alternated to brewery premises. Prior to alternation of brewery
premises to distilled spirits plant premises, the proprietor must
remove all beer from the premises except beer that is being received
for production of distilled spirits as provided in Sec. 19.296.
(3) General premises. Prior to alternation between bonded and
general premises, the proprietor must remove all spirits, denatured
spirits, articles and wine from the premises to be alternated. However,
the proprietor may keep bonded spirits on portions of bonded

[[Page 26243]]

premises to be alternated to general premises if the spirits are
taxpaid concurrently with the alternation. Also, the proprietor may
keep taxpaid spirits on general premises that will be alternated to
bonded premises if the spirits are to be immediately dumped and
returned to bond under the provisions of subpart Q of this part.
(4) Manufacture of nonbeverage products. Prior to alternation of
the distilled spirits plant premises for use in the manufacture of
eligible flavors, the proprietor must remove all spirits, denatured
spirits, articles and wine from the premises to be alternated. However,
the proprietor may keep spirits on portions of the premises to be
curtailed if the proprietor pays the tax concurrent with the
alternation. Further, the proprietor may keep taxpaid spirits that have
not been used in the manufacture of a nonbeverage product on parts of
the premises to be included in the extension of the bonded premises if
the spirits are to be immediately dumped and returned to bond under the
provisions of subpart Q of this part.
(e) Records. The proprietor must prepare the record of alternating
premises prescribed by Sec. 19.627 each time that the proprietor
alternates premises.

(26 U.S.C. 5172, 5178)

Sec. 19.144 Alternation of distilled spirits plant and volatile
fruit-flavor concentrate plant premises.

The proprietor may temporarily extend or curtail the distilled
spirits plant premises for alternate use with the premises of a
contiguous volatile fruit-flavor concentrate plant. If a proprietor
wishes to use all or a portion of the premises alternately as a
volatile fruit-flavor concentrate plant or vice-a-versa, the proprietor
must comply with the requirements of Sec. Sec. 18.39 and 18.41 through
18.43 of this title.

(26 U.S.C. 5172, 5178)

Discontinuance of Operations

Sec. 19.147 Notice of discontinuance of operations.

If the proprietor plans to permanently discontinue one or more of
the operations listed on the notice of registration filed under subpart
D of this part, the proprietor must notify the appropriate TTB officer
by filing form TTB F 5110.41, Registration of Distilled Spirits Plant,
to show discontinuance of operations. The proprietor must submit the
following with form TTB F 5110.41:
(a) The permit covering each discontinued operation;
(b) A written request for cancellation of the permit(s);
(c) A written statement indicating whether or not--
(1) The proprietor has lawfully disposed of all spirits, denatured
spirits, articles, wines, liquor bottles, and other pertinent items;
(2) There are any spirits, denatured spirits, wines, or liquor
bottles in transit to the premises; and
(3) The proprietor has secured and returned to the appropriate TTB
officer for cancellation all approved applications for transfer of
spirits and denatured spirits to the premises; and
(d) A monthly operations report, as provided for under Sec.
19.632, for each discontinued operation, with each report marked
``Final Report''.

(26 U.S.C. 5172, 5271)

Subpart F--Bonds and Consents of Surety

Bonding Requirements for a DSP

Sec. 19.151 General.

(a) Bond required. Any person who plans to establish and operate a
distilled spirits plant must provide TTB with one or more bonds on form
TTB F 5110.56, Distilled Spirits Bond. TTB will not approve a
registration or allow a person to operate a distilled spirits plant
until the applicant has provided the necessary bonds. If a proprietor
fails to pay any liability covered by the bond, TTB may seek payment
from the proprietor, from the surety (see Sec. 19.153) or from both
the proprietor and the surety. The types and penal sums of bonds
required will depend upon the type and size of the operations that the
proprietor will conduct.
(b) Bond terms and conditions. The terms and conditions of a
distilled spirits bond require that the proprietor comply with all
provisions of law and regulations relating to activities covered by the
bond, and to pay all taxes imposed by 26 U.S.C. Chapter 51, including
taxes on unexplained shortages of bottled distilled spirits. The bond
will further specify that the proprietor will pay all penalties
incurred, or fines imposed, for violations of law and regulations
relating to activities covered by the bond. The specific terms of the
required bond(s) are stated on form TTB F 5110.56.
(c) Corporations and controlled subsidiaries. For purposes of this
subpart, the term ``corporation'' includes a Limited Liability Company
(LLC) in any jurisdiction where the law authorizes such a business
organization to operate. Whenever used in this subpart, the term
``controlled subsidiary'' means a corporation (or LLC) in which more
than 50 percent of the voting power is controlled by a parent
corporation.

(26 U.S.C. 5173, 5551)

Sec. 19.152 Types of bonds.

(a) Basic Bonds. There are two basic types of bonds: the operations
bond, and the withdrawal bond.
(1) Operations bond. An operations bond covers the tax liability
for a variety of operations at a distilled spirits plant, along with
any penalties incurred and fines imposed for violation of the law and
regulations relating to activities covered by the bond.
(2) Withdrawal bond. A withdrawal bond covers the tax liability for
tax determined distilled spirits withdrawn from the bonded premises on
a tax deferred basis.
(b) Other bonds. In addition to the basic operations and withdrawal
bonds, several variations of these bonds are available:
(1) An adjacent wine cellar bond covers operations at a distilled
spirits plant and an adjacent bonded wine cellar;
(2) An area bond covers operations at two or more distilled spirits
plant and any adjacent bonded wine cellars; and
(3) A unit bond covers both operations and withdrawals at one or
more distilled spirits plants and operations at any adjacent bonded
wine cellars.

(26 U.S.C. 5173)

Sec. 19.153 Bond guaranteed by a corporate surety.

(a) Corporate surety. A company that issues bonds is called a
``corporate surety.'' Proprietors must obtain the surety bonds required
by this subpart from a corporate surety approved by the Secretary of
the Treasury.
(b) How to find an approved surety. The Department of the Treasury
publishes a list of approved corporate surety companies in Treasury
Department Circular No. 570, ``Companies Holding Certificates of
Authority as Acceptable Sureties on Federal Bonds and as Acceptable
Reinsuring Companies''. Circular 570 is published annually in the
Federal Register. The most current edition of the circular is posted at
the website of the Financial Management Service, Department of the
Treasury at http://www.fms.treas.gov/c570. Printed copies of Circular
570 are available for purchase from the Government Printing Office.

(31 U.S.C. 9304, 9306)

[[Page 26244]]

Sec. 19.154 Bond guaranteed by deposit of securities.

(a) General. As an alternative to the corporate surety bond under
Sec. 19.153, a person can file a bond that guarantees payment of the
liability by pledging one or more acceptable negotiable securities.
These securities must have a par value (face amount) equal to or
greater than the penal sums of the required bonds. The pledged
securities are held in the Federal Reserve Bank in a safekeeping
account with TTB as the pledgee. Should the proprietor fail to pay one
or more of the guaranteed liabilities, TTB can take action to sell the
deposited securities to satisfy the debt. Pledged securities will be
released if there are no outstanding liabilities when the bond is
terminated. (See Sec. 19.170.)
(b) Acceptable securities. Only public debt obligations of the
United States, the principal and interest of which are unconditionally
guaranteed by the United States Government, are acceptable for the
purpose described in paragraph (a) of this section. The Department of
the Treasury and certain other United States Government agencies issue
debt instruments that are acceptable as collateral, such as Treasury
notes and Treasury bills. Savings bonds, certificates of deposit and
letters of credit are not acceptable. A list of securities acceptable
as collateral in lieu of surety bonds is available from the Bureau of
the Public Debt, Office of the Commissioner, Government Securities
Regulations Staff. Current information and guidance from the Bureau of
the Public Debt may be found at http://www.publicdebt.treas.gov.

(31 U.S.C. 9301, 9303)
(31 CFR Part 380)

Sec. 19.155 Change of surety bond terms-consent of surety.

In order to change the terms of an approved bond, both the
principal and the surety company that guaranteed bond must agree to the
change. TTB must also approve the change. All changes to the terms of a
bond must be executed on form TTB F 5000.18, Change of Bond (Consent of
Surety) by both the principal and the surety with the same formality
and proof of authority as required for the original bond. The
completed, executed form TTB F 5000.18 must be submitted to the
National Revenue Center.

(26 U.S.C. 5173)

Sec. 19.156 Power of attorney for surety.

(a) Requirement for power of attorney. Every bond and every consent
of surety filed with TTB in which an agent or officer executed the bond
or consent on behalf of the surety must be supported by a power of
attorney authorizing the agent or officer to execute the bond or
consent of surety. The power of attorney assures TTB that the person
who signed the bond on behalf of the surety has the legal authority to
obligate the surety.
(b) Form of power of attorney and endorsement. A power of attorney
will be prepared on the surety's own form, and must be executed under
the surety's corporate seal. If the power of attorney submitted is
other than a manually signed original, it must be accompanied by a
certification from the surety that the power of attorney is valid.
(c) Additional documentation. The appropriate TTB officer
authorized to approve and accept the bond may require additional
evidence of the authenticity of signatures and the authority of persons
signing on behalf of the surety to execute the bond or consent.

(31 U.S.C. 9304, 9306)

Sec. 19.157 Disapproval of bonds and consents of surety.

(a) Grounds for disapproval. The appropriate TTB officer may
disapprove any bond or consent of surety required by this part if the
principal or any person having ownership, control or responsibility for
actively managing the business has been previously convicted, in a
court of competent jurisdiction of:
(1) Any fraudulent noncompliance with any provision of any law of
the United States relating to internal revenue or customs taxation of
spirits, wines, or beer, or if the offense was compromised by payment
of penalties or otherwise, or
(2) Any felony under a law of any State or the District of
Columbia, or the United States, prohibiting the manufacture, sale,
importation, or transportation of spirits, wine, beer, or other
intoxicating liquor.
(b) Appeal. If the appropriate TTB officer disapproves a bond or
consent of surety, the person giving the bond may appeal the
disapproval to the Administrator, who will hear the appeal. The
decision of the Administrator will be final.

(26 U.S.C. 5551)

Requirements for Operations and Withdrawal Bonds

Sec. 19.161 Operations bond.

(a) General. Any person who intends to establish a distilled
spirits plant must furnish an operations bond (or a unit bond, see
Sec. 19.165) covering distilled spirits operations at such plant on
TTB Form 5110.56 with the original application to register the
distilled spirits plant.
(b) Approval of bond. The appropriate TTB officer may require a
statement, executed under the penalty of perjury, as to whether the
principal, or any person owning, controlling, or managing the business
has been convicted of, or has compromised any offense listed in Sec.
19.157(a)(1), or has been convicted of any offense listed in Sec.
19.157(a)(2). If the above statement contains an affirmative answer,
the applicant must provide an additional detailed statement describing
the circumstances surrounding each conviction or compromise. The
appropriate TTB officer will decide whether to approve or disapprove
the bond.

(26 U.S.C. 5173, 5551)

Sec. 19.162 Operations bond for distilled spirits plant and adjacent
bonded wine cellar.

(a) One bond satisfying two requirements. A proprietor who operates
a bonded wine cellar that is adjacent to the proprietor's distilled
spirits plant, may file a single operations bond to cover the
operations of the distilled spirits plant and the bonded wine cellar. A
proprietor who files this type of bond satisfies the requirement in 26
U.S.C. 5173 for an operations bond covering the distilled spirits plant
and the requirement in 26 U.S.C. 5354 for a bond covering wine and
spirits possessed at, and in transit to, the bonded wine cellar. (The
proprietor may still have to obtain a supplemental bond for the wine
cellar to cover liabilities resulting from deferred payment of tax. See
the second sentence of 26 U.S.C. 5354.)
(b) One bond combining terms and coverage of separate bonds. An
operations bond filed under paragraph (a) of this section must contain
the same terms and conditions that would be in separate bonds for the
distilled spirits plant and for the bonded wine cellar. The proprietor
may not allocate or divide the penal sum between the distilled spirits
plant and the bonded wine cellar. The total amount of the bond must be
available to satisfy any liability incurred under the terms of the bond
at either facility.
(c) Persons qualified for a single bond. A proprietor may choose to
file a single operations bond for a distilled spirits plant and
adjacent bonded wine cellar only if:
(1) Such distilled spirits plant is qualified under subpart D of
this part for the production of distilled spirits; and
(2) Such wine cellar and distilled spirits plant are operated by
the same person (or in the case of a corporation,

[[Page 26245]]

by such corporation and its controlled subsidiaries).

(26 U.S.C. 5173, 5351, 5354)

Sec. 19.163 Area operations bond.

(a) Area operations bond covering multiple locations. A person who
operates more than one distilled spirits plant within the geographical
area serviced by the National Revenue Center, may submit to TTB an area
operations bond covering the operations of any two or more such plants
and any bonded wine cellars that are adjacent to such plants and which
otherwise could be covered by an operations bond. Area operations bonds
filed under this section will be in lieu of the operations bond
requirements for single distilled spirits plants under Sec. Sec.
19.161 and 19.166 and must contain the same terms and conditions as
those contained in separate bonds filed for single distilled spirits
plants. Any person who files an area operations bond may not allocate
or divide the penal sum of the area operations bond between the
separate locations and the total penal sum of the bond must be
available to satisfy liability incurred at any of the covered
locations.
(b) Area operations bonds filed by corporations. An area operations
bond may only cover distilled spirits plants and adjacent bonded wine
cellars that are operated by the same person. For purposes of this
section, a corporation and its controlled subsidiaries are considered
to be one person. Further, a controlled subsidiary is a corporation in
which more than 50 percent of the voting power is controlled by the
parent corporation. Consequently, an area operations bond may cover
distilled spirits plants and adjacent bonded wine cellars operated by a
parent corporation and one or more of its controlled subsidiaries. The
name of each corporation that operates a covered facility must appear
on the bond as a principal, whether the operating corporation is the
parent or a subsidiary. The bond must bear an authorized signature for
each operating corporation appearing on the bond.

(26 U.S.C. 5173)

Sec. 19.164 Withdrawal bond.

(a) Requirement for a withdrawal bond. If a person intends to
withdraw spirits from a distilled spirits plant upon determination of
the taxes due on the spirits but before payment of the tax, the person
must provide TTB with a withdrawal bond for the distilled spirits
plant. The withdrawal bond must guarantee payment of any taxes due on
distilled spirits withdrawn from bonded premises up to the amount of
the bond. Such bond will be in addition to the operations bond, and if
the distilled spirits are withdrawn under the withdrawal bond, the
operations bond will no longer cover liability for payment of the tax
on the spirits withdrawn. For purposes of this section, a person
includes a corporation, together with all of its controlled
subsidiaries, and a controlled subsidiary has the same meaning as in
Sec. 19.163(b).
(b) One bond covering multiple plants. A person who operates more
than one distilled spirits plant within the geographical area serviced
by the National Revenue Center, may submit to TTB a single withdrawal
bond that covers withdrawals from all such distilled spirits plants
within that geographic area.
(c) Penal sum of bonds--(1) Penal sum of a bond covering a single
plant. A person who files a withdrawal bond for a single plant must
compute the penal sum of such bond in accordance with Sec. 19.166. If
the penal sum of such bond is less than the maximum amount, withdrawals
from the plant may not exceed the penal sum.
(2) Penal sum of bond covering multiple plants. A person who files
one withdrawal bond to cover two or more distilled spirits plants must
compute the required penal sum for each plant individually in
accordance with Sec. 19.166. The penal sum of the withdrawal bond must
be equal to, or greater than, the total of the minimum amounts required
for the individual plants. The bond must show the amount of coverage
allocated to each individual plant as well as the total penal sum for
all plants. If the portion of the penal sum allocated to a particular
plant is less than the maximum amount prescribed in Sec. 19.166 for a
single plant, withdrawals from that plant must not exceed the amount of
the penal sum allocated to that plant. The allocation of the penal sum
notwithstanding, the entire penal sum of the bond must be available to
satisfy all liability for tax on withdrawals from any and all of the
covered plants.

(26 U.S.C. 5173)

Sec. 19.165 Unit bonds.

(a) Unit bond covering operations and withdrawals. If a person is
otherwise required to file bonds for both operations at one or more
distilled spirits plants and withdrawals from one or more distilled
spirits plants, the person may instead submit a single unit bond that
provides all of the guarantees that would otherwise be provided by
separate operations and withdrawal bonds. The unit bond may also
provide coverage for operations at adjacent bonded wine cellars.
For purposes of this section, a person includes a corporation,
together with all of its controlled subsidiaries, and a controlled
subsidiary has the same meaning as in Sec. 19.163(b).
(b) Required penal sum--(1) General. A person must determine the
penal sum for the unit bond by separately calculating in accordance
with Sec. 19.166, and then totaling, the amounts needed to cover
operations and withdrawals at each individual plant covered by the
bond. The penal sum for the unit bond must not be less than the sum of
the minimum penal sums that would be required if each of the plants had
its own bond.
(2) Allocation between operations and withdrawals. A unit bond must
show separately the amount of coverage provided for operations
(including operations at each adjacent bonded wine cellar if
applicable) and for withdrawals at each distilled spirits plant covered
by the bond.
(3) Tax liability must not exceed allocated penal sum. If the
amount of the penal sum allocated to operations at, or withdrawals
from, a particular plant is less than the maximum amount prescribed in
Sec. 19.166 for a single plant, the tax liability for operations at,
or withdrawals from, that plant must not exceed that allocated amount.
(4) Total penal sum available for each plant. Even when the penal
sum of a unit bond is allocated among multiple plants, the bond must
provide that the total penal amount of the bond will be available to
satisfy any liability incurred under the terms and conditions of the
bond at any plant covered by the bond.

(26 U.S.C. 5173)

Sec. 19.166 Required penal sums.

A person must determine the penal sums for the various bonds
required by this subpart according to the following table:

[[Page 26246]]

----------------------------------------------------------------------------------------------------------------
The penal sum must be:
(a) Operations bond for a single ----------------------------------------
plant operating as a: Required penal sum represents: and need not be
not less than-- more than--
----------------------------------------------------------------------------------------------------------------
(1) Distiller.................. The amount of tax on spirits $5,000............ $100,000
produced during a 15-day period.
(2) Warehouseman, in general... The amount of tax on spirits and 5,000............. 200,000
wines deposited in, stored on, and
in transit to, the bonded premises.
(3) Warehouseman limited to The amount of tax on spirits and 5,000............. 50,000
storage of spirits in packages wines deposited in, stored on, and
to a total of not over 50,000 in transit to, the bonded premises.
proof gallons.
(4) Distiller and warehouseman. The amount of tax on spirits 10,000............ 200,000
produced during a period of 15 days,
plus the tax on spirits and wines
deposited in, stored on, and in
transit to the bonded premises.
(5) Distiller and processor.... The amount of tax on spirits 10,000............ 200,000
produced during a 15-day period,
plus the amount of tax on spirits,
denatured spirits, articles and
wines deposited in, or stored on,
and in transit to the bonded
premises.
(6) Warehouseman and processor The amount of tax on spirits, 10,000............ 250,000
in general. denatured spirits, articles, and
wines deposited in, stored on, and
in transit to, the bonded premises.
(7) Warehouseman and processor, The amount of tax on spirits, 10,000............ 50,000
limited to storage of spirits denatured spirits, articles, and
or denatured spirits in wines deposited in, stored on, and
packages to a total of not over in transit to, the bonded premises.
50,000 proof gallons, and
processing of spirits or
denatured spirits so stored.
(8) Distiller, warehouseman and The amount of tax on spirits 15,000............ 250,000
processor. produced during a 15-day period,
plus the amount of tax on spirits,
denatured spirits, articles and
wines deposited in, stored on, and
in transit to, the bonded premises.
(9) Distiller with adjacent The amount required for a distiller 6,000............. 150,000
bonded wine cellar. (see (a) 1. above) plus the amount
of tax on wines and wine spirits
possessed on, and in transit to, the
adjacent wine cellar.
(10) Distiller and warehouseman The amount required for a distiller 11,000............ 250,000
with adjacent bonded wine & warehouseman (see (a) 4. above)
cellar. plus the amount of tax on wines and
wine spirits possessed on, and in
transit to, the adjacent wine
cellar.
(11) Distiller and processor The amount required for a distiller 11,000............ 250,000
with adjacent bonded wine & processor (see (a) 5. above) plus
cellar. the amount of tax on wines and wine
spirits possessed on, and in transit
to, the adjacent wine cellar.
(12) Distiller, warehouseman The amount required for a distiller- 16,000............ 300,000
and processor with adjacent warehouseman-processor (see (a) 8.
bonded wine cellar. above) plus the amount of tax on
wines and wine spirits possessed on,
and in transit to, the adjacent wine
cellar.
----------------------------------------------------------------------------------------------------------------

(b) Area operations bond for two
or more plants whose combined
required penal sums under Required penal sum But need not be
paragraph (a) of this section: is: more than:

------------------------------------------------------------------------
(1) Do not exceed $300,000..... 100%.............. $300,000
(2) Exceed $300,000 but do not $300,000 plus 70% $510,000
exceed $600,000. of the amount
over $300,000.
(3) Exceed $600,000 but do not $510,000 plus 50% $710,000
exceed $1,000,000. of the amount
over $600,000.
(4) Exceed $1,000,000 but do $710,000 plus 35% $1,060,000
not exceed $2,000,000. of the amount
over $1,000,000.
(5) Exceeds $2,000,000......... $1,060,000 plus
25% of the amount
over $2,000,000.
------------------------------------------------------------------------

The penal sum must be
----------------------------------------
(c) Withdrawal bond for: Required penal sum represents: and need not be
not less than-- more than--
----------------------------------------------------------------------------------------------------------------
(1) One distilled spirits plant The amount of tax which, at any one $1,000............ $1,000,000
time, is chargeable against such
bond, but has not yet been paid..

[[Page 26247]]

(2) Two or more distilled Sum of the penal sums for each plant ($1,000) x (number (Number of
spirits plants. calculated in (c)1 of this section. of plants). plants) x
$1,000,000
----------------------------------------------------------------------------------------------------------------

The penal sum must be:
----------------------------------------
(d) Unit bond for: Required penal sum represents: and need not be
not less than-- more than--
----------------------------------------------------------------------------------------------------------------
(1) Operations at one distilled An amount equal to the sum of the $6,000............ $1,300,000
spirits plant (including any required penal sums of an operations
adjacent bonded wine cellar), bond and a withdrawal bond for the
and withdrawals from the bonded plant, if such bonds were obtained
premises of the same plant. separately. (See (a) and (c)1 in
this table.)
(2) Operations at two or more An amount equal to the sum of the Sum of the minimum Sum of the
distilled spirits plants penal sums of an area operations penal sums for maximum penal
(including any adjacent bonded bond and withdrawal bonds needed for operations and sums for area
wine cellars), and withdrawals all of the covered plants, if such withdrawal bonds operations bonds
from the bonded premises of the bonds were obtained separately. required for each and withdrawal
same plants. [Total penal sums of (b) and (c)(2) plant covered by bonds required
in this table.] the bond. for the plants
covered by the
unit bond.
----------------------------------------------------------------------------------------------------------------

(26 U.S.C. 5173)

Sec. 19.167 Increase of bond coverage.

(a) When required. If the penal sum of a bond is less than the
maximum amount specified by Sec. 19.166, and liabilities increase to
the point where they exceed the bond coverage, the proprietor must
increase the amount of the bond to cover the increased liability. The
proprietor must increase the bond coverage either by replacing the
existing bond with a new, larger bond that covers the entire liability,
or by supplementing the existing bond with a separate strengthening
bond in accordance with paragraph (b) of this section.
(b) Strengthening bonds. A strengthening bond is a second bond with
the same surety as on the original bond which covers the increased
liability. A strengthening bond must show both its execution date and
its effective date. TTB will not accept a strengthening bond if it
contains any term or condition that is a release, or could be
interpreted as a release, from liability under any former bond, or that
limits the liability of any bond to less than its full penal sum.

(26 U.S.C. 5173)

Sec. 19.168 Superseding bonds.

(a) General. In any of the circumstances outlined in paragraphs (b)
through (d) of this section, the proprietor must replace an existing
bond with a new bond. A new bond that replaces another bond is called a
superseding bond.
(b) Surety company no longer acceptable. The proprietor must file a
superseding bond if the surety on the proprietor's current bond becomes
insolvent or if the surety is removed from the list of approved
sureties in Treasury Circular 570. TTB may also require the filing of a
superseding bond if any other contingency affecting the validity or
efficiency of the bond arises.
(c) Change of control. An executor, administrator, assignee,
receiver, trustee, or other person acting in a fiduciary capacity,
continuing or liquidating the business of the principal on a bond, must
either provide TTB with a superseding bond, or obtain consent from the
surety on each existing bond when assuming control of the business.
(d) Termination of bond by surety. If the surety applies to
terminate a bond under Sec. 19.171, and the proprietor wishes to
continue the activity covered by the bond, the proprietor must file a
superseding bond that becomes effective on or before the termination
date of the existing bond. The superseding bond must show both its
execution date and its effective date.

(26 U.S.C. 5173, 5175, 5176, 5551)

Sec. 19.169 Effect of failure to furnish a superseding bond.

(a) Operations bond. A person may not operate a distilled spirits
plant without an operations bond. If a person does not submit an
acceptable superseding operations bond when required to do so under
Sec. 19.168, the person must immediately discontinue the activities to
which the lapsed bond coverage relates upon lapse of the existing bond
coverage.
(b) Withdrawal bond. A person who does not submit an acceptable
superseding withdrawal bond when required to do so under Sec. 19.168
may not withdraw distilled spirits from the bonded premises on a
deferred basis. Upon lapse of the existing bond coverage the person
must pay the tax at the time of withdrawal, except in the case of
distilled spirits withdrawn free of tax or withdrawn without payment of
tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C.
7510.
(c) Unit bond. A person who does not provide an acceptable
superseding unit bond when required to do so under Sec. 19.168 must
immediately discontinue the business or distilled spirits operations to
which the lapsed bond coverage relates. Upon lapse of the existing bond
coverage the person must also pay the tax at the time of withdrawal,
except in the case of distilled spirits withdrawn free of tax or
withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn
exempt from tax under 26 U.S.C. 7510.

(26 U.S.C. 5173, 5175, 5176)

Sec. 19.170 Termination of bonds.

Liability under operations bonds, withdrawal bonds, and unit bonds
may be terminated for future withdrawals, future production, or future
deposits as set forth below:
(a) On application by the surety. A surety may terminate a bond by
filing a notice as provided in Sec. 19.171;

[[Page 26248]]

(b) By replacement of the bond. A principal may terminate an
existing bond by replacing it with a superseding bond approved by TTB;
(c) By discontinuing withdrawals. A principal may terminate a
withdrawal bond by notifying TTB that the principal has stopped making
withdrawals covered by the bond, if the bond was filed solely as a
withdrawal bond; or
(d) By discontinuing the business. A principal may terminate a bond
by notifying TTB that the principal has discontinued business.

(26 U.S.C. 5173)

Sec. 19.171 Surety notice of relief from bond liability.

(a) Notice to principal. A surety on a bond may, at any time,
notify the principal in writing that the surety desires to be relieved
of liability under the bond.
(b) Notice to TTB. A surety on a bond may, at any time, notify the
appropriate TTB officer in writing that the surety desires to be
relieved of liability under the bond. The notice must specify the date
after which the surety desires to be relieved of liability. In the case
of a withdrawal bond, the date specified in the notice must be at least
ten days after the notice is received by the appropriate TTB officer.
In the case of an operations bond or unit bond, the date specified in
the notice must be at least 90 days after the notice is received by the
appropriate TTB officer. When a surety files a termination notice with
TTB, the surety must include either an acknowledgement from the
principal that the principal is aware that the surety is terminating
the bond or proof that the surety has served the principal with notice
of its intent to terminate the bond.
(c) Effect of notice. The bond coverage will end as of close of
business on the date specified in the notice, provided the surety
timely filed a proper and complete termination notice, and the surety
does not withdraw its termination notice in writing prior to the
termination date. The surety will be released from future liability
under the bond to the extent set forth in Sec. 19.172.

(26 U.S.C. 5173, 5175, 5176)

Sec. 19.172 Relief of surety from bond liability.

A surety who has provided proper notice under Sec. 19.171 will be
relieved from liability under the bond in question as set forth below:
(a) Operations or unit bond. When a superseding bond is submitted,
the surety will be relieved of future liability related to production
and deposits that take place after the effective date of the
superseding bond. However, the surety remains liable for the tax on all
distilled spirits or wines produced, or for other liabilities incurred,
during the term of the bond. Further, if a superseding bond is not
submitted, the surety will remain liable under the bond for all spirits
or wines that are on hand or in transit to the bonded premises or
bonded wine cellar on the date specified in the notice. The liability
of the surety will continue until all such spirits or wines have been
lawfully disposed of, or until a new bond has been submitted by the
principal covering the spirits or wine.
(b) Withdrawal or unit bonds. The surety will be relieved from
liability for withdrawals made after the date specified in the notice,
or upon the effective date of a new bond if one is given.

(26 U.S.C. 5173, 5176)

Sec. 19.173 Release of pledged securities.

Securities that are pledged and deposited with TTB under Sec.
19.154 will only be released by TTB in accordance with the provisions
of 31 CFR Part 225. The appropriate TTB officer will not release
pledged securities prior to termination of the liability under the bond
for which they were pledged. When the appropriate TTB officer is
satisfied that the pledged securities may be released, the official
will set a date or dates on which a part or all of the securities may
be released. At any time prior to the release of the securities, the
appropriate TTB officer may extend the date of release for any
additional length of time deemed necessary.

(31 U.S.C. 9301, 9303)

Subpart G--Construction, Equipment, and Security Requirements

Sec. 19.181 General.

The proprietor of a distilled spirits plant must apply certain
construction, equipment, and security standards at the plant. These
standards are intended to ensure the protection of untaxed spirits at
the plant and to ensure proper measurement and accountability for
products on bonded premises. This subpart prescribes those standards.

(26 U.S.C. 5178)

Tank Requirements

Sec. 19.182 Tanks--general requirements.

The proprietor of a distilled spirits plant must ensure that all
tanks on the premises used to hold spirits, denatured spirits, or wines
are:
(a) Used for the purpose listed on the application and plant
registration;
(b) Equipped with accurate means for measuring their contents. If
the means for measurement is not a permanent fixture on the tank, the
proprietor must equip the tank with a fixed device for measuring the
contents. However, tanks having a capacity of less than 101 gallons are
not required to have permanent gauge devices;
(c) Accurately calibrated if used for any of the gauges described
in this part. Further, if tanks or their gauging devices are moved in
any manner subsequent to original calibration, the tanks shall not be
used until recalibrated;
(d) Accessible through walkways, landings, and stairs that permit
access to all parts of the tank;
(e) Equipped or situated so that they may be locked or secured; and
(f) Constructed to prevent access to the spirits or wines through
vents, flame arresters or other safety devices.

(26 U.S.C. 5006, 5204, 5505)

Sec. 19.183 Scale tanks.

(a) Except as otherwise provided in paragraph (b) of this section,
if the proprietor uses a tank to determine the distilled spirits tax
imposed by 26 U.S.C. 5001, the tank must be mounted on scales and the
contents of the tank must be determined by weight. The scale tank also
must be equipped with a suitable device so that the volume of the
contents can be quickly and accurately determined.
(b) The requirement to mount tanks on scales does not apply to
tanks having a capacity of 55 gallons or less. Such tanks may be moved
onto an accurately calibrated scale when a tax determination gauge
needs to be made.

(26 U.S.C. 5006, 5204, 5505)

Sec. 19.184 Scale tank minimum graduations.

(a) The beams or dials on scale tanks used for tax determination
must have minimum graduations not greater than the following:

------------------------------------------------------------------------
Minimum
Quantity to be weighed (pounds) graduation
(pounds)
------------------------------------------------------------------------
Not exceeding 2,000........................................ \1/2\
Between 2,000 and 6,000.................................... 1
Between 6,000 and 20,000................................... 2
Between 20,000 and 50,000.................................. 5
Over 50,000................................................ 10
------------------------------------------------------------------------

(b) For scales having a capacity greater than 2,000 pounds, the
minimum quantity which may be entered onto the weighing tank scale for
gauging for tax determination will be the greater of:
(1) 1,000 times the minimum graduation of the scale, or

[[Page 26249]]

(2) 5 percent of the total capacity of the weighing tank scale.
(c) The weighing of lesser quantities for determination of tax may
be authorized by the appropriate TTB officer where the beam of the
scale is calibrated in \1/2\ pound or 1 pound graduations and it is
found by actual test that the scales are accurate at each graduation.
(d) Lots of spirits weighing 1,000 pounds or less shall be weighed
on scales having \1/2\ pound graduations.

(26 U.S.C. 5006, 5204, 5505)

Sec. 19.185 Testing scale tanks for accuracy.

(a) A proprietor who uses a scale tank for tax determination must
ensure the accuracy of the scale through periodic testing. Testing of
the scale must be conducted at least every 6 months and whenever the
scale is adjusted or repaired.
(b) A proprietor also must test, at least once a month, the
gallonage represented to be in a scale tank against the gallonage
indicated by volumetric determination of the contents of the tank.
However, if the scale is not used during a month, it is only necessary
to verify against the volumetric determination when the scale is next
used. The proprietor must make the volumetric determination in
accordance part 30 of this chapter. If the variation exceeds .5 percent
of the quantity shown in the tank, the proprietor must take appropriate
action to verify the accuracy of the scale.
(c) If the appropriate TTB officer determines that a scale may be
inaccurate, the proprietor must test the accuracy of the scale.

(26 U.S.C. 5006, 5204, 5505)

Package Scale and Pipeline Requirements

Sec. 19.186 Package scales.

Proprietors must ensure that scales used to weigh packages are
tested at least every 6 months and whenever they are adjusted or
repaired. However, if a scale is not used during a 6-month period, it
is only necessary to test the scale prior to its next use. Scales used
to weigh packages that hold 10 wine gallons or less must indicate
weight in ounces or hundredths of a pound.

(26 U.S.C. 5204)

Sec. 19.187 Pipelines.

All pipelines, including flexible hoses, that are used to transfer
spirits, denatured spirits, articles, and wines must be constructed,
arranged, and secured so as to ensure protection of the revenue and
permit ready examination. The appropriate TTB officer may approve
pipelines that cannot be readily examined if they pose no jeopardy to
the revenue.

(26 U.S.C. 5178)

Measuring and Proofing Equipment Requirements

Sec. 19.188 Measuring devices and proofing instruments.

(a) General. A proprietor of a distilled spirits plant must have
accurate instruments and equipment at the plant for determining the
proof and volume of spirits.
(b) Instruments. The hydrometers and thermometers that a proprietor
uses to gauge spirits must show subdivisions or graduations of proof
and temperature as specified in part 30 of this chapter. Proprietors
must frequently test their hydrometers and thermometers to ensure their
accuracy. If an instrument appears to be in error, the proprietor may
not use the instrument until it is tested and certified as accurate by
the manufacturer or another qualified person.
(c) Meters. A proprietor may use an accurate mass flow meter to
measure the volume of bulk spirits. A mass flow meter used for tax
determination of bulk spirits must be certified by the manufacturer or
other qualified person as accurate within a tolerance of +-0.1%. A mass
flow meter used for all other required gauges of bulk spirits must be
certified by the manufacturer or other qualified person as accurate
within a tolerance of +-0.5%. The proprietor must make corrections for
the temperature of the spirits being measured in conjunction with the
volumetric measurement of spirits by mass flow meter. The proprietor
must also test mass flow meters at least every 6 months to ensure that
they are accurate within the required tolerances.

(26 U.S.C. 5204)

Other Plant Requirements

Sec. 19.189 Identification of structures, areas, apparatus, and
equipment.

(a) Buildings. The proprietor must mark each building at a
distilled spirits plant where spirits, denatured spirits, articles,
wine, or distilling or fermenting materials are kept with a
distinguishing number or letter.
(b) Tanks. The proprietor must mark each tank or receptacle for
spirits, denatured spirits, or wine to show a unique serial number and
capacity.
(c) Stills. The proprietor must number and mark to show the use of
each still, fermenter, cooker, and yeast tank.
(d) Other major equipment. The proprietor must identify the use of
all other major equipment used for processing or containing spirits,
denatured spirits, wine, distilling or fermenting material, and all
other tanks, unless the intended purpose is readily apparent.

(26 U.S.C. 5178)

Sec. 19.190 Office facilities for TTB use.

(a) When required by the appropriate TTB officer, the proprietor
must provide a secure cabinet equipped for locking for use by TTB.
(b) If one or more TTB officers are assigned to a distilled spirits
plant to supervise operations on a continuing basis, the proprietor
must provide a suitable office at the plant for the exclusive use of
the TTB officers in performing their duties. The appropriate TTB
officer will determine if the office facilities are suitable.

(26 U.S.C. 5178)

Sec. 19.191 Signs.

The proprietor must place and keep a conspicuous sign on the
outside of the place of business showing the name of the proprietor and
the business, or businesses, in which engaged.

(26 U.S.C. 5180)

Sec. 19.192 Security.

(a) General. The proprietor of a distilled spirits plant must
provide adequate security measures at the plant in order to protect the
revenue.
(b) Buildings. The buildings, rooms, and partitions must be
constructed of substantial materials. Doors, windows, or any other
openings to the building must be secured or fastened during times when
distilled spirits plant operations are not being conducted.
(c) Outdoor tanks. Outdoor tanks containing spirits, denatured
spirits, or wine must be individually locked or locked within an
enclosure when they are not in use.
(d) Indoor tanks. Indoor tanks containing spirits, denatured
spirits, or wines, or the rooms or buildings in which such tanks are
housed, must be equipped so that they may be secured.
(e) Approved locks. Locks meeting the specifications prescribed in
paragraph (f) of this section must be used to secure:
(1) Outdoor tanks used to store spirits, or an enclosure around
such tanks;
(2) Indoor tanks used to store spirits, or the door from which
access may be gained from the outside to the rooms or buildings in
which such tanks are housed; and
(3) Any doors from which access may be gained from the outside to
rooms or buildings containing spirits stored in portable bulk
containers.

[[Page 26250]]

(f) Specifications for locks. Locks meeting the specifications in
this section or other locks that have been approved for use by the
appropriate TTB officer are approved locks for the purpose of 26 U.S.C.
5682.
(1) General. The following are the specifications for approved
locks:
(i) A corresponding serial number on the lock and on the key,
except for master key locking systems;
(ii) A case hardened shackle at least one-fourth inch in diameter,
with heel and toe locking;
(iii) A body width of at least 2 inches;
(iv) A captured key feature (the key may not be removed while the
shackle is unlocked);
(v) A tumbler with at least 5 pins; and
(vi) A lock and key containing no bitting data.
(2) Other approved locks. If the proprietor wishes to use locks of
an unusual design, which do not meet the specifications in paragraph
(f)(1) of this section, the proprietor must submit an example or
prototype of the lock to the appropriate TTB officer, with a request
that the lock be approved for use. The appropriate TTB officer will
evaluate the lock and determine whether the lock should be approved for
use.
(3) Master key systems. Master key locking systems using approved
locks may be used at the option of the proprietor.
(g) Additional security. Whenever the appropriate TTB officer finds
that the construction, arrangement, equipment, or protection is
inadequate, additional security (such as fences, flood lights, alarm
systems, and guard services) must be provided or changes in
construction, arrangement, or equipment must be made to the extent
necessary to protect the revenue.

(26 U.S.C. 5178, 5202, 5682)

Sec. 19.193 Breaking Government locks.

TTB may assign TTB officers to a distilled spirits plant and
utilize controls, such as Government locks, if TTB determines that such
measures are necessary to effectively supervise operations at the
plant. The proprietor may not remove such Government locks without the
authorization of the appropriate TTB officer, except when a person or
property is in imminent danger from a disaster or other emergency. If
the proprietor must remove Government locks under such circumstances,
the proprietor must ensure that security measures are taken to prevent
illegal removal of spirits. In addition, the proprietor must notify the
appropriate TTB officer as soon as possible of the action taken and
within 5 days of removing the locks submit a written report describing
the emergency and the action taken.

(26 U.S.C. 5202)

Subpart H--Special (Occupational) Tax

Sec. 19.201 Liability for special (occupational) tax.

(a) General liability for tax. Special tax is an occupational tax
imposed by the IRC, and TTB is responsible for collecting this tax. A
proprietor of a distilled spirits plant must file a special tax return
and pay a special (occupational) tax at the rate specified in Sec.
19.202. The proprietor must pay this tax on or before the date of
commencing business as a distilled spirits plant, and thereafter every
year on or before July 1. When a proprietor first commences business,
the tax liability will be computed from the first day of the month in
which the business starts through the following June 30. Thereafter,
the tax must be computed for the entire year (July 1 through June 30).
(b) Suspension of tax. During the period from July 1, 2005, through
June 30, 2008, the rate of the tax referred to in paragraph (a) of this
section is zero. However, the proprietor must still register by filing
the special tax return on form TTB F 5630.5 during this suspension
period even though the amount of tax due is zero. During the suspension
period, as at other times, the special tax return is due on or before
the proprietor commences business and on or before July 1 of each year
thereafter.

(26 U.S.C. 5081, 5142, 5143)

Sec. 19.202 Special (occupational) tax rates.

During the period from July 1, 2005, through June 30, 2008, the
rate of the tax is zero. At all other times, there are two rates of
special tax for distilled spirits plants. The rate depends upon the
gross receipts of the business. The annual rates are:

------------------------------------------------------------------------
Then the
If-- annual tax
rate is--
------------------------------------------------------------------------
the taxable-year gross receipts are less than $500,000,.... $500
the taxable-year gross receipts are $500,000 or more,...... $1,000
------------------------------------------------------------------------

(26 U.S.C. 5081)

Sec. 19.203 Eligibility for the reduced rate.

(a) General. Except during the suspension period described in Sec.
19.201(b) when the tax rate is zero, 26 U.S.C. 5081(b) provides for a
reduced tax rate of $500 per year for small proprietors. A proprietor
is eligible to pay the reduced rate as a small proprietor if the
proprietor's total gross receipts for the income tax year that most
recently ended are less than $500,000. All gross receipts must be
included, not just the gross receipts of the activity subject to
special tax. Further, proprietors of new businesses that have not yet
begun a taxable year, as well as proprietors of existing businesses
that have not yet ended a taxable year, who commence a new activity
subject to special tax, may qualify for the reduced rate in the initial
tax year if gross receipts for the business (or the entire controlled
group, if the proprietor is a member of a controlled group) were under
$500,000 during the income tax year that most recently ended. If the
proprietor is a member of a controlled group, the rules under paragraph
(b) of this section will apply.
(b) Controlled Group. If the proprietor is a member of a controlled
group, the controlled group will be treated as a single taxpayer for
the purpose of determining gross receipts under paragraph (a) of this
section. A controlled group is defined in subpart D of part 70 of this
chapter.
(c) Special rules for gross receipts. For any taxable year shorter
than 12 months, the proprietor must project annual gross receipts for a
12 month period. To make this projection, the proprietor must multiply
gross receipts for the short period by 12 and divide the result by the
number of months in the short period. Gross receipts for any taxable
year will be reduced by returns and allowances made during that year
under 26 U.S.C. 448(c)(3).

(26 U.S.C. 448, 5061, 5081)

Sec. 19.204 Exemption for alcohol fuel producers.

Some alcohol fuel producers are exempt from special tax. For
further information, see subpart X of this part.

(26 U.S.C. 5081, 5181)

Sec. 19.205 Locations subject to tax.

(a) A proprietor must pay special (occupational) tax, or must
register during the suspension period described in Sec. 19.201(b), for
each place of business at which an occupation subject to special tax is
conducted. A ``place of business'' means the entire office, plant, or
area of the business in any one location under the same proprietorship.
Passageways, streets, highways, rail crossings, waterways, or
partitions dividing the premises are not sufficient separation to
require additional special tax, if the premises are otherwise
contiguous.
(b) A proprietor does not incur additional special tax liability,
and is not required to register during the

[[Page 26251]]

suspension period described in Sec. 19.201(b), for the sale of liquor
made at a location other than the distilled spirits plant premises
described on the notice of registration, Form 5110.41, if the location
where such sales are made is the same place of business as described in
paragraph (a) of this section.

(26 U.S.C. 5081, 5113, 5142, 5143)

Sec. 19.206 Liability as a wholesale or retail dealer.

(a) General. A proprietor of a distilled spirits plant shall be
subject to or exempt from a liquor dealer's special (occupational) tax
as provided in part 31 of this chapter.
(b) Exemption for sales by a proprietor of a distilled spirits
plant. A proprietor of a distilled spirits plant is not required to pay
special tax, or to register during the suspension period described in
Sec. 19.201(b), as a wholesale or retail dealer in liquor because of
sales at the principal place of business, or at the distilled spirits
plant, of liquor that at the time of sale is stored at the distilled
spirits plant or which had been removed and stored in a taxpaid
storeroom operated in connection with the distilled spirits plant. Each
proprietor of a distilled spirits plant may have only one exemption
from a dealer's special tax payment or dealer's registration for each
distilled spirits plant. The proprietor may designate, in writing to
the appropriate TTB officer, that the principal place of business is
exempt from dealer's special (occupational) tax or registration;
otherwise, the exemption will apply to the distilled spirits plant.

(26 U.S.C. 5113)

Sec. 19.207 Special tax returns.

(a) Form. A proprietor must file TTB F 5630.5, Special Tax
Registration and Return, in order to:
(1) Pay special (occupational) tax when the tax is due, or
(2) Register during the period July 1, 2005, through June 30, 2008,
when the tax is suspended.
(b) Information for the return or registration. A proprietor must
follow the instructions on the Special Tax Registration and Return, TTB
F 5630.5 providing all the required information including:
(1) The name as the taxpayer;
(2) The trade name(s) (if any) of the business(es) subject to
special tax;
(3) The employer identification number (see Sec. 19.210);
(4) The exact location of the place of business, by name and number
of building or street or if these do not exist, by some description in
addition to the post office address. In the case of one return for two
or more locations, the address shown will be the principal place of
business (or principal office, in the case of a corporate taxpayer);
(5) The class(es) of special (occupational) tax to which the
proprietor is subject, or to which the registration relates during the
suspension period referred to in paragraph (a)(2) of this section; and
(6) Ownership and control information: that is, the name, position,
and residence address of every owner of the business and of every other
person having power to control the management and policies with respect
to the activity subject to special tax. For purposes of this section,
an owner includes every partner of a partnership and every person
owning 10% or more of the stock of a limited liability company or
corporation. However, the ownership and control information required by
this paragraph does not need to be stated if the same information has
been previously provided to TTB in connection with a permit
application, and if the information previously provided is still
current.

(26 U.S.C. 6151, 7011)

Sec. 19.208 Multiple locations and multiple tax classes.

A proprietor subject to special (occupational) tax, or required to
register during the suspension period referred to in Sec. 19.201(b),
for the same period at more than one location or for more than one tax
class, must:
(a) Prepare, sign and file one special tax registration and return
on TTB F 5630.5;
(b) Include any applicable tax payment, to cover all locations and
classes of tax;
(c) Prepare, in duplicate, a list identified with the proprietor's
name, address (as shown on Form 5630.5), employer identification
number, and period covered by the return. The list shall show, by
States, the name, address, and tax class of each location for which
special tax is being paid, or for which registration is being made
during the suspension period described in Sec. 19.201(b). The original
of the list will be filed in accordance with instructions on the
return, and the copy shall be retained at the proprietor's principal
place of business (or principal office, in the case of a corporate
taxpayer) for the period of three years from the last day of the return
period.

(26 U.S.C. 6151, 7011)

Sec. 19.209 Signing special tax returns.

(a) Ordinary returns. The proprietor must sign all tax returns. The
individual must sign the return of an individual proprietor. A general
partner must sign the return for a partnership. An officer of a
corporation will sign the return for a corporation. In each case, the
person signing the return will designate his or her capacity as
``individual owner,'' ``general partner,'' or, in the case of a
corporation, the title of the officer.
(b) Fiduciaries. A receiver, trustee, assignee, executor,
administrator, or other legal representative who continues the business
of a bankrupt, insolvent, deceased, or other person, must indicate the
fiduciary capacity in which the person is acting.
(c) Agent or attorney in fact. If a return is signed by an agent or
attorney in fact, the signature must be preceded by the name of the
principal and followed by the title of the agent or attorney in fact. A
return signed by a person as agent will not be accepted unless a power
of attorney authorizing the agent to perform the act is filed with the
TTB office with which the return is filed.
(d) Perjury statement. Form TTB F 5630.5 must contain or be
verified by a written declaration that the return has been executed
under the penalties of perjury.

(26 U.S.C. 6061, 6062, 6063, 6064, 6065)

Sec. 19.210 Employer identification number.

(a) Requirement. A proprietor must enter the employer
identification number (EIN) assigned to the proprietor by the Internal
Revenue Service on the special tax return, including any amended
return, filed under this subpart. Failure to enter the assigned EIN on
the return may result in a $50.00 penalty for each occurrence as
specified in Sec. 70.113 of this chapter.
(b) Application for employer identification number. Each proprietor
who files a special tax return, who has not already been assigned an
employer identification number, must file IRS Form SS-4 to apply for
one. The proprietor will apply for and be assigned only one employer
identification number, regardless of the number of places of business
for which the proprietor is required to file a special tax return. The
proprietor must apply for an employer identification number no later
than 7 days after the filing of the taxpayer's first special tax
return.

(26 U.S.C. 6109)

Sec. 19.211 Issuance, distribution, and examination of special tax
stamps.

(a) Issuance of special tax stamps--(1) General. Except as provided
in paragraph (a)(2) of this section, TTB will issue to the proprietor a
special tax

[[Page 26252]]

stamp upon filing a properly executed TTB F 5630.5, Special Tax
Registration and Return, along with any applicable tax. If the return
covers multiple locations, TTB will issue one appropriately designated
stamp for each location listed on the attachment that Sec. 19.208
requires, but showing, as to name and address, only the name of the
proprietor and the address of the proprietor's principal place of
business (or principal office in the case of a corporate taxpayer).
(2) Exception for suspension period. During the suspension period
described in Sec. 19.201(b), when registration is required but no tax
is due, TTB will not issue a special tax stamp.
(b) Distribution of special tax stamps for multiple locations. On
receipt of the special tax stamps, the proprietor will verify that
there is one stamp for each location listed on the attachment to form
TTB F 5630.5. The proprietor will designate one stamp for each location
and will type on each stamp the address of the business conducted at
the location for which that stamp is designated. The taxpayer will then
forward each stamp to the place of business designated on the stamp.
(c) Examination of special tax stamps. The proprietor will keep all
stamps denoting payment of special tax available at the location for
which designated for inspection by appropriate TTB officers during
business hours.

(26 U.S.C. 5146, 6806)

Sec. 19.212 Change in name.

If there is a change in the corporate or firm name, or in the trade
name, as shown on Form 5630.5, the proprietor will file an amended
special tax return as soon as practicable after the change, covering
the new corporate or firm name, or trade name. No new special tax is
required to be paid. The proprietor will attach the special tax stamp
for endorsement of the change in name except if the change occurs
during the suspension period described in Sec. 19.201(b).

(26 U.S.C. 5143, 7011)

Sec. 19.213 Change in proprietorship.

(a) General. Except as provided in paragraph (b) of this section,
if there is a change in the proprietorship of a distilled spirits
plant, the successor must file a new special tax return, pay a new
special tax, and obtain the required special tax stamps. However, if
the change in proprietorship occurs during the suspension period
described in Sec. 19.201(b) when no tax is due and no stamp is issued,
the successor is only required to file a new special tax return.
(b) Exception. Persons having the right of succession provided for
in paragraph (c) of this section may carry on the business for the
remainder of the period for which the special tax was paid (or for
which registration was made during the suspension period described in
Sec. 19.201(b)), without paying a new special tax, if within 30 days
after the date on which the successor begins to carry on the business,
the successor files a special tax return on form TTB F 5630.5, which
shows the basis of succession.
(c) Right of succession. Under the conditions listed in paragraph
(b) of this section, the right of succession will pass to certain
persons as follows:

------------------------------------------------------------------------
The following person may
In the case of: succeed to the tax stamp:
------------------------------------------------------------------------
Death of the taxpayer..................... The widowed spouse or child,
or executor, administrator,
or other legal
representative of the
taxpayer.
Succession of spouse...................... A husband or wife succeeding
to the business of a living
spouse.
Insolvency................................ A receiver or trustee in
bankruptcy, or an assignee
for benefit of creditors.
Withdrawal from partnership............... The partner or partners
remaining after death or
withdrawal of a member.
------------------------------------------------------------------------

(d) Failure to register. Except during the suspension period
described in Sec. 19.201(b), a person who is a successor to a business
for which the special tax has been paid and who fails to register the
succession is liable for the special tax computed from the first day of
the calendar month in which the successor began to carry on the
business. During the suspension period, a failure to register the
succession may result in a penalty under 26 U.S.C. 5603(b).

(26 U.S.C. 5143, 7011)

Sec. 19.214 Change in location.

(a) Except as provided in paragraph (b) of this section, if there
is a change in location of a taxable place of business, the proprietor
will, within 30 days after the change, file an amended special tax
return covering the new location. The proprietor will attach the
special tax stamp or stamps, for endorsement of the change in location.
No new special tax must be paid. However, if the proprietor does not
file the amended return within 30 days, the proprietor must file a new
special tax return, pay a new special tax, and obtain a new special tax
stamp.
(b) If the change in location occurs during the suspension period
described in Sec. 19.201(b) when no tax is due and no special tax
stamp is issued, the requirements of paragraph (a) of this section
still apply, except with regard to attachment of a special tax stamp
and payment of a new special tax. During the suspension period, a
failure to comply with paragraph (a) of this section may result in a
penalty under 26 U.S.C. 5603(b).

(26 U.S.C. 5143, 7011)

Subpart I--Distilled Spirits Taxes

Sec. 19.221 Scope.

This subpart covers the taxation of distilled spirits and the
procedures for payment of taxes by proprietors of distilled spirits
plants. Issues covered in this subpart include: tax rates, liability
for tax, tax determination, return periods, filing of tax returns,
forms of payment, electronic fund transfers, and credits under 26
U.S.C. 5010.

(26 U.S.C. 5001)

Basic Provisions of Tax Law Affecting Spirits

Sec. 19.222 Basic tax law provisions.

(a) Distilled spirits tax. 26 U.S.C. 5001 and 7652 impose a tax on
all distilled spirits produced in, or imported into or brought into,
the United States at the rate prescribed in section 5001 on each proof
gallon and a proportionate tax at a like rate on all fractional parts
of a proof gallon. For the current rate of tax see 26 U.S.C. 5001.
(b) Products containing distilled spirits. All products of
distillation, by whatever name known, which contain distilled spirits,
on which the tax imposed by law has not been paid, and any alcoholic
ingredient added to such products, are considered and taxed as
distilled spirits.
(c) Wines with high alcohol content. Wines containing more than 24
percent of alcohol by volume are taxed as distilled spirits.
(d) Attachment of the tax. Under 26 U.S.C. 5001(b), the tax
attaches to distilled spirits as soon as the substance comes into
existence as such, whether it be subsequently separated as pure or
impure spirits, or be immediately, or at any subsequent time,
transferred into any other substance, either in the process of original
production, or by any subsequent process.
(e) Alcohol tax is a lien on spirits. Under 26 U.S.C. 5004, the tax
becomes a first lien on the distilled spirits from the time the spirits
come into existence as such. The conditions under which the first lien
terminates are described in 26 U.S.C. 5004.
(f) Tax credit for eligible wines and eligible flavors. Under 26
U.S.C. 5010, a

[[Page 26253]]

credit against the tax imposed on distilled spirits by 26 U.S.C. 5001
or 7652 on each proof gallon of alcohol derived from eligible wine, or
from eligible flavors which do not exceed 2\1/2\% of the finished
product on a proof gallon basis is allowed at the time the tax is
payable as if it constituted a reduction in the rate of tax.
(g) Effective tax rates. Where credit against the tax is desired,
the proprietor liable for the tax must establish an effective tax rate
in accordance with Sec. 19.246. The effective tax rate established
will be applied to each withdrawal or other taxable disposition of the
distilled spirits.

(26 U.S.C. 5001, 5004, 5010, 7652)

Sec. 19.223 Persons liable for tax.

(a) Distilling. Under 26 U.S.C. 5005, the distiller of spirits is
liable for the tax and each proprietor or possessor of, and person in
any manner interested in the use of, any still, distilling apparatus,
or distillery, shall be jointly and severally liable for the tax on
distilled spirits produced. However, a person, not an officer or
director of a corporate proprietor, owning or having the right of
control of not more than 10 percent of any class of stock of that
proprietor, is not liable by reason of the stock ownership or control.
Persons transferring spirits in bond are relieved of tax liability if:
(1) The proprietors of transferring and receiving distilled spirits
plant premises are independent of each other and neither has a
proprietary interest, directly or indirectly, in the business of the
other, and
(2) No person liable for the tax on transferred spirits retains any
interest in the spirits.
(b) Storage on bonded premises. Under 26 U.S.C. 5005(c) each person
operating bonded premises will be liable for the tax on all spirits
while the spirits are stored on the premises, and on all spirits which
are in transit to the premises from the time of removal from the
transferor's bonded premises, pursuant to an approved application.
Liability for the tax continues until the spirits are transferred or
withdrawn from bonded premises as authorized by law, or until the
liability for tax is relieved under the provisions of 26 U.S.C.
5008(a). Claims for relief from liability for spirits lost are covered
in subpart J of this part. Voluntary destruction of spirits in bond is
covered in subpart Q of this part.
(c) Withdrawals without payment of tax. Under 26 U.S.C. 5005(e),
any person who withdraws spirits from the bonded premises of a plant
without payment of tax, as provided in 26 U.S.C. 5214, will be liable
for the tax on the spirits from the time of withdrawal. The person will
be relieved of any liability at the time the spirits are exported,
deposited in a foreign-trade zone, used in production of wine,
deposited in a customs bonded warehouse, laden as supplies upon or used
in the maintenance or repair of certain vessels or aircraft, or used
for certain research, development or testing, as provided by law.
(d) Withdrawals free of tax. Persons liable for tax under paragraph
(a) of this section, are relieved of the liability on spirits withdrawn
from bonded premises free of tax under this part, at the time the
spirits are withdrawn.
(e) Withdrawn from customs custody without payment of tax. Under 26
U.S.C. 5232(a) when imported distilled spirits in bulk containers are
withdrawn from customs custody and transferred to the bonded premises
of a distilled spirits plant without payment of the tax imposed on
imported distilled spirits by 26 U.S.C. 5001, the person operating the
bonded premises of the distilled spirits plant to which spirits are
transferred will become liable for the tax on the spirits upon their
release from customs custody, and the importer will thereupon be
relieved of liability for the tax.

(26 U.S.C. 5005, 5066, 5232)

Requirements for Gauging and Tax Determination

Sec. 19.225 Requirement to gauge and tax determine spirits.

Before withdrawing distilled spirits from bond, the proprietor must
gauge the spirits and determine the tax that is due on the spirits.
This requirement applies to all spirits on which the tax will be either
prepaid or deferred.

(26 U.S.C. 5006, 5204, 5213)

Sec. 19.226 Gauges for tax determination.

There are several acceptable methods that a proprietor may use when
gauging spirits for tax determination.
(a) Cases. If spirits are withdrawn from the bonded premises in
cases, the proprietor must gauge the spirits based on the contents of
the cases. The proprietor will determine the number of proof gallons of
spirits in cases as provided in part 30 of this chapter. The proprietor
must convert metric units of measure to U.S. units according to Sec.
19.579.
(b) Packages. If spirits are withdrawn from the bonded premises in
packages on the basis of an individual package gauge, each package must
be gauged unless the tax is to be determined on the production or
filling gauge. When gauging the packages, the proprietor must prepare a
package gauge record as specified in Sec. 19.619 and attach it to the
record of tax determination that is required by Sec. 19.611.
(c) Tanks. The proprietor must use weight, or an accurate mass flow
meter and proof as prescribed in Sec. Sec. 19.284 and 19.285, to gauge
bulk spirits in tanks that are to be withdrawn on determination of tax.
The proprietor must record the elements of the gauge on the record of
tax determination. As an alternative, the proprietor may record gauge
elements on a separate gauge record, and attach the gauge record to the
record of tax determination.

(26 U.S.C. 5204, 5213)

Sec. 19.227 Determination of the tax.

After gauging, the proprietor must determine the tax on the spirits
to be removed from the bonded premises. The proprietor must use the tax
rate prescribed in 26 U.S.C. 5001 to calculate the tax, unless the
product is eligible for a reduced effective tax rate as provided in 26
U.S.C. 5010. If the product is eligible for a reduced effective tax
rate, the proprietor may use that rate to determine the tax. The
proprietor must record the results of each tax determination in a
record of tax determination as required by Sec. 19.611.

(26 U.S.C. 5213)

Rules for Deferred Payment and Prepayment of Taxes

Sec. 19.229 Deferred payment and prepayment of taxes.

There are two basic methods of paying the tax on distilled spirits
withdrawn from bonded premises: deferred payment and prepayment.
(a) Deferred payment. Under the deferred payment system, the
proprietor may withdraw spirits from bond after tax determination but
before payment of tax. The excise tax paid is based on the amount of
spirits removed from bond during each return period. In order to pay
taxes under the deferral system, the proprietor must file a withdrawal
bond or unit bond. For detailed information regarding return periods
and filing requirements under the deferred system see Sec. Sec.
19.234, 19.235 and 19.236.
(b) Prepayment. Under the prepayment system, the proprietor must
pay the distilled spirits tax after tax determination but before
withdrawal of the spirits from bonded premises. See Sec. 19.230 for
conditions that require prepayment of taxes.

(26 U.S.C. 5061)

[[Page 26254]]

Sec. 19.230 Conditions requiring prepayment of taxes.

Under certain conditions, the proprietor must prepay the distilled
spirits tax on form TTB F 5000.24, Excise Tax Return, before removing
spirits from the bonded premises. Those conditions are:
(a) When the proprietor has not given TTB a withdrawal bond or a
unit bond;
(b) When the proprietor has posted a withdrawal or a unit bond, but
defaults on any payment of tax under this section, and the tax payment
remains in default. The proprietor must continue to prepay the tax
until the appropriate TTB officer decides that allowing them to make
deferred tax payments again will not jeopardize the revenue;
(c) When the proprietor receives a notice from the appropriate TTB
officer that the tax must be prepaid. Such notice may be issued to the
proprietor if--
(1) The proprietor fails to maintain records required by this part
to substantiate the correctness of his tax returns; or
(2) The proprietor fails to comply with any other provision of this
part; or
(d) When the proprietor's withdrawal bond, or the withdrawal
coverage under their unit bond, is for less than the maximum penal sum.
The proprietor must prepay the tax to the extent that a withdrawal
would cause the outstanding tax liability to exceed the limits of
coverage under the bond. See Sec. 19.231 if the bond is for less than
the maximum penal sum.

(26 U.S.C. 5213, 5555)

Sec. 19.231 Accounting for bond coverage.

When a proprietor furnishes a withdrawal bond or a unit bond to
cover the tax on spirits withdrawn on determination of tax, and such
bond is in less than the maximum penal sum, the proprietor must
maintain an account for the bond to ensure that outstanding tax
liabilities do not exceed the penal sum of the bond. The account must
charge the bond for the amount of liability incurred on each withdrawal
on determination of tax and, credit the bond for each payment of tax
made with a return and for authorized credits taken on a return. If the
balance of the bond account reaches zero, the proprietor may no longer
defer tax payments for taxable withdrawals. Where the bond is for less
than the maximum penal sum and has been allocated among two or more
plants, the proprietor must maintain an account at each plant for that
part of the penal sum allocated to each plant.

(26 U.S.C. 5173, 5201)

Requirements for Filing Tax Returns

Sec. 19.233 Filing prepayment returns.

When the proprietor is required to prepay the tax prior to
withdrawal of spirits from the bonded premises, he must prepay the tax
with a return on form TTB F 5000.24, Excise Tax Return, and include the
remittance with the return. The proprietor may prepay tax for one or
more withdrawals with a single prepayment return on form TTB F 5000.24.
The proprietor will note the serial number of the form TTB F 5000.24,
and the date and time of the prepayment on the individual record of tax
determination. The proprietor may not remove spirits from the bonded
premises until the tax has been paid.

(26 U.S.C. 5061)

Sec. 19.234 Filing deferred payment returns.

A proprietor must pay the tax on spirits withdrawn from bond for
deferred payment of tax by filing a return on form TTB F 5000.24,
Excise Tax Return. The proprietor must execute and file form TTB F
5000.24, for each return period, even when no tax is due for a
particular return period. The proprietor of each bonded premises must
pay the full amount of distilled spirits tax determined for all spirits
released for withdrawal from the bonded premises on determination of
tax during the period covered by the return (except spirits on which
tax has been prepaid).

(26 U.S.C. 5061)

Sec. 19.235 Deferred payment return periods--quarterly and
semimonthly.

(a) Two types of return periods. The IRC provides for two different
return periods for those taxpayers who pay their taxes on a deferred
basis: quarterly and semimonthly. Small taxpayers who meet certain
criteria are eligible to use quarterly return periods and pay their
taxes on a quarterly basis. Larger taxpayers must use semimonthly
return periods and pay their taxes on a semimonthly basis.
(b) Quarterly return period. Effective January 1, 2006, a taxpayer
who reasonably expects to be liable for not more than $50,000 in taxes
with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652
for the current calendar year, and who was liable for not more than
$50,000 in such taxes in the preceding calendar year, may choose to use
a quarterly return period. However, the taxpayer may not use the
quarterly return period procedure for any portion of the calendar year
following the first date on which the aggregate amount of tax due from
the taxpayer during the calendar year exceeds $50,000, and any tax
which has not been paid on that date will be due on the 14th day after
the last day of the semimonthly period in which that date occurs.
(c) Semimonthly return period. Except in the case of a taxpayer who
qualifies for, and chooses to use, quarterly return periods as provided
in paragraph (b) of this section, all other taxpayers must use
semimonthly return periods for deferred payment of tax. The semimonthly
return periods will run from the 1st day through the 15th day of each
month, and from the 16th day through the last day of each month, except
as otherwise provided in Sec. 19.277.
(d) Definitions. For purposes of this section, the following terms
have the meanings indicated:
Reasonably expects. When used with reference to a taxpayer,
reasonably expects means the taxpayer was not liable for more than
$50,000 in taxes the previous year and there is no other existing or
anticipated circumstance known to the taxpayer (such as an increase in
production capacity) that would cause the taxpayer's liability to
increase beyond that limit.
Taxpayer. A taxpayer is a person who is liable for excise tax
imposed with respect to distilled spirits by 26 U.S.C. 5001 and 7652
under the same Employer Identification Number as defined in 26 CFR
301.7701-12.

(26 U.S.C. 5061)

Sec. 19.236 Due dates for returns.

(a) Semimonthly returns. Except when payment is pursuant to a
quarterly return as provided in paragraph (b) of this section, where
the proprietor of bonded premises has withdrawn spirits from such
premises on determination and before payment of tax, the proprietor
must file a semi-monthly tax return covering such spirits on form TTB F
5000.24, Excise Tax Return, and remittance, as required by Sec. Sec.
19.238, 19.239 or Sec. 19.240, not later than the 14th day after the
last day of the return period, except for returns filed for September
as provided in Sec. 19.237. If the due date falls on a Saturday,
Sunday or legal holiday, the return and payment are due on the
immediately preceding day that is not a Saturday, Sunday or legal
holiday, except as provided in Sec. 19.237(c).
(b) Quarterly returns. Where the proprietor of bonded promises has
withdrawn spirits from such premises on determination and before
payment of tax, and the proprietor uses quarterly return periods as
provided in Sec. 19.235(b), the proprietor must file a quarterly
return covering such spirits on form TTB F 5000.24, and remittance, as

[[Page 26255]]

required by Sec. Sec. 19.238, 19.239 or Sec. 19.240, not later than
the 14th day after the last day of the quarterly return period. If the
due date falls on a Saturday, Sunday, or legal holiday, the return and
remittance will be due on the immediately preceding day which is not a
Saturday, Sunday, or legal holiday.

(26 U.S.C. 5061)

Sec. 19.237 Special rule for semimonthly filers for the month of
September.

(a) Returns required for September. If the proprietor is required
to file semimonthly returns as provided in Sec. 19.235(c), there are
three return periods during the month of September. The first
semimonthly return period is from the first day through the fifteenth
day of the month and the return with remittance is due by the 29th of
September. The second semimonthly return period for the month of
September is divided into two payment periods. The exact dates of these
periods depends upon whether the proprietor remits tax payments by
electronic fund transfer (EFT).
(1) Taxpayments by EFT. If the proprietor remits tax payments by
EFT, the two payment periods for the second half of September are from
the 16th through the 26th, and from the 27th through the 30th. The
return on form TTB F 5000.24 and remittance for the period September
16-26 is due on or before September 29. The return on form TTB F
5000.24 and remittance for the period September 27-30 is due no later
than October 14.
(2) Taxpayment other than by EFT. If the proprietor is not required
to pay the distilled spirits tax by EFT, the two payment periods for
the second half of September are from the 16th through the 25th and
from the 26th through the 30th. The return on form TTB F 5000.24 and
remittance for the period September 16-25 is due on or before September
28. The return on Form 5000.24 and remittance for the period September
26-30 is due no later than October 14.
(b) Amount of payment: Safe harbor rule--(1) EFT Taxpayers. The
proprietor satisfies the requirements of paragraph (a)(1) of this
section if by September 29 the amount paid is at least 11/15ths (73.3
percent) of the tax liability incurred in the semimonthly return period
for September 1-15, and the proprietor also pays any underpayment of
tax resulting from the use of the safe harbor rule on or before October
14.
(2) Other than EFT taxpayers. The proprietor satisfies the
requirements of paragraph (a)(2) of this section if the amount paid by
September 28 is at least 2/3rds (66.7 percent) of the tax liability
incurred in the semimonthly return period for September 1-15, and the
proprietor also pays any underpayment of tax resulting from the use of
the safe harbor rule on or before October 14.
(c) Last day for payment. If the required tax payment due date for
the return period September 16-25 (non-EFT taxpayers) or September 16-
26 (EFT taxpayers), falls on a Saturday or legal holiday, the
proprietor's return and remittance are due on the immediately preceding
day. If the required tax payment due date falls on a Sunday, the
proprietor's return and payment are due on the immediately following
day.
(d) Example. Payment of tax for the month of September.
(1) Facts. X, a proprietor required to pay taxes by electronic fund
transfer, incurred tax liability in the amount of $30,000 for the first
semimonthly period of September. For the period September 16-26, X
incurred tax liability in the amount of $45,000, and for the period
September 27-30, X incurred tax liability in the amount of $2,000.
(2) Payment requirement. X's payment of tax in the amount of
$30,000 for the first semimonthly period of September is due no later
than September 29. X's payment of tax for the period September 16-26 is
also due no later than September 29. X may use the safe harbor rule to
determine the amount of payment due for the period of September 16-26.
Under the safe harbor rule, X's payment of tax must equal $22,000.00,
11/15ths of the tax liability incurred during the first semimonthly
period of September. Additionally, X's payment of tax in the amount of
$2,000 for the period September 27-30 must be paid no later than
October 14. X must also pay the underpayment of tax, $23,000.00, for
the period September 16-26, no later than October 14.

(26 U.S.C. 5061)

Sec. 19.238 Payment by mail.

The proprietor must file each return on form TTB F 5000.24 in
accordance with the instructions printed on the form. If the proprietor
submits the return by U.S. mail, the official postmark of the U.S.
Postal Service stamped on the cover in which the return is mailed will
be considered to be the date of delivery of the remittance. If the
postmark on the cover is illegible, the proprietor will bear the burden
of proving when the postmark was made. If the proprietor sends the
return with or without remittance by registered mail or certified mail,
the date of registry, or the date of the postmark on the sender's
postal receipt for certified mail, will be treated as the date of
delivery of the return and also of the remittance, if included.

(26 U.S.C. 6302)

Sec. 19.239 Form of payment.

(a) General. The proprietor must pay the tax due on spirits when
filing a return on form TTB F 5000.24, Excise Tax Return. The
remittance for the tax must accompany the return and may be in any form
that is authorized by Sec. 70.61 of this chapter and acceptable to the
appropriate TTB officer. Exception: This does not apply to payments
that must be made by electronic fund transfer (EFT). For EFT payments
see Sec. 19.240.
(b) Consequences of default. If a check or money order tendered in
payment of taxes is not paid on presentment, or where the taxpayer is
otherwise in default in payment, then any remittance made during the
period of default must be either in cash or by an acceptable certified
instrument. The proprietor must continue to pay in cash or by certified
instrument as long as the proprietor remains in default, and until the
appropriate TTB officer finds that accepting a check will not
jeopardize the revenue.
(c) Certified instruments. Acceptable certified instruments include
certified checks, cashier's checks or treasurer's checks drawn on any
bank or trust company incorporated under the laws of the United States,
or under the laws of any State, Territory or possession of the United
States, or a money order, as provided in Sec. 70.61 of this chapter.
(d) Payment of taxes. The proprietor must make checks or money
orders payable to ``Alcohol and Tobacco Tax and Trade Bureau''.

(26 U.S.C. 5061, 6311)

Sec. 19.240 Payment of tax by electronic fund transfer.

(a) General--(1) Criteria requiring ETF payment. Under certain
conditions, a proprietor may not make payments by cash, check, or money
order. Instead, the proprietor must use the services of a commercial
bank to pay tax on distilled spirits tax by electronic fund transfer
(EFT). Payments must be made by EFT in the current calendar year if the
proprietor, as a taxpayer, was liable for five million dollars or more
in taxes on distilled spirits during the prior calendar year. For the
purpose of determining whether the proprietor is subject to this
requirement, the proprietor must use the total amount of tax liability
on distilled spirits incurred under this part and parts 26 and 27 of
this chapter (gross tax liability). Gross tax liability includes the
distilled spirits tax on all taxable withdrawals of spirits, taxable
importations of spirits, as well

[[Page 26256]]

as tax on spirits brought into the United States from Puerto Rico and
the Virgin Islands during the calendar year. This figure includes taxes
incurred at any and all premises at which the proprietor conducts
regulated activities. The proprietor may not net out or adjust for any
drawback, credits or refunds of tax that are allowed. Overpayments made
in excess of actual tax liability will not be included in the gross tax
liability figure.
(2) Controlled group. If the taxpayer is a member of a controlled
group, the controlled group is treated as a single taxpayer when
calculating liability of five million dollars or more in distilled
spirits taxes during the prior calendar year. A controlled group is a
related group of taxpayers and is defined in subpart D of part 70 of
this chapter.
(3) Separate return and payment for each DSP. When the proprietor
makes payments by EFT, the proprietor must file a separate return, form
TTB F 5000.24 and make a separate EFT payment for each DSP from which
spirits are withdrawn upon determination of tax.
(b) Requirements--(1) Notice to TTB. If the proprietor's gross tax
liability is five million dollars or more in one calendar year, the
proprietor must notify the appropriate TTB officer of this fact not
later than January 10 of the following year. The proprietor must use
the total amount of tax liability incurred under this part and parts 26
and 27 of this chapter to determine whether he must make this
notification. Exception: this notice requirement does not apply if the
proprietor already pays tax on distilled spirits by EFT. The notice
shall be an agreement to make payments by EFT.
(2) Separate EFT for each return. For each return filed in
accordance with this part, the proprietor will direct the bank to make
an EFT to the Treasury Account for the amount of the tax reported due
on the return. The proprietor must give instructions to the bank early
enough for the EFT to be made to the Treasury Account by no later than
close of business on the last day for filing the return as prescribed
in Sec. 19.236 or Sec. 19.237, as appropriate.
(3) Discontinuing EFT payments. If the proprietor pays tax by EFT
and has a gross tax liability of less than five million dollars in
distilled spirits taxes during a calendar year, combining tax
liabilities incurred under this part and parts 26 and 27 of this
chapter, payment by EFT will be optional in the following year. The
proprietor may continue to remit tax payment by EFT as provided in this
section, or the proprietor may remit taxpayment using any acceptable
method as set forth in Sec. 19.239. If the proprietor decides to stop
paying tax by EFT, the proprietor must give the appropriate TTB officer
written notice of that decision. The proprietor must attach a written
notice to the first return on form TTB F 5000.24 filed using a method
of payment other than EFT. Such notice must state that tax is not due
by EFT because the proprietor's tax liability during the preceding
calendar year was less than five million dollars. The proprietor must
further state that future tax payments will be filed with the returns
on form TTB F 5000.24.
(c) Remittance--(1) Identifying EFT payments. When the proprietor
completes the return on form TTB F 5000.24, the proprietor must
indicate on the form that the tax was paid by EFT. The proprietor must
file the completed form TTB F 5000.24 with TTB as directed by the
instructions on the form.
(2) Credit for payment. TTB will credit the proprietor as having
made a tax payment when the Treasury Account receives the EFT. TTB
considers the EFT to be received by the Treasury Account when the EFT
is paid to a Federal Reserve Bank.
(3) Record of payment. When a proprietor directs a bank to make an
EFT as required by paragraph (b)(2) of this section, any transfer data
record furnished to the proprietor as part of normal banking procedures
will serve as the record of payment. The proprietor will retain this
document as part of the required records.
(d) Failure to make a taxpayment by EFT. The proprietor will be
subject to a penalty imposed by 26 U.S.C. 5684, 6651, or 6656 for
failure to make a required EFT tax payment before close of business on
the last day for filing.
(e) Procedure. Upon receipt of a notice filed pursuant to paragraph
(b)(1) of this section, the appropriate TTB officer will provide the
proprietor with a copy of the TTB Procedure entitled ``Payment of Tax
by Electronic Fund Transfer''. This publication outlines the procedure
that the proprietor must follow when preparing returns and payments by
EFT as required by this part. Customs and Border Protection (CBP) will
provide instructions for submitting the EFT payments that must be made
to CBP.

(26 U.S.C. 5061, 6302)

Requirements for Employer Identification Numbers

Sec. 19.242 Employer identification number.

The proprietor must enter the employer identification number (EIN)
assigned to him by the Internal Revenue Service on each form TTB F
5000.24, Excise Tax Return, filed with TTB. Failure to enter the
assigned EIN on form TTB F 5000.24, may result in a $50.00 penalty for
each occurrence as specified in Sec. 70.113 of this chapter.

(26 U.S.C. 6109, 6723)

Sec. 19.243 Application for employer identification number.

(a) Use Form SS-4. The proprietor must obtain an employer
identification number (EIN) by filing an application with the Internal
Revenue Service (IRS) on Form SS-4. Form SS-4 is available from the
local IRS Center, from the IRS District Director, the IRS Web site at
http://www.irs.gov or from TTB's National Revenue Center. The
proprietor may file this form with IRS by mail, telephone, or fax by
following the instructions on the form.
(b) Time limit. If the proprietor has not already received, or
applied for, an EIN at the time that the first return on form TTB F
5000.24, Excise Tax Return, is filed, the proprietor must file such
application for an EIN not later than seven days from the date of
filing the form TTB F 5000.24.
(c) One EIN only. Each proprietor must obtain and use only one EIN,
regardless of the number of places of business for which the proprietor
is required to file a tax return under this subpart.

(26 U.S.C. 6109)

Effective Tax Rates

Sec. 19.245 Tax credits under 26 U.S.C. 5010.

(a) The distilled spirits tax. Sections 5001 and 7652 of the IRC
impose a tax on all distilled spirits produced in, or imported into, or
brought into the United States at the rate prescribed in section 5001
of the IRC.
(b) Tax credits. Section 5010 of the IRC provides a credit for the
wine and flavors content in distilled spirits products. These credits
effectively reduce the rate of excise tax paid on distilled spirits
products that contain eligible wines and eligible flavors. As a result,
the alcohol derived from eligible wine is taxed at the rates specified
for wine in 26 U.S.C. 5041, and the alcohol derived from eligible
flavors is not taxed to the extent that it does not exceed 2\1/2\
percent of the alcohol in the product. This results in an effective tax
rate on the distilled spirits product that is lower than the rate
prescribed in 26 U.S.C. 5001.
(c) Eligible wine and eligible flavor. The credit for the wine and
flavor content of a distilled spirits product is allowable only if the
wine or flavor contained in the product is an ``eligible wine'' or an
``eligible flavor''. To determine whether a wine or flavor is

[[Page 26257]]

eligible, refer to the definitions in Sec. 19.1, and 26 U.S.C. 5010.
(d) Application of effective tax rates. Section 19.246 describes
how the proprietor should compute the effective tax rate for each
distilled spirits product containing eligible wine or eligible flavor.
Sections 19.247 through 19.250 set forth several different methods that
the proprietor may use in applying the effective tax rates to taxable
removals of products from the proprietor's bonded premises.

(26 U.S.C. 5010)

Sec. 19.246 Computing the effective tax rate for a product.

(a) How to compute effective tax rates. In order to determine the
effective tax rate for a distilled spirits product containing eligible
wine or eligible flavor, the proprietor must first determine the total
excise taxes due on the product from all sources including distilled
spirits, eligible wine, and alcohol from eligible flavors in excess of
2 \1/2\ percent of the total proof gallons in the product. Then, the
proprietor must determine the total number of proof gallons of alcohol
in the product regardless of the source. By dividing the total tax
(numerator) by the total number of proof gallons (denominator) the
proprietor will arrive at the effective tax rate for the product in
dollars per proof gallon. The proprietor will compute the effective tax
rate according to the following formula:
(1) Numerator. The numerator will be the sum of:
(i) The proof gallons of all distilled spirits used in the product
(exclusive of distilled spirits derived from eligible flavors),
multiplied by the tax rate prescribed by 26 U.S.C. 5001;
(ii) The wine gallons of each eligible wine used in the product,
multiplied by the tax rate prescribed by 26 U.S.C. 5041(b)(1), (2), or
(3), that would be imposed on the wine but for its removal to bonded
premises. Three different tax classes of wine are eligible for the tax
credit. The proprietor will have to repeat this step for each different
tax class of eligible wine used; and
(iii) The proof gallons of all distilled spirits derived from
eligible flavors used in the product, multiplied by the tax rate
prescribed by 26 U.S.C. 5001, but only to the extent that such
distilled spirits exceed 2\1/2\ percent of the denominator prescribed
in paragraph (a)(2) of this section.
(2) Denominator. The denominator will be the sum of:
(i) The proof gallons of all distilled spirits used in the product,
including distilled spirits derived from eligible flavors; and
(ii) The wine gallons of each eligible wine used in the product,
multiplied by twice the percentage of alcohol by volume of each,
divided by 100.
(b) Rounding numbers--(1) Proof gallons. When determining the
effective tax rate, the proprietor must express quantities of distilled
spirits, eligible wine, and eligible flavors to the nearest tenth of a
proof gallon.
(2) Tax rates. The proprietor may round the effective tax rate to
as many decimal places as the proprietor deems appropriate, provided
that the rate is expressed no less exactly than the rate rounded to the
nearest whole cent. The proprietor must be consistent and round the
effective tax rates for all products to the same number of decimal
places. When rounding, if the number to the right of the last decimal
place to be kept is less than five, it will be dropped, if it is five
or over, a unit will be added.
(c) Example. The following is an example of the use of the formula.

Batch Record
------------------------------------------------------------------------

------------------------------------------------------------------------
Distilled spirits......................... 2249.1 proof gallons.
Eligible wine (14% alcohol by volume)..... 2265.0 wine gallons.
Eligible wine (19% alcohol by volume)..... 1020.0 wine gallons.
Eligible flavors.......................... 100.9 proof gallons.
------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP08MY08.001

(26 U.S.C. 5010)

Sec. 19.247 Use of effective (actual) tax rates.

(a) Select method of applying tax rate. The proprietor may choose
to apply an effective tax rate to taxable removals of distilled spirits
products in accordance with Sec. Sec. 19.248, 19.249, or 19.250. Any
proprietor who does not elect one of these options must establish an
effective tax rate for each batch of distilled spirits product on which
a claim for tax credit for alcohol derived from eligible wine or
eligible flavor will be made. The proprietor must compute the effective
tax rates for these products in accordance with the instructions in
Sec. 19.246.
(b) Record tax rates used. The proprietor must record the effective
tax rate used on the dump or batch records for the products as required
by Sec. 19.598. The proprietor must record the serial numbers of cases
of product removed at each rate on the record of tax determination or
other related record. The proprietor must keep these records available
for inspection by TTB officers.

(26 U.S.C. 5010, 5207)

Sec. 19.248 Standard effective tax rate.

(a) Establishing a standard effective tax rate for a product. The
proprietor may establish a permanent standard effective tax rate for
any eligible distilled spirits product, rather than calculate a
separate effective tax rate for each batch of product made. If the
proprietor elects to use this option, the

[[Page 26258]]

proprietor must determine the permanent standard effective tax rate
based on the least quantity and the lowest alcohol content of eligible
wine or eligible flavors used to manufacture the product. Thus, the
permanent standard effective tax rate is the highest tax rate that
would apply to the product because it is based on a batch with the
least amount of alcohol from eligible wine and flavors that qualify for
the credit under 26 U.S.C. 5010. By using this method the proprietor
forgoes the possible use of a lower tax rate in exchange for the
convenience of using a permanent standard effective tax rate that does
not have to be recomputed for each batch of product made. The
proprietor must keep a permanent record of the standard effective tax
rates established for each product, in accordance with Sec. 19.615.
(b) Batches subject to a higher tax rate. Whenever the proprietor
manufactures a batch of the product with a lesser quantity or lower
alcohol content of eligible wine or eligible flavor, this will result
in a higher tax rate on the product since the product will have less
alcohol qualifying for the credit under 26 U.S.C. 5010 and a higher
percentage of alcohol taxable at the rate published in 26 U.S.C. 5001.
In such instances, the proprietor must keep the cased goods segregated
from other completed cases of the same product subject to the permanent
standard effective tax rate for that product. The proprietor must
determine the tax rate for the non-standard batch in accordance with
Sec. 19.247.
(c) TTB review of standard tax rates. If the appropriate TTB
officer finds that the use of this procedure jeopardizes the revenue,
or causes administrative difficulty, the proprietor upon notification
from TTB must discontinue use of this procedure.
(26 U.S.C. 5010, 5207)

Sec. 19.249 Average effective tax rate.

(a) Establishing an average tax rate. The proprietor may establish
an average effective tax rate for any eligible distilled spirits
product based on the total proof gallons in all batches of the same
composition which have been produced during the preceding 6-month
period and which have been or will be bottled or packaged, in whole or
in part, for domestic consumption. At the beginning of each month, the
proprietor must recompute the average effective tax rate so as to
include only the immediately preceding 6-month period. The proprietor
must show the average tax rate established for a product in the record
of average effective tax rates as prescribed in Sec. 19.613.
(b) TTB review of average effective tax rates. If the appropriate
TTB officer finds that the use of this procedure jeopardizes the
revenue, or causes administrative difficulty, the proprietor upon
notification from TTB must discontinue use of this procedure.

(26 U.S.C. 5010, 5207)

Sec. 19.250 Inventory reserve account.

(a) The proprietor may establish an inventory reserve account for
any eligible distilled spirits product by maintaining an inventory
reserve record as prescribed by Sec. 19.614. The effective tax rate
applied to each removal or other disposition will be the effective tax
rate recorded on the inventory reserve record from which the removal or
other disposition is depleted. With an inventory reserve account, the
proprietor will tax pay removals on a first-in first-out basis
regardless of which lot of product is actually removed.
(b) If the appropriate TTB officer finds that the use of this
procedure jeopardizes the revenue, or causes administrative difficulty,
the proprietor upon notification from TTB must discontinue use of this
procedure.

(26 U.S.C. 5010, 5207)

Assessment of Taxes by TTB

Sec. 19.253 Assessment of tax on spirits not accounted for or
reported.

The proprietor is required by law to properly account for and
report all spirits that he produces. TTB will assess the proprietor for
the tax on the difference between the quantity reported and the
quantity actually produced.

(26 U.S.C. 5006)

Sec. 19.254 Assessment of tax for losses or unauthorized removals.

(a) Lost or destroyed in bond. TTB will assess the proprietor for
the tax on spirits, denatured spirits or wines in bond that are lost or
destroyed if:
(1) The proprietor is liable for the tax on spirits, denatured
spirits or wines in bond, and the proprietor fails to file a claim for
remission of the tax on spirits, denatured spirits, or wines that are
lost or destroyed in bond as provided in Sec. 19.263(a), or
(2) The proprietor files a claim for such loss or destruction but
the claim is denied. Exception: The provisions of this section do not
apply to spirits, denatured spirits or wines on which the tax is not
collectable due to the provisions of 26 U.S.C. 5008(a) or (d), or 26
U.S.C. 5370, as applicable.
(b) Unauthorized removal from bond.
(1) TTB will assess the proprietor for the tax on any spirits,
denatured spirits or wines in bond that are removed from bonded
premises other than as authorized by law.
(2) TTB will assess the proprietor for tax on spirits or denatured
spirits lost from casks or other packages as described in 26 U.S.C.
5006(b) if the proprietor does not pay the tax upon demand by the
appropriate TTB officer.

(26 U.S.C. 5006, 5008, 5370)

Additional Tax Provisions

Sec. 19.256 Tax on wine.

(a) Imposition of tax. All wine (including imitation, substandard,
or artificial wine, and compounds sold as wine) produced in or imported
into or brought into the United States is subject to tax pursuant to 26
U.S.C. 5041 or 7652. The proprietor may be liable for wine taxes under
26 U.S.C. 5362(b)(3) for wine that is transferred in bond to the
proprietor's distilled spirits plant. The proprietor may not remove
wine from the bonded premises of a distilled spirits plant for
consumption or sale as wine. (See 26 U.S.C. 5362.)
(b) Liability for tax. Except as otherwise provided by law, the
proprietor is liable for the tax on wine transferred in bond to the
proprietor's distilled spirits plant from a bonded wine cellar or from
another distilled spirits plant until the proprietor uses the wine in
the manufacture of a distilled spirits product or properly disposes of
the wine as provided elsewhere in this part.

(26 U.S.C. 5041, 5362, 7652)

Sec. 19.257 Imported spirits.

The proprietor will incur a tax liability greater than the internal
revenue tax imposed by 26 U.S.C. 5001(a)(1), if spirits originally
imported for nonbeverage purposes are transferred from customs custody
to TTB bonded premises pursuant to 26 U.S.C. 5232, and the proprietor
subsequently decides to withdraw the spirits for beverage purposes. If
the spirits would have been subject to a higher duty had they been
imported for beverage purpose, the proprietor must pay a tax equal to
the difference between the higher duty and the duty actually paid.
Proprietors will refer to this additional tax as ``additional tax--less
duty'' and pay it at the same time and in the same manner as the
distilled spirits excise tax. Proprietors must compute the amount of
``additional tax--less duty'' owed by applying this rate to the total
quantity of proof gallons withdrawn. The proprietor must make a
separate entry on the tax return labeled

[[Page 26259]]

``additional tax--less duty'' and show the amount of tax due.

(26 U.S.C. 5001)

Sec. 19.258 Additional tax on nonbeverage spirits.

The additional tax imposed by 26 U.S.C. 5001(a)(8), on imported
spirits withdrawn from customs custody without payment of tax and later
withdrawn from bonded premises for beverage purposes, and the related
provisions of Sec. 19.257, are not applicable to Puerto Rican or
Virgin Islands spirits brought into the United States and transferred
to bonded premises under the provisions of this part.

(26 U.S.C. 5201)

Subpart J--Claims

Sec. 19.261 Scope.

This subpart covers the various types of claims that a proprietor
may file and includes provisions regarding the following:
(a) General requirements for filing claims;
(b) Specific requirements for filing certain types of claims; and
(c) Remission, abatement, credit and refund of tax.

(26 U.S.C. 5008, 5215, 6065)

Requirements for Filing Claims

Sec. 19.262 General requirements for filing claims.

(a) A proprietor must file all claims for abatement, remission,
credit, or refund under this part on form TTB F 5620.8, Claim--Alcohol
and Tobacco Tax and Trade Bureau Taxes. The claim must:
(1) Be filed with TTB's National Revenue Center;
(2) Show the name, address, and capacity of the claimant;
(3) Be signed by the claimant or by the claimant's duly authorized
agent under penalties of perjury as provided in Sec. 19.45; and
(4) Include any supporting documents required by this part. The
supporting documents will be considered a part of the claim.
(b) The appropriate TTB officer may require that the claimant
submit additional evidence or documentation to further support the
legitimacy or accuracy of the claim.

(26 U.S.C. 5008, 5215, 6065)

Sec. 19.263 Claims on spirits, denatured spirits, articles, or wines
lost or destroyed in bond--specific requirements.

(a) Claims for remission. A claim for remission of tax liability
relating to the destruction or loss of spirits, denatured spirits,
articles, or wines in bond must include the following information:
(1) Identity of containers. Identification of the containers, by
serial number if they were numbered, and location of the containers
from which the spirits, denatured spirits, articles or wines were lost,
or in which they were removed for destruction;
(2) Quantity of spirits. The quantity of spirits, denatured
spirits, articles, or wines lost or destroyed from each container, and
the total quantity of spirits or wines covered by the claim;
(3) Amount of claim. The total amount of tax for which the claim is
filed;
(4) Identity of distilled spirits plant. The name, number, and
address of the distilled spirits plant from which withdrawn without
payment of tax or removed for transfer in bond, if the claim involves
spirits so withdrawn or removed or if the claim involves wines
transferred in bond, and the date and purpose of such withdrawal or
removal. In the case of imported spirits lost or destroyed while being
transferred from customs custody to TTB bond as provided in Sec.
19.409 of this part, the name of the customs bonded warehouse, if any,
and port of entry will be included instead of the plant name, number,
and address;
(5) Date and cause. The date of the loss or destruction. If the
date is not known, enter the date the loss or destruction was
discovered. Include the cause of the loss together with relevant facts
and details;
(6) Carrier. The name of the carrier if the loss occurred while the
spirits were in transit;
(7) Consignee. The name and address of the consignee, in the case
of spirits withdrawn without payment of tax which are lost before being
used for research, development or testing;
(8) Theft. If lost by theft, the facts establishing that the loss
did not occur as the result of any negligence, connivance, collusion or
fraud on the part of the proprietor of the plant, owner, consignor,
consignee, bailee, or carrier, or the employees or agents of any of
them; and
(9) Insurance. In the case of a loss by theft, whether the claimant
is indemnified or recompensed for the spirits or wines lost and if so,
the amount and nature of indemnity or recompense and the actual value
of the spirits or wines, less the tax.
(b) Claims for abatement, credit or refund. If a proprietor files a
claim for abatement of an assessment, or for credit or refund of tax
that has been paid or determined, for spirits, denatured spirits,
articles, or wines lost or destroyed in bond, the claim must include
all of the applicable information described in paragraph (a) of this
section as well as the following:
(1) The date of assessment or payment of the tax for which
abatement, credit or refund is claimed. If the tax has not been
assessed or paid, give the date of the tax determination; and
(2) The name, plant number and address of the plant where the tax
was determined, assessed or paid. If the tax was assessed against, or
paid by, someone other than the proprietor, then give the name, address
and capacity of the person who was assessed or paid the tax.
(c) Supporting documents--(1) General. If possible, the proprietor
should support the information and details on all claims filed under
this section with affidavits by persons having personal knowledge of
the circumstances of the loss or destruction.
(2) Losses in transit. For claims on spirits, denatured spirits,
articles, or wines lost while being transferred by a carrier, the claim
must be supported by a copy of the bill of lading.
(3) Spirits withdrawn without payment of tax. If the lost spirits
were withdrawn without payment of tax for research, development or
testing, the claim must be supported by a copy of the proprietor's
sample record prescribed in subpart V of this part.

(26 U.S.C. 5008, 5370)

Sec. 19.264 Claims on spirits returned to bonded premises--specific
requirements.

(a) General. Section 5215(a) of the IRC allows for the return of
tax paid or tax determined spirits to the bonded premises of a
distilled spirits plant under certain conditions. In addition, section
5008(c) of the IRC allows a proprietor to file a claim for credit or
refund of tax on the spirits returned to bonded premises under section
5215(a). For information on allowable returns see subpart Q of this
part.
(b) Claims for credit or refund. A claim for credit or refund of
tax on spirits returned to bonded premises under section 5215(a), must
include the following information:
(1) Quantity of spirits so returned;
(2) Amount of tax for which the claim is filed;
(3) Name, address, and plant number of the plant to which the
spirits were returned and the date of the return;
(4) The purpose for which the spirits were returned; and
(5) The serial number of the gauge record on which the spirits were
returned.

[[Page 26260]]

(c) Puerto Rican and Virgin Islands spirits and imported rum. If
the alcoholic content of the spirits contain at least 92 percent Puerto
Rican or Virgin Islands rum, or if the spirits contain rum imported
from any area other than Puerto Rico and the Virgin Islands, the claim
must show:
(1) Proof gallons of the finished product derived from Puerto Rican
or Virgin Islands spirits, or derived from rum imported from any other
area; and
(2) The amount of tax imposed by 26 U.S.C. 7652 or 26 U.S.C. 5001,
determined at the time of withdrawal from bond, on the Puerto Rican or
Virgin Islands spirits, or on the rum imported from any other area,
contained in the product.
(d) Products subject to 26 U.S.C. 5010 tax credits. A claim for
credit or refund of tax on spirits containing eligible wine or eligible
flavors must include the date and serial number of the record of tax
determination and the effective tax rate at which the tax was paid or
determined. If this information is not provided, the amount of tax
claimed will be based on the lowest effective tax rate applied to the
product.
(e) Limits on claims. Claims for credit or refund of tax must be
filed by the proprietor of the plant to which the spirits were
returned. The claim must be filed within six months of the date of the
return. No interest is allowed on any claims for refund or credit.

(26 U.S.C. 5008, 5215)

Sec. 19.265 Claims relating to spirits lost after tax determination.

Claims for abatement, credit, or refund of tax under this part,
relating to losses of spirits occurring on bonded premises after tax
determination but prior to physical removal from such premises, will be
prepared and filed in accordance with the regulations in Sec.
19.263(b) and (c).

(26 U.S.C. 5008)

Rules Regarding Credits, Abatement, Remission or Refund

Sec. 19.266 Claims for credit of tax.

A proprietor may file a claim for credit of tax, as provided in
this part, after the tax has been determined, whether or not the tax
has been paid. However, a proprietor may not anticipate allowance of a
credit or make an adjusting entry in a tax return pending action on the
claim.

(26 U.S.C. 5008, 5215)

Sec. 19.267 Adjustments for credited tax.

When a proprietor receives a notice of allowance of credit from
TTB, including notification of credit for tax on spirits exported with
benefit of drawback as provided in part 28 of this chapter, the
proprietor will make an adjusting entry and an explanatory statement on
his next excise tax return. The proprietor will identify the
notification of allowance of credit that authorizes the adjusting entry
in the explanatory statement. If the allowable tax credit is greater
than the tax due on the excise tax return, the proprietor will apply
the balance of the tax credit to one or more following tax returns
until the tax credit is exhausted.

(26 U.S.C. 5008, 5062)

Sec. 19.268 Allowance of remission, abatement, credit or refund of
tax.

The appropriate TTB officer is authorized to allow claims for
remission, abatement, credit, and refund of tax, filed under the
provisions of this part.

(26 U.S.C. 5008)

Rules for Puerto Rican and Virgin Islands Spirits

Sec. 19.269 Puerto Rican and Virgin Islands spirits.

(a) The provisions of 26 U.S.C. 5008, authorizing abatement,
remission, credit, or refund for loss or destruction of distilled
spirits, also apply to spirits brought into the United States from
Puerto Rico or the Virgin Islands with respect to the following:
(1) Spirits lost while in TTB bond;
(2) Voluntary destruction of spirits in bond;
(3) Spirits returned to bonded premises after withdrawal without
payment of tax; and
(4) Spirits returned to bonded premises after withdrawal upon tax
determination.
(b) In addition to the information required by Sec. 19.263, claims
relating to spirits lost in bond must show the name of the producer and
the serial number and date of the formula under which produced, if any.

(26 U.S.C. 5008, 5215)

Subpart K--Gauging

Sec. 19.281 Scope.

This subpart covers gauging, which is the determination of the
quantity and the proof of distilled spirits. Topics covered in this
subpart include: the general requirements for gauging; when gauges are
required at distilled spirits plants; and special rules that apply to
the gauges performed at distilled spirits plants. For additional
requirements and procedures governing gauging, see part 30 of this
chapter, Gauging Manual.

Sec. 19.282 General requirements for gauging and measuring equipment.

A proprietor is required to perform periodic gauges of the spirits,
wines, and alcoholic flavorings at the plant. A proprietor must have
accurate and readily usable gauging and measuring equipment as required
by this part and part 30 of this chapter. At any time, TTB may require
that the proprietor's gauges be performed in the presence of, and be
verified by, a TTB officer. In addition, TTB may disapprove the use of
any equipment, or the proprietor's means of gauging, if TTB finds that
it is not sufficiently accurate or suitable for the gauges and
measurements to be made.

(26 U.S.C. 5006, 5204)

Required Gauges

Sec. 19.283 When gauges are required.

The proprietor must gauge spirits, wine, and alcoholic flavoring
materials when they are:
(a) Produced and entered for deposit;
(b) Filled into packages from storage tanks;
(c) Transferred or received in bond;
(d) Transferred between operational accounts;
(e) Mixed in the manufacture of a distilled spirits product;
(f) Mingled under Sec. 19.329;
(g) Reduced in proof before bottling;
(h) Voluntarily destroyed;
(i) Removed or withdrawn from bond;
(j) Tax determined;
(k) Returned to bond;
(l) Denatured; or
(m) When required by a TTB officer.

(26 U.S.C. 5204, 5559)

Rules for Gauging

Sec. 19.284 Quantity determination of bulk spirits.

(a) Gauge of spirits in packages. When determining the quantity of
bulk spirits in packages, the proprietor must determine the quantity by
weight as provided in part 30 of this chapter.
(b) Bulk Gauge for Tax Determination. When determining the quantity
of bulk spirits for determination of tax or when performing a
production gauge that will be used for tax determination, the
proprietor must determine the quantity by weight as provided in part 30
of this chapter or by an accurate mass flow meter. For tax
determination purposes, an accurate mass flow meter is a mass flow
meter that has been certified by the manufacturer or other qualified
person as accurate within a tolerance of +/-0.1%.
(c) Volumetric determination. Except as provided in paragraphs (a)
and (b) of this section, in all other instances when the proprietor is
required to gauge bulk

[[Page 26261]]

spirits in bond, the proprietor may determine the quantity by either
weight or volume. When the proprietor determines the quantity by
volume, the proprietor must measure the spirits by using:
(1) A tank or bulk conveyance for which a calibration chart is
provided, with the calibration charts certified as accurate by persons
qualified to calibrate tanks or bulk conveyances; or
(2) An accurate mass flow meter. For purposes of this paragraph, an
accurate mass flow meter is a mass flow meter that has been certified
by the manufacturer or other qualified person as accurate within a
tolerance of +/-0.5%; or
(3) Another device or method when approved by the appropriate TTB
officer.

(26 U.S.C. 5559)

Sec. 19.285 Proof determination of distilled spirits.

(a) Except as provided in paragraph (b) of this section, when the
proprietor is required to gauge distilled spirits, the proprietor must
determine the proof in accordance with the procedures prescribed in
part 30 of this chapter, Gauging Manual.
(b) Use of Initial proof. After a proprietor has determined the
proof of distilled spirits in accordance with the procedures in part 30
of this part, a proprietor may use the initial determination of proof
when required to make a later gauge at the same plant. However, a
proprietor must determine the proof again when:
(1) A bottling tank gauge is required by Sec. 19.353;
(2) A gauge for tax determination is required by Sec. 19.226; or
(3) In any case where the proof may have changed.

(26 U.S.C. 5559)

Sec. 19.286 Gauging of spirits in bottles.

When gauging spirits in bottles, the proprietor may determine the
proof and quantity from case markings and label information if the
bottles are full and there is no evidence that tampering has occurred.

(26 U.S.C. 5204, 5559)

Sec. 19.287 Gauging of alcoholic flavoring materials.

Generally, alcoholic flavoring material must be gauged when dumped.
However, when received from a manufacturer in a closed, nonporous
container such material may be gauged by using the proof shown on the
container label or a related statement of proof from the manufacturer.
When the proof is determined from a label or manufacturer's statement,
the proprietor will test a sufficient number of samples to verify the
accuracy of the proof so determined. TTB may require that alcoholic
flavoring materials be gauged by the methods provided in part 30 of
this chapter.

(26 U.S.C. 5204, 5559)

Sec. 19.288 Determination of tare.

When packages are to be individually gauged for withdrawal from
bonded premises, the actual tare must be determined in accordance with
part 30 of this chapter.

(26 U.S.C. 5204)

Sec. 19.289 Production gauge.

(a) General requirements for production gauges. A proprietor must
gauge all spirits by determining the quantity and proof as soon as
reasonably possible after production is completed. Except as otherwise
provide in this section, a proprietor may determine the quantity by
volume or by weight, by an accurate mass flow meter, or when approved
by the appropriate TTB officer, by other devices or methods that
accurately determine the quantities. If caramel is added to brandy or
rum, the proof of the spirits must be determined after the addition.
Spirits in each receiving tank will be gauged before any reduction in
proof and both before and after each removal of spirits. The gauges
must be recorded in the records required by Sec. 19.585.
(b) Tax to be determined on production gauge. If the tax is to be
determined based on the production gauge, all transaction records must
be marked ``Withdrawal on Production Gauge.'' A proprietor may
determine the tax based on the production gauge if the spirits are:
(1) Weighed into bulk conveyances or metered using an accurate mass
flow meter;
(2) Uniformly filled by weight or an accurate mass flow meter into
metal packages; or
(3) Filled by weight or an accurate mass flow meter into packages
for immediate withdrawal from bonded premises with the details recorded
on a package gauge record in accordance with Sec. 19.619.
(c) Tax not to be determined on production gauge. If spirits are
drawn from the production system into barrels, drums, or similar
portable containers of the same rated capacity and the containers are
filled to capacity, and the tax is not to be determined on the basis of
the production gauge, the gauge may be made by:
(1) Weighing in a tank, converting the weight into proof gallons,
and determining the average content of each container;
(2) Measuring volumetrically, in a calibrated tank, converting the
wine gallons determined into proof gallons, and determining the average
content of each container;
(3) Converting the rated capacity into proof gallons to determine
the average content of each container. Rated capacity will be
determined from specifications of the manufacturer. The proprietor will
determine the rated capacity of used cooperage; or
(4) Determining by an accurate mass flow meter or a device or
method approved under paragraph (a) of this section, the total quantity
filled into containers, and determining the average content of each
container.
(d) Records of production gauge. For the production gauge,
fractional proof gallons will be rounded to the nearest one-tenth and
the average content and the number of packages filled will be used in
computing the quantity produced. The actual proof gallons in each
remnant container must be shown. As provided in Sec. 19.618, a
separate gauge record will be prepared for each lot of packages filled
(see Sec. 19.485) and for each removal by pipeline or bulk conveyance
for deposit in bond on the same plant premises. The gauge record will
show ``Deposit in storage'' or ``Deposit in processing.'' If spirits
are to be transferred in bond or withdrawn from bond, the production
gauge will be made on the form or record required by this part
(accompanied by a package gauge record, if required).

(26 U.S.C. 5204, 5211)

Subpart L--Production of Distilled Spirits

Sec. 19.291 General.

The regulations in this subpart cover production operations. A
proprietor authorized to produce distilled spirits must conduct
production operations in accordance with the provisions of this
subpart. Subpart V of this part sets forth record keeping requirements
that apply to production operations.

(26 U.S.C. 5201)

Notification to TTB When Beginning or Suspending Production Operations

Sec. 19.292 Notice of operations.

A proprietor authorized to produce distilled spirits may not
commence, suspend, or resume production operations at the plant without
first providing written notice to TTB.
(a) Beginning operations. A proprietor must file a letterhead
notice with the appropriate TTB officer before

[[Page 26262]]

beginning or resuming production operations. A proprietor must not
begin or resume operations before the time specified in the notice.
(b) Suspending operations. If a proprietor intends to suspend
production operations for a period of 90 days or more, the proprietor
must file a letterhead notice with the appropriate TTB officer
specifying the date on which operations will be suspended.
(c) Discontinuing reports. A proprietor is not required to prepare
or file reports of production operations under subpart V of this part
for periods during which production operations are suspended.

(26 U.S.C. 5221)

Rules for Receipt, Use, and Disposal of Materials

Sec. 19.293 Receipt of materials.

When a proprietor receives certain materials on bonded premises,
the proprietor must determine the quantity received and record those
quantities in the records prescribed by subpart V of this part. This
requirement applies to:
(a) Fermenting materials;
(b) Distilling materials (including nonpotable chemical mixtures
containing spirits); and
(c) Spirits, denatured spirits, articles, and spirits residue for
redistillation.

(26 U.S.C. 5201, 5222, 5223)

Sec. 19.294 Removal of fermenting material.

Material received for use as fermenting material may be removed
from or used on bonded premises for other purposes. The proprietor must
keep a record of use or removal as provided in subpart V of this part.

(26 U.S.C. 5201)

Sec. 19.295 Removal or destruction of distilling material.

(a) Distilling material. Generally, a proprietor may not remove
distilling material from bonded premises before it is distilled.
However, a proprietor may remove mash, wort, wash or other distilling
material:
(1) To plant premises, other than bonded premises, for use in any
business authorized under Sec. 19.55;
(2) To other premises for use in processes not involving the
production of spirits, alcohol beverages, or vinegar by the vaporizing
process; or
(3) For destruction.
(b) Residues. A proprietor may remove the residue of distilling
material not introduced into the production system from the premises if
the liquid is extracted from the material before removal and the liquid
is not received at any distilled spirits plant or bonded wine cellar. A
proprietor may return residue of beer used as distilling material to
the producing brewery. A proprietor may destroy distilling material
produced and wine and beer received for use as distilling material.
(c) Records. A proprietor must keep a record of removal or
destruction as provided in subpart V of this part.

(26 U.S.C. 5222, 5370)

Sec. 19.296 Fermented materials

Fermented materials that a proprietor intends to use in the
production of spirits must be:
(a) Produced on the bonded premises where used;
(b) Received from a bonded wine cellar in the case of wine;
(c) Beer received from a brewery without payment of tax, or beer
that was removed from a brewery upon determination of tax; or
(d) Apple cider exempt from tax under 26 U.S.C. 5042(a)(1).

(26 U.S.C. 5201, 5222, 5223)

Sec. 19.297 Use of materials in production of spirits.

A proprietor may produce spirits from any suitable material in
accordance with the proprietor's statements of production procedure in
the notice of registration. Materials from which alcohol will not be
produced may be used in production only if the use of the materials is
described in the approved statements of production procedure. The
distillation of nonpotable chemical mixtures as described in Sec.
19.36 will be deemed to be the original and continuous distillation of
the spirits in such mixtures and to constitute the production of
spirits.

(26 U.S.C. 5172, 5178)

Rules for Production of Spirits

Sec. 19.301 Distillation.

The distillation of spirits must be done in a continuous system.
Distilling operations are continuous when the spirits are moved through
the various steps of production as quickly as plant operation will
permit. The proprietor may move the product through as many distilling
or other production operations as desired, provided the operations are
continuous. The collection of unfinished spirits for the purpose of
redistillation is not considered to be a break in the continuity of the
distilling procedure. However, the quantity and proof of any unfinished
spirits must be determined and recorded before any mingling with other
materials or before any further operations involving the unfinished
spirits outside the continuous system. Before the production gauge,
spirits may be held only as long as reasonably necessary to complete
the production procedure.

(26 U.S.C. 5178, 5211, 5222)

Sec. 19.302 Treatment during production.

During production, the proprietor may purify or refine the spirits
by using any material that will not remain in the finished product.
Juniper berries and other natural aromatics or their extracted oils may
be used in the distillation of gin. Spirits may be percolated through
or treated with oak chips that have not been treated with any chemical.
The proprietor must destroy or so treat any materials used in treatment
of spirits, and which do not remain in the spirits, so as to preclude
the extraction of potable spirits.

(26 U.S.C. 5201)

Sec. 19.303 Addition of caramel to rum or brandy and addition of oak
chips to spirits.

A proprietor may add caramel that has no material sweetening
properties to rum or brandy in packages or tanks prior to production
gauge. A proprietor may add oak chips that have not been treated with
any chemical to packages of spirits prior to or after the production
gauge. The proprietor must note the use of oak chips on all transaction
records.

(26 U.S.C. 5201)

Sec. 19.304 Production gauge.

A proprietor must gauge all spirits by determining the quantity and
proof as soon as reasonably possible after production is completed.
Additional requirements regarding production gauges are found in
subpart K of this part.

(26 U.S.C. 5204, 5211)

Sec. 19.305 Identification of spirits.

Upon completion of the production gauge, the proprietor must
identify containers of spirits as provided in subpart S of this part.
When the proprietor intends to enter spirits into bonded storage for
later packaging in wooden packages, the proprietor may identify the
spirits with the designation to which they would be entitled if drawn
into wooden packages, followed by the word ``Designate,'' for example,
``Bourbon Whisky Designate.''

(26 U.S.C. 5201, 5206)

Sec. 19.306 Entry.

(a) Following completion of the production gauge, a proprietor must
make the appropriate entry for:
(1) Deposit of the spirits on bonded premises for storage or
processing;
(2) Withdrawal of the spirits on determination of tax;
(3) Withdrawal of the spirits free of tax;

[[Page 26263]]

(4) Withdrawal of the spirits without payment of tax; or
(5) Transfer of the spirits for redistillation.
(b) A proprietor may use the production gauge as the entry gauge
when spirits are:
(1) Deposited for storage or processing at the same distilled
spirits plant; or
(2) Entered for redistillation at the same distilled spirits plant.
(c) When spirits are entered for deposit at another distilled
spirits plant or are entered for withdrawal or redistillation, the
provisions subpart P of this part will apply.

(26 U.S.C. 5211)

Sec. 19.307 Distillates containing extraneous substances.

(a) Use in production. Distillates that contain substantial
quantities of fusel oil, aldehydes, or other extraneous substances may
be removed from the distilling system before the production gauge and
promptly added to fermenting or distilling material at the distillery
where produced.
(b) Use at adjacent bonded wine cellar. Distillates that contain
aldehydes may be removed, without payment of tax, to an adjacent bonded
wine cellar for use in fermentation of wine to be used as distilling
material at the distilled spirits plant from which the distillates were
removed. The removal of distillates to an adjacent bonded wine cellar
must be done as provided in Sec. 19.419. The receipt and use of those
distillates must conform to the requirements of part 24 of this
chapter.

(26 U.S.C. 5201, 5222, 5373)

Rules for Chemical By-Products

Sec. 19.308 Spirits content of chemicals produced.

All chemicals and chemical by-products produced must be
substantially free of spirits before being removed from bonded
premises. The spirits content of chemicals to be removed from bonded
premises must not exceed 10 percent by volume unless the appropriate
TTB officer approves higher limits. A proprietor must test chemicals
for spirits content and maintain a record of such tests as required by
Sec. 19.584.

(26 U.S.C. 5201)

Sec. 19.309 Disposition of chemicals.

Chemicals that meet the requirements in Sec. 19.308 may be removed
from bonded premises by pipeline or in containers marked to show the
contents. The proprietor must determine the quantities of chemicals
removed from bonded premises and keep records of removals as required
by Sec. 19.586. A TTB officer may take samples of chemicals.

(26 U.S.C. 5201, 5222)

Sec. 19.310 Wash water.

Water used in washing chemicals to remove spirits may be run into a
wash tank or a distilling material tank, or may be destroyed or
disposed of on the premises.

(26 U.S.C. 5008, 5201)

Production Inventories

Sec. 19.312 Physical inventories.

A proprietor must take a physical inventory of the spirits and
denatured spirits in tanks and other containers in the production
account at the close of each calendar quarter. A proprietor must record
the results of the inventory as provided in subpart V of this part and
must show separately spirits and denatured spirits received for
redistillation. TTB may require additional inventories be taken at any
time.

(26 U.S.C. 5201)

Rules for Redistillation

Sec. 19.314 General.

Distillers or processors may redistill spirits, denatured spirits,
articles, and spirits residues. Some redistillation requires an
approved formula on form TTB F 5100.51, Formula and Process for
Domestic and Imported Alcohol Beverages, as specified in Sec. Sec.
5.26 and 5.27 of this chapter.

(26 U.S.C. 5223)

Sec. 19.315 Receipts for redistillation.

(a) A proprietor may receive and redistill spirits or denatured
spirits that:
(1) Have not been removed from bond;
(2) Have been withdrawn from bond on payment or determination of
tax and returned to bond under subpart Q of this part;
(3) Have been withdrawn from bond free of tax or without payment of
tax and returned to bond under subpart T of this part; or
(4) Have been abandoned to the United States and sold to the
proprietor without the payment of tax.
(b) A proprietor may also receive and redistill:
(1) Recovered denatured spirits and recovered articles returned
under Sec. 19.454, and
(2) Articles and spirits residues received under Sec. 19.454.

(26 U.S.C. 5201, 5215, 5223, 5243)

Sec. 19.316 Redistillation.

(a) TTB has established standards of identity for the various
classes and types of distilled spirits. Those standards are found in
part 5 of this chapter. If a proprietor intends to redistill spirits,
the proprietor must ensure that the redistillation process does not
cause the distillate to be become ineligible for designation in the
class or type of spirits that the proprietor intends to produce.
Therefore, spirits must not be redistilled at a proof lower than that
allowed for the class and type at which the spirits were originally
produced, unless the redistilled spirits are to be:
(1) Used in wine production;
(2) Used in the manufacture of gin or vodka; or
(3) Designated as alcohol.
(b) In order to preserve the class and type of spirits during the
redistillation process, different kinds of spirits must be redistilled
separately, or with distilling material of the same kind or type as
that from which the spirits were originally produced. However, this
restriction does not apply when:
(1) Brandy is redistilled into ``spirits-fruit'' or ``neutral
spirits-fruit''. In this case the resulting distillate must not be used
for producing wine;
(2) Whiskey is redistilled into ``spirits-grain'' or ``neutral
spirits-grain'';
(3) Spirits originally distilled from different kinds of material
are redistilled into ``spirits-mixed'' or ``neutral spirits-mixed''; or
(4) The spirits are redistilled into alcohol.
(c) All spirits redistilled after the production gauge will be
treated the same as if the spirits had been originally produced by the
redistiller. Spirits recovered by redistillation of denatured spirits,
articles, or spirits residues may not be withdrawn from bonded premises
except for industrial use or after denaturation. Otherwise, all
provisions of this part and 26 U.S.C. Chapter 51 applicable to the
original production of spirits will be applicable to the redistillation
of spirits. Nothing in this section affects any provision of this
chapter relating to the labeling of distilled spirits.

(26 U.S.C. 5215, 5223)

Subpart M--Storage of Distilled Spirits

Sec. 19.321 General.

This subpart covers storage operations at distilled spirits plants.
A proprietor qualified as a warehouseman and authorized to store bulk
distilled spirits and wines must conduct storage operations in
accordance with the provisions of this subpart. Subpart V of this part
sets forth record keeping requirements that apply to storage
operations.

[[Page 26264]]

(26 U.S.C. 5201)

Receipt and Storage of Spirits and Wines

Sec. 19.322 Receipt and storage of bulk spirits and wines.

(a) Deposit of spirits into storage account. A proprietor may
receive bulk spirits into the storage account:
(1) From the production facilities of the same plant;
(2) By transfer in bond from another plant;
(3) From customs custody without payment of tax; or
(4) By return to bulk storage.
(b) Deposit of wine into storage account. A proprietor may receive
bulk wine into the storage account:
(1) By transfer in bond from a bonded wine cellar; or
(2) By transfer in bond from another distilled spirits plant.
(c) Storage. A proprietor may store spirits or wines in packages,
tanks or portable bulk containers in the storage account on the bonded
premises. If stored in portable containers, the containers must be kept
so that they can be readily inspected or inventoried by TTB officers.

(26 U.S.C. 5201, 5202, 5211, 5212, 5231, 5232, 5601)

Rules for Filling and Changing Packages

Sec. 19.324 Filling of packages from tanks.

A proprietor may fill spirits or wines into packages from storage
tanks on bonded premises. The spirits or wines in the tank must be
gauged before the filling of packages begins and again when the filling
is finished if the tank is not empty. The results of the gauges must be
recorded in the records required by Sec. 19.618.

(26 U.S.C. 5201)

Sec. 19.325 Change of packages.

A proprietor may transfer spirits or wines in storage from one
package to another. Each new package must contain spirits from only one
package except in the case of spirits of 190 degrees or more proof.
Packages of spirits must be marked as provided in subpart S of this
part. Each package of wine must bear the same marks as the package from
which the wine was transferred.

(26 U.S.C. 5201)

Rules for Mingling or Blending Spirits

Sec. 19.326 Mingling or blending of spirits for further storage.

A proprietor may mingle or blend spirits in the storage account
according to the following rules:
(a) Spirits distilled at 190 degrees or more of proof, whether or
not later reduced, may be mingled in storage.
(b) Domestic spirits distilled at less than 190 degrees of proof
may be mingled for withdrawal or further storage if the spirits:
(1) Are of the same kind; and
(2) Were produced in the same State.
(c) Imported spirits distilled at less than 190 degrees of proof
may be mingled for withdrawal or further storage if the spirits:
(1) Are of the same kind;
(2) Were produced in the same foreign country; and
(3) Were treated, blended, or compounded in the same foreign
country and the U.S. import duty was paid at the same rate.
(d) Imported spirits distilled at less than 190 degrees of proof
that are recognized as distinctive products under part 5 of this
chapter may be mingled for withdrawal or further storage if the
spirits:
(1) Are of the same kind;
(2) Were produced by the same proprietor in the same foreign
country; and
(3) Were treated, blended, or compounded by the same proprietor in
the same foreign country and the U.S. import duty was paid at the same
rate.
(e) Fruit brandies distilled from the same kind of fruit at not
more than 170 degrees of proof may, for the sole purpose of perfecting
such brandies according to commercial standards, be blended with each
other, or with any blend of such fruit brandies in storage. Rums may,
for the sole purpose of perfecting them according to commercial
standards, be blended with each other, or with any blend of rums.
(f) Packaging after mingling or blending must be done under the
provisions of Sec. 19.324. The mingled or blended spirits may be
returned to the packages from which they were dumped, or as many of the
packages as needed.

(26 U.S.C. 5201, 5214)

Sec. 19.327 Packages dumped for mingling.

A proprietor must examine each package of spirits to be dumped for
mingling. If any package bears evidence of loss due to theft or
unauthorized voluntary destruction, the proprietor must notify the
appropriate TTB officer before dumping the package. Mingled spirits
must be recorded on the tank record required by Sec. 19.592 and Sec.
19.593, as appropriate.

(26 U.S.C. 5201)

Sec. 19.328 Determining age of mingled spirits.

When spirits are mingled, the age of the spirits for the entire lot
will be the age of the youngest spirits contained in the lot.

(26 U.S.C. 5201)

Sec. 19.329 Mingled spirits or wines held in tanks.

When wines or spirits of less than 190 degrees of proof are mingled
in a tank, the proprietor must gauge the spirits or wines in the tank
and record the mingling gauge on the tank record prescribed in Sec.
19.592.

(26 U.S.C. 5201)

Use of Oak Chips and Caramel

Sec. 19.331 Use of oak chips in spirits and caramel in brandy and
rum.

A proprietor may add oak chips that have not been treated with any
chemical to packages of spirits. The proprietor must note the use of
oak chips on all transaction records. A proprietor may add caramel that
has no material sweetening properties to rum or brandy stored in
packages or tanks.

(26 U.S.C. 5201)

Storage Inventories

Sec. 19.333 Physical inventories.

A proprietor must take a physical inventory of all spirits and
wines held in the storage account in tanks and other containers (except
packages) at the close of each calendar quarter. A proprietor must
record the results of the inventory as provided in subpart V of this
part. TTB may require additional inventories at any time.

(26 U.S.C. 5201)

Subpart N--Processing of Distilled Spirits

Sec. 19.341 General.

This subpart covers processing operations at distilled spirits
plants. A proprietor authorized to perform processing operations must
conduct processing operations in accordance with the provisions of this
subpart. Subpart V of this part sets forth record keeping requirements
that apply to processing operations. Also, the provisions of subpart O
of this part apply if a proprietor denatures spirits or manufactures
articles on bonded premises as part of processing operations under this
subpart.

(26 U.S.C. 5201)

[[Page 26265]]

Rules for Receipt and Use of Spirits, Wines, and Alcoholic Flavoring
Materials

Sec. 19.342 Receipt of spirits, wines, and alcoholic flavoring
materials for processing.

(a) Receipt of bulk spirits. A proprietor may receive bulk spirits
into the processing account:
(1) From the production or storage account at the same plant;
(2) By transfer in bond from another distilled spirits plant; or
(3) By withdrawal from customs custody under 26 U.S.C. 5232.
(b) Receipt of wines. A proprietor may receive wines into the
processing account:
(1) From the storage account at the same plant; or
(2) By transfer in bond from a bonded wine cellar or another
distilled spirits plant.
(c) Receipt of spirits returned to bond. A proprietor may receive
spirits into the processing account that are returned to bond under the
provisions of 26 U.S.C. 5215.
(d) Receipt of alcoholic flavoring materials. A proprietor may
receive alcoholic flavoring materials into the processing account.
(e) Dumping of spirits, wines, and alcoholic flavoring materials.
As provided in Sec. Sec. 19.343 and 19.598, the proprietor must
prepare a dump/batch record when spirits, wines, and alcoholic
flavoring materials are dumped for use in the processing account.
Spirits, wines, and alcoholic flavoring materials that are dumped into
the processing account are subject to the following rules:
(1) Spirits and wines received in bulk containers or conveyances
may be retained in the containers or conveyances in which received
until used, but must be recorded as dumped upon receipt;
(2) Spirits and wines received by pipeline must be deposited in
tanks and recorded as dumped on receipt; and
(3) Alcoholic flavoring materials may be retained in the containers
in which received or may be transferred to another container if the
proprietor marks or otherwise indicates thereon, the full
identification of the original container, the date of receipt, and the
quantity deposited. Alcoholic flavoring materials and nonalcoholic
ingredients will be considered dumped when mixed with spirits or wines.
(f) Gauging. A proprietor must determine the proof gallon content
of spirits, wines, and alcoholic flavoring materials at the time of
dumping. Additional information regarding the gauging of spirits,
wines, and alcoholic flavoring materials is found in subpart K of this
part.

(26 U.S.C. 5201)

Sec. 19.343 Use of spirits, wines and alcoholic flavoring materials.

A proprietor must prepare a dump/batch record in accordance with
Sec. 19.598 for spirits, wines, alcoholic flavoring materials, and
nonalcoholic ingredients used in the manufacture of a distilled spirits
product according to the following rules.
(a) Dump record. A proprietor must prepare a dump record when
spirits, wines, or alcoholic flavoring materials are dumped for use in
the manufacture of a distilled spirits product, and when spirits are
dumped for redistillation in the processing account.
(b) Batch record. A proprietor must prepare a batch record to
report:
(1) The dumping of spirits that are to be used immediately and in
their entirety in preparing a batch of a product manufactured under an
approved formula;
(2) The use of spirits or wines previously dumped, reported on dump
records and retained in tanks or receptacles; or
(3) The use of any combination of ingredients under paragraph
(b)(1) or paragraph (b)(2) of this section in preparing a batch of
product manufactured under an approved formula.

(26 U.S.C. 5201)

Sec. 19.344 Manufacture of nonbeverage products, intermediate
products, or eligible flavors.

(a) Distilled spirits and wine may be used for the manufacture of
flavors or flavoring extracts of a nonbeverage nature as intermediate
products to be used exclusively in the manufacture of other distilled
spirits products on bonded premises.
(b) Nonbeverage products on which drawback will be claimed, as
provided in 26 U.S.C. 5131-5134, may not be manufactured on bonded
premises. Premises used for the manufacture of nonbeverage products on
which drawback will be claimed must be separated from bonded premises.
(c) For purposes of computing an effective tax rate, flavors
manufactured on either the bonded or general premises of a distilled
spirits plant are not eligible flavors. See Sec. 19.1 for the
definition of the term ``eligible flavor'' and further restrictions
that apply to the manufacture of an eligible flavor.

(26 U.S.C. 5201)

Obscuration Determination

Sec. 19.346 Determining obscuration.

A proprietor may determine, as provided in Sec. 30.32 of this
chapter, the proof obscuration of spirits to be bottled on the basis of
a representative sample taken from a storage tank before the transfer
of the spirits to the processing account or from a tank after the
spirits have been dumped for processing, whether or not combined with
other alcoholic ingredients. The obscuration will be determined after
the sample has been reduced to within one degree of bottling proof.
Only water may be added to a lot of spirits to be bottled for which the
determination of proof obscuration is made from a sample under this
section. The proof obscuration for spirits gauged under this section
must be frequently verified by testing samples taken from bottling
tanks before bottling.

(26 U.S.C. 5204)

Filing Formulas With TTB

Sec. 19.348 Formula requirements.

A proprietor must obtain an approved formula on form TTB F 5100.51
as provided in Sec. Sec. 5.26 and 5.27 of this chapter before a
proprietor may:
(a) Blend, mix, purify, refine, compound or treat spirits in any
manner which results in a change of character, composition, class or
type of the spirits, including redistillation as provided in Sec.
19.314; or
(b) Produce gin or vodka by other than original and continuous
distillation.

(26 U.S.C. 5201, 5555)

Rules for Bottling, Packaging, and Removal of Products

Sec. 19.351 Removals from processing.

(a) Method of removal. A proprietor may remove spirits or wines
from the processing account in any approved bulk container, by
pipeline, or in bulk conveyances in compliance with the provisions of
this part. Spirits may be bottled and cased for removal.
(b) Authorized removals from processing. A proprietor may remove
from processing:
(1) Spirits, upon tax determination or withdrawal under 26 U.S.C.
5214 or 26 U.S.C. 7510;
(2) Spirits, to the production account at the same plant for
redistillation;
(3) Bulk spirits, by transfer in bond to production or processing
account at another distilled spirits plant for redistillation or
further processing;
(4) Spirits or wines, for authorized voluntary destruction; or
(5) Wines, by transfer in bond to a bonded wine cellar or to
another

[[Page 26266]]

distilled spirits plant. However, wine may not be removed from the
bonded premises of a distilled spirits plant for consumption or sale as
wine.
(c) Exception. Except as provided in paragraph (b)(2) and (3) of
this section, spirits may not be transferred from the processing
account to the storage account.

(26 U.S.C. 5001, 5006, 5008, 5201, 5206, 5212, 5214, 5223, 5362)

Sec. 19.352 Bottling tanks.

Generally, a proprietor must bottle all spirits from tanks that are
listed in the notice of registration and have been certified as
accurate. However, if a proprietor files a letterhead application and
shows the need to do so, the appropriate TTB officer may authorize
bottling from original packages, tank trucks, totes or special
containers where it is not practical to use a bottling tank. In
addition, a proprietor may bottle liqueurs directly from a tank truck
or tote without applying for permission to TTB if the liqueurs are
gauged prior to unloading and piped directly to the bottling line.

(26 U.S.C. 5201)

Sec. 19.353 Bottling tank gauge.

When a distilled spirits product is to be bottled or packaged, the
proprietor must gauge the product after any filtering, reduction, or
other treatment, and before bottling or packaging begins. The gauge
must be made at labeling or package marking proof, and the details of
the gauge must be entered on the bottling and packaging record required
in Sec. 19.599.

(26 U.S.C. 5201)

Sec. 19.354 Bottling or packaging records.

A proprietor must prepare a record for each batch of spirits
bottled or packaged as provided in Sec. 19.599. A proprietor must keep
a separate daily summary record of spirits bottled or packaged as
provided in Sec. 19.601.

(26 U.S.C. 5201, 5207)

Sec. 19.355 Labels describing the spirits.

Labels affixed to containers must accurately describe the spirits
in the tanks from which the containers are filled. The proprietor's
records must enable TTB officers to readily determine which label was
used on any filled container.
Additional information regarding labeling requirements is found in
subpart T of this part and part 5 of this chapter.

(26 U.S.C. 5201)

Sec. 19.356 Alcohol content and fill.

(a) General. At representative intervals during bottling
operations, a proprietor must examine and test bottled spirits to
determine whether the alcohol content and quantity (fill) of those
spirits agree with what is stated on the label or the bottle. A
proprietor's test procedures must be adequate to ensure accuracy of
labels on the bottled product. Proprietors must record the results of
all tests of alcohol content and quantity (fill) in the record required
by Sec. 19.600.
(b) Variations in fill. Quantity (fill) must be kept as close to
100 percent fill as the equipment and bottles in use will permit. There
must be approximately the same number of overfills and underfills for
each lot bottled. In no case will the quantity contained in a bottle
vary by more than plus or minus two percent from the quantity stated on
the label or bottle.
(c) Variations in alcohol content. Variations in alcohol content,
subject to a normal drop that may occur during bottling, must not
exceed:
(1) 0.25 percent alcohol by volume for products containing solids
in excess of 600 mg per 100 ml;
(2) 0.25 percent alcohol by volume for all spirits products bottled
in 50 or 100 ml size bottles; or
(3) 0.15 percent alcohol by volume for all other spirits and bottle
sizes.
(d) Example. Under paragraph (c) of this section, a product with a
solids content of less than 600 mg per 100 ml, labeled as containing 40
percent alcohol by volume and bottled in a 750 ml bottle, would be
acceptable if the test for alcohol content found that it contained
39.85 percent alcohol by volume.

(26 U.S.C. 5201, 5301)

Sec. 19.357 Completion of bottling.

When the contents of a bottling tank are not completely bottled at
the close of the day, the proprietor must make entries on the bottling
and packaging record covering the total quantity bottled that day from
the tank. Entries must be made not later than the morning of the
following business day unless the proprietor maintains auxiliary or
supplemental records as provided in Sec. 19.580.

(26 U.S.C. 5201)

Sec. 19.358 Cases.

(a) On completion of bottling, a proprietor must place filled
bottles with properly affixed closures in cases. A proprietor may only
fill cases with the same kind, size, and proof of spirits. Normally,
the cases must be sealed; however, cases may be temporarily retained on
bonded premises without being sealed pending the affixing to bottles of
any required labels, State stamps, or seals. Unsealed cases must be
marked in accordance with subpart S of this part, and segregated from
other cases until sealed. All cases must be sealed and marked as
provided in subpart S of this part before removal from the bonded
premises.
(b) Filled bottles may remain on the bottling line at the end of
the workday if the identical product will be bottled on the next
bottling shift and if adequate security measures are in place to
prevent theft.

(26 U.S.C. 5201, 5206)

Sec. 19.359 Remnants.

When at the end of a bottling run less bottles remain than the
number necessary to fill a case, the remaining bottles may be placed in
a case marked as a remnant case or kept uncased on the bonded premises
until spirits of the same kind are again bottled. The remnant bottles
may later be used to complete the filling of a case, or may be used for
another lawful purpose such as replacing accidental breakage occurring
on bonded premises.

(26 U.S.C. 5201, 5206)

Sec. 19.360 Filling packages.

A proprietor may draw spirits into packages from a tank meeting the
requirements of Sec. 19.182 through Sec. 19.184. A proprietor must
gauge the packages, report the details of the gauge on a package gauge
record as provided in Sec. 19.619, and attach a copy of the package
gauge record to each copy of the bottling and packaging record covering
the product. The packages must be marked as provided in subpart S of
this part.

(26 U.S.C. 5201)

Sec. 19.361 Removals by bulk conveyances or pipelines.

(a) When a proprietor removes spirits from the processing account
in bulk conveyances or by pipeline, the proprietor must record the
removal on the bottling and packaging record.
(b) Transfers and withdrawals of bulk spirits from the processing
account must be performed in accordance with the provisions of subpart
P of this part.
(c) The consignor of the transfer must forward to the consignee a
statement of composition or a copy of any formula under which the
spirits were processed for determining the proper use of the spirits,
or for the labeling of the finished product.
(d) Bulk conveyances must be marked as provided in subpart S of
this part.

[[Page 26267]]

(26 U.S.C. 5201)

Sec. 19.362 Rebottling.

When spirits are dumped for rebottling, the proprietor must prepare
an appropriately modified bottling and packaging record. If the spirits
were originally bottled by another proprietor, the rebottling
proprietor must obtain a statement from the original bottler consenting
to the rebottling.

(26 U.S.C. 5201)

Sec. 19.363 Reclosing and relabeling.

(a) A proprietor may reclose or relabel distilled spirits before
removal from, or after return to, bonded premises. The reclosing or
relabeling of spirits returned to bonded premises must be done
immediately, and the spirits promptly removed.
(b) If the spirits were originally bottled by another proprietor,
the relabeling proprietor must have on file a statement from the
original bottler consenting to the relabeling.
(c) When spirits are relabeled, the proprietor must have a
certificate of label approval or certificate of exemption from label
approval issued under part 5 of this chapter for the labels used on
relabeled spirits.
(d) A proprietor must prepare a separate record under Sec. 19.604
for the relabeling or reclosing of spirits.

(26 U.S.C. 5201, 5215)

Sec. 19.364 Bottled-in-bond spirits.

If a proprietor labels spirits as bottled-in-bond for domestic
consumption, the labels must meet the requirements in part 5 of this
chapter and the bottles must bear a closure or other device as required
by subpart T of this part.

(26 U.S.C. 5201)

Sec. 19.365 Spirits not originally intended for export.

Spirits produced in the United States and originally intended for
domestic use may be exported with benefit of drawback or without
payment of tax if the containers are marked as required by part 28 of
this chapter. A proprietor may relabel the spirits to show any of the
information required by Sec. 19.519. If a proprietor intends to file a
claim for drawback on spirits prepared for export under this section,
the proprietor must follow the provisions of Sec. 28.195b of this
chapter. If a proprietor intends to withdraw spirits without payment of
tax for export, the proprietor must follow the procedures in subpart E
of part 28 of this chapter.

(26 U.S.C. 5062, 5214)

Sec. 19.366 Alcohol.

(a) Containers. A proprietor may put alcohol for industrial use in
bottles, packages, or other containers, subject to the provisions of
subpart S of this part. A proprietor must follow the provisions of
subpart T of this part when bottling alcohol for nonindustrial domestic
use.
(b) Closures. Closures or other devices must be affixed to
containers of alcohol as provided in subpart T of this part.
(c) Bottle labels. All bottles of alcohol for industrial use must
have a label that is securely affixed to the bottle showing the word
``Alcohol'' and the name and plant number of the bottler. The
proprietor may place additional information on the label if it is not
inconsistent with the required information.
(d) Case marks. Each case of bottled alcohol must bear the marks
required by subpart S of this part.

(26 U.S.C. 5201, 5206, 5235, 5301)

Requirements for Processing Inventories

Sec. 19.371 Inventories of wines and bulk spirits in processing.

A proprietor must take a physical inventory of all wines and bulk
spirits (except packages) held in the processing account at the close
of each calendar quarter. The results of the inventory must be recorded
as provided in subpart V of this part. TTB may require additional
inventories at any time.

(26 U.S.C. 5201)

Sec. 19.372 Physical inventories of bottled and packaged spirits.

(a) Physical inventories. Generally, a proprietor must take
physical inventories of bottled and packaged spirits in the processing
account for the return periods ending June 30 and December 31, and at
any other time that the appropriate TTB officer requires. Physical
inventories may be taken within a period of a few days before or after
June 30 or December 31 if:
(1) The period does not include more than one complete weekend; and
(2) Necessary adjustments are made to the inventory record to
reflect the actual quantities on hand June 30 or December 31.
(b) Alternate dates. On approval of an application filed with the
appropriate TTB officer, required physical inventories may be taken on
dates other than June 30 and December 31 if the dates established for
taking such inventories:
(1) Coincide with the end of a return period, and
(2) Are approximately six months apart.
(c) Waiver of physical inventory. A proprietor may file an
application to take only one physical inventory per year. The
appropriate TTB officer may approve the application if he finds that
only one physical inventory per year will be sufficient to protect the
revenue. However, the requirement for the waived inventory may be
reimposed if it becomes necessary for protection of the revenue.
(d) Notification of physical inventory. A proprietor must notify
the appropriate TTB officer at least 5 business days in advance of the
date and time of a physical inventory of bottled or packaged spirits.
TTB officers may be assigned to verify or supervise physical
inventories taken under the provisions of this section.

(26 U.S.C. 5201)

Subpart O--Denaturing Operations and Manufacture of Articles

Sec. 19.381 General.

This subpart covers the denaturation of spirits and the manufacture
of articles by proprietors of distilled spirits plants. Denatured
spirits are distilled spirits that have been rendered unsuitable for
beverage use by the addition of specific amounts of approved denaturing
materials. For purposes of this subpart, articles are products that
contain denatured spirits and that are made in accordance with this
subpart or part 20 of this chapter. Proprietors who are qualified under
this part as processors may make denatured spirits and articles in
accordance with the provisions of this subpart. Additional requirements
regarding the distribution, use, and standards for denatured spirits
are set forth in parts 20 and 21 of this chapter.

(26 U.S.C. 5178, 5241)

Sec. 19.382 Formulas.

(a) Approved formulas. A proprietor must denature spirits according
to an approved formula listed in 27 CFR part 21.
(b) Alternate formulas and denaturants. If a proprietor wishes to
denature spirits by using an alternative formula or a different
denaturant, the proprietor must apply to TTB for authorization. A
proprietor must receive written approval from the appropriate TTB
officer before denaturing spirits using an alternative formula or a
different denaturant. See also Sec. Sec. 21.5 and 21.91 of this
chapter for additional requirements that apply in these circumstances.

(26 U.S.C. 5241)

[[Page 26268]]

Rules for Denaturing Spirits and Testing Denaturants

Sec. 19.383 Gauge for denaturation.

(a) General. A proprietor must gauge spirits before denaturation
and after denaturation and must record each gauge in the record of
denaturation required by Sec. 19.606(b). However, a proprietor is not
required to gauge either spirits that are dumped from previously gauged
containers or spirits that are transferred directly to mixing tanks
from gauge tanks where they were gauged. Measurements of spirits and
denaturants may be made by volume, weight, accurate mass flow meter, or
by any other device that has been approved by the appropriate TTB
officer.
(b) Denaturation and article manufacture in a single process. When
a proprietor both denatures spirits and manufactures articles in a
single, unified process, the proprietor may, in place of the procedure
specified in paragraph (a) of this section, gauge the spirits before
and after denaturation in the following manner:
(1) Gauge the spirits to be denatured by volume, weight, accurate
mass flow meter, or other device or method approved by the appropriate
TTB officer;
(2) Gauge the denaturants to be used by volume, weight, accurate
mass flow meter, or other device approved by the appropriate TTB
officer; and
(3) Compute the number of wine gallons of denatured spirits
produced, and enter this figure in the record required by Sec.
19.606(b). In calculating the amount of denatured spirits produced, the
proprietor must not include in the calculation the amount of additional
chemicals or denaturants used for article manufacture.

(26 U.S.C. 5204, 5241)

Sec. 19.384 Adding denaturants to spirits.

(a) When making denatured spirits, a proprietor must mix the
denaturants and spirits only in packages, tanks or bulk conveyances and
only on bonded premises. A proprietor must thoroughly mix the
denaturants with the spirits to ensure that all of the spirits are
effectively denatured.
(b) If a proprietor wishes to use another method of mixing
denaturants and spirits not prescribed in this subpart, the proprietor
must submit to the appropriate TTB officer a written application for
approval of the alternative method in accordance with Sec. 19.27. TTB
may require that the proprietor submit additional information,
including a flow diagram or other graphic representation of the
alternative method, in support of the application.

(26 U.S.C. 5242)

Sec. 19.385 Making alcohol or water solutions of denaturants.

If a proprietor uses a denaturant that is difficult to dissolve in
spirits at normal working temperatures, that is highly volatile, or
that becomes solid at normal working temperature, the proprietor may
liquefy or dissolve the denaturant in a small amount of spirits or
water prior to its use in the production of denatured spirits. However,
the proof of the denatured spirits produced must not fall below the
proof required by the approved formula. In addition, if alcohol is used
as a solvent, the proprietor must include this additional alcohol in
calculating the total quantity of spirits denatured in the batch.

(26 U.S.C. 5242)

Sec. 19.386 Adjusting pH of denatured spirits.

A proprietor may add trace amounts of acidic or caustic chemical
compounds to adjust or neutralize the pH of denatured spirits. However,
a proprietor may not adjust the pH with any substance that will
counteract or reduce the effect of the denaturants. A proprietor who
adjusts the pH of denatured spirits must keep a record of the
adjustment with reference to the formula number of the treated
denatured spirits. The record must include the kinds and quantities of
chemical compounds used for each batch of denatured spirits treated.

(26 U.S.C. 5241, 5242)

Sec. 19.387 Ensuring the quality of denaturants.

(a) Testing. Proprietors must ensure that the materials they
receive for use in denaturing conform to the specifications prescribed
in part 21 of this chapter. In addition, the appropriate TTB officer
may require that a proprietor test the quality of denaturants at any
time.
(b) Sampling denaturants. Proprietors must use good commercial
practice when taking samples of denaturants for quality assurance
testing. Samples of denaturants must be representative of the lot being
sampled.
(c) Third party testing. A proprietor may employ an outside
laboratory or other appropriate third party to test samples of
denaturants. In the case of a third party test, the proprietor must
obtain a copy of the analysis or statement of findings signed by the
chemist who performed the test. On request, the proprietor must provide
to the appropriate TTB officer samples of denaturants for quality
control testing in a Government laboratory.
(d) Substandard denaturants. If TTB or a proprietor finds that a
material does not conform to the specifications for a denaturant
prescribed in part 21 of this chapter, the proprietor must immediately
terminate use of the substandard material as a denaturant. However, the
proprietor may continue to use the material as a denaturant after
treating or reprocessing the substandard material to correct the
deficiency and bring the material into conformity with the applicable
specifications.

(26 U.S.C. 5242)

Rules for Storing Denatured Spirits and Filling Containers

Sec. 19.388 Storing denatured spirits.

(a) Bonded storage. A proprietor must store on bonded premises all
denatured spirits produced, received in bond, or received by return to
bond.
(b) Storage methods. A proprietor may store denatured spirits on
bonded premises in any appropriate tank, package or container
authorized for filling with denatured spirits. The proprietor must
store containers of denatured spirits in a manner that allows for easy
inspection and inventory of the denatured spirits by TTB officers. A
proprietor must store portable containers of denatured spirits within a
building or structure that protects the spirits from unauthorized
access. A proprietor may apply to the appropriate TTB officer for
authorization to store containers of denatured spirits in an
alternative manner in accordance with Sec. 19.27.
(c) Tank Records. A proprietor must maintain a record for tanks in
which denatured spirits are stored in accordance with Sec. 19.606.

(26 U.S.C. 5201)

Sec. 19.389 Filling containers from tanks.

(a) Filling portable containers. A proprietor may fill portable
containers with denatured spirits from tanks on the bonded premises.
(b) Accounting for denatured spirits in filling operations. In
performing filling operations under paragraph (a) of this section, a
proprietor must:
(1) Gauge the denatured spirits remaining in the tanks at the end
of each filling operation;
(2) Maintain a record of each gauge and document the quantity of
denatured spirits drawn from the tank during each filling operation;
and
(3) Make a record of any spirits lost during the filling operation.
(c) Gauging requirements. The provisions of Sec. 19.289 (a) and
(c) apply

[[Page 26269]]

to the filling and gauging of portable containers. In addition, a
proprietor may withdraw denatured spirits from the bonded premises in
portable containers based on the filling gauge.

(26 U.S.C. 5201)

Sec. 19.390 Container marking requirements.

A proprietor must mark packages and portable containers containing
denatured spirits in accordance with the requirements of subpart S of
this part.

(26 U.S.C. 5206)

Rules for Mixing and Converting Denatured Spirits

Sec. 19.391 Mixing denatured spirits.

(a) Spirits of the same formula. If a proprietor has two or more
different batches of denatured spirits produced under the same formula,
the proprietor may mix them on bonded premises.
(b) Spirits of different formulas. A proprietor may mix denatured
spirits produced under different formulas on bonded premises for
immediate redistillation at the same plant or at another plant subject
to the provisions of Sec. Sec. 19.314, 19.315, and 19.316.

(26 U.S.C. 5241, 5242)

Sec. 19.392 Converting denatured alcohol to a different formula.

(a) General. A proprietor may convert specially denatured alcohol
(SDA) from one formula of SDA to another formula of SDA if the
resultant mixture contains only alcohol and the denaturants listed for
an approved SDA formula and in the correct concentrations, as set forth
in part 21 of this chapter. Such converted SDA may be used only as
authorized in part 21 of this chapter.
(b) Converting SDA to SDA Formula No. 1--(1) All SDA other than SDA
Formulas No. 3-A and No. 30. A proprietor may convert any SDA, other
than SDA produced under Formulas No. 3-A and No. 30, into SDA Formula
No. 1 by adding methyl alcohol and any one of the other alternative
denaturants listed in Sec. 21.32 of this chapter in accordance with
the formulation prescribed in that section.
(2) SDA Formulas No. 3-A and No. 30. SDA Formulas No. 3-A and No.
30 specify more methyl alcohol than is specified for SDA Formula No. 1.
Therefore, in order to convert SDA produced under Formulas No. 3-A or
No. 30 into SDA under Formula No. 1, a proprietor must first add a
sufficient amount of ethyl alcohol to the SDA in question to bring the
methyl alcohol content to the proportion prescribed for SDA Formula No.
1. After adjusting the proportion of methyl alcohol, the proprietor
must add the specified amount of any one of the other alternative
denaturants listed in Sec. 21.32 of this chapter.
(c) Converting SDA to SDA Formula No. 29. A proprietor may convert
any SDA into SDA Formula No. 29 by adding the amount of acetaldehyde or
ethyl acetate specified in Sec. 21.56 of this chapter. However, due to
the presence of other denaturants from the original formula, SDA under
Formula No. 29 that has been converted from another SDA formula may be
used only as authorized in Sec. 21.56(b) but not in the manufacture of
vinegar, drugs or medicinal chemicals, and the conditions governing use
provided in Sec. 21.56(c) will apply.
(d) Other conversions of SDA. If a proprietor wishes to make an SDA
formula conversion other than one authorized in paragraph (a), (b), or
(c) of this section, the proprietor must obtain approval from the
appropriate TTB officer prior to the conversion.
(e) Conversions to completely denatured alcohol. A proprietor may
convert any SDA from a formula that does not contain methyl alcohol or
wood alcohol to any one of the completely denatured alcohol (CDA)
formulas prescribed in subpart C of part 21 of this chapter, by adding
the denaturants specified for CDA.

(26 U.S.C. 5242)

Rules for Restoration and Redenaturation, Inventories, and Manufacture
of Articles; Records Required

Sec. 19.393 Restoration and redenaturation of recovered denatured
spirits and recovered articles.

(a) Recovered denatured spirits and articles. A proprietor may
receive recovered denatured spirits and recovered articles on bonded
premises for restoration (including redistillation, if necessary), or
redenaturation, or both, as provided in subpart Q of this part.
However, the proprietor may not withdraw the spirits from bonded
premises except for industrial use or after redenaturation.
(b) Spirits or articles retaining some denaturants. If recovered
denatured spirits or recovered articles are to be redenatured and do
not require the full amount of denaturants for redenaturation, the
proprietor must make an entry to that effect in the record of
denaturation required by Sec. 19.606(b).

(26 U.S.C. 5242)

Sec. 19.394 Inventory of denatured spirits.

A proprietor must take a physical inventory of all denatured
spirits in the processing account at the close of each calendar
quarter. The proprietor must record the results of that inventory as
provided in subpart V of this part. TTB may require additional
inventories at any time.

(26 U.S.C. 5201)

Sec. 19.395 Manufacture of articles.

A proprietor must manufacture, label, mark and dispose of articles
in accordance with part 20 of this chapter.

(26 U.S.C. 5273)

Sec. 19.396 Required records.

(a) Records of denaturing operations. A proprietor who denatures
spirits must maintain daily records of denaturing operations in
accordance with Sec. 19.606.
(b) Records of manufacture of articles. A proprietor who
manufactures articles must maintain daily records in accordance with
Sec. 19.607.

(26 U.S.C. 5178, 5241)

Subpart P--Transfers, Receipts, and Withdrawals

Sec. 19.401 Authorized transactions.

(a) General. A proprietor of a distilled spirits plant may transfer
spirits and wines in bond to other distilled spirits plants, receive
spirits and wines in bond from other distilled spirits plants, receive
spirits from customs custody, and withdraw spirits from the distilled
spirits plant without payment of tax or free of tax under certain
conditions. This subpart sets forth the rules that a proprietor must
follow when so transferring, receiving, or withdrawing spirits and
wines and also includes related rules for taking samples and securing
conveyances.
(b) Other transfers and withdrawals. For withdrawals of spirits
from bonded premises on determination or payment of tax, see subpart I
of this part. For rules regarding withdrawals for exportation and
transfers to foreign trade zones or to customs bonded warehouses, see
part 28 of this chapter.

(26 U.S.C. 5181, 5212, 5213, 5214, 5232, 5362, 5373)

Transfers Between Bonded Premises

Sec. 19.402 Authorized transfers in bond.

The IRC allows a proprietor to transfer and receive spirits, wines,
and industrial alcohol as provided in paragraphs (a) through (c) of
this section.
(a) Spirits. Bulk spirits or denatured spirits may be transferred
in bond between the bonded premises of plants qualified under 26 U.S.C.
5171 or 26 U.S.C. 5181 in accordance with Sec. Sec. 19.403 and 19.733.
However, spirits or denatured spirits produced from

[[Page 26270]]

petroleum, natural gas, or coal may not be transferred to alcohol fuel
plants.
(b) Wine. Wines may be transferred:
(1) From a bonded wine cellar to the bonded premises of a distilled
spirits plant;
(2) From the bonded premises of a distilled spirits plant to a
bonded wine cellar; and
(3) Between the bonded premises of distilled spirits plants.
(c) Alcohol for industrial purposes. Alcohol bottled for industrial
purposes in accordance with Sec. 19.366 and subpart S of this part,
may be transferred between the bonded premises of distilled spirits
plants in the same manner as provided in Sec. 19.403 through Sec.
19.407 for bulk distilled spirits.

(26 U.S.C. 5181, 5212, 5362)

Sec. 19.403 Application to receive spirits in bond.

(a) When the proprietor of a distilled spirits plant qualified
under 26 U.S.C. 5171 or of an alcohol fuel plant qualified under 26
U.S.C. 5181 wishes to have spirits or denatured spirits transferred in
bond to his plant from another distilled spirits plant, the proprietor
must complete an application on TTB F 5100.16, Application for Transfer
of Spirits and/or Denatured Spirits in Bond, in triplicate, and forward
it to the appropriate TTB officer for approval. A proprietor is not
required to submit an application on TTB F 5100.16 for transfers from
customs custody under 26 U.S.C. 5232.
(b) TTB will not approve the application submitted under paragraph
(a) of this section unless the proprietor's operations bond or unit
bond either is in the maximum penal sum amount or is sufficient to
cover the tax on the spirits or denatured spirits to be transferred in
addition to all other liabilities chargeable against the bond. If TTB
approves the application, TTB will return two signed copies of the
approved application to the proprietor.
(c) Upon receipt of an approved application from TTB, the
proprietor must retain one of the signed copies for his files and
forward the other signed copy to the consignor that will ship the
spirits or denatured spirits.

(26 U.S.C. 5005, 5112)

Sec. 19.404 Termination of application.

A proprietor may at any time terminate an approved application on
TTB F 5100.16 by retrieving the consignor's copy and returning it
together with his own approved copy to the appropriate TTB officer for
cancellation.

(26 U.S.C. 5005)

Sec. 19.405 Consignor for in-bond shipments.

(a) General. A proprietor who ships spirits, denatured spirits, or
wines by transfer in bond, is the ``consignor'' of the shipment for
purposes of this part. The following rules apply to these transfers:
(1) A consignor who is a proprietor of a distilled spirits plant
must prepare a transfer record in accordance with Sec. 19.620 to cover
the transfer in bond of--
(i) Spirits or denatured spirits to another distilled spirits plant
pursuant to an approved application on TTB F 5100.16, Application for
Transfer of Spirits and/or Denatured Spirits in Bond;
(ii) Wine to the bonded premises of a distilled spirits plant or a
bonded wine cellar; or
(iii) Spirits or denatured spirits to an alcohol fuel plant
pursuant to an approved application on TTB F 5100.16, Application for
Transfer of Spirits and/or Denatured Spirits in Bond; and
(2) A consignor who is a proprietor of an alcohol fuel plant must
prepare a transfer record in accordance with Sec. 19.620 to cover the
transfer in bond of spirits to the bonded premises of a distilled
spirits plant pursuant to an approved application on TTB F 5100.16.
(b) Disposition of the transfer record. On completion of lading or
transfer by pipeline, the consignor must retain one copy of the
transfer record and one copy of any accompanying document and must
forward the original transfer record and any accompanying document to
the consignee. If the shipment is made by truck, the original transfer
record and accompanying documents must accompany the shipment.
(c) Multiple shipments. As a general rule, a consignor must prepare
a transfer record for each conveyance. However, a consignor may prepare
a single transfer record that covers all packages of spirits shipped by
truck on the same day to the same plant. In such a case, the consignor
must prepare a shipment and delivery order for each shipment showing
the number of packages, their serial numbers or other package
identification, the name of the producer, warehouseman, or processor,
and the serial numbers of any seals or other security devices applied
to the truck. The shipping and delivery order must be properly
authenticated by the consignor and must constitute a complete record of
the spirits transferred in each truck each day. The consignor must
retain a copy of each shipping and delivery order. After lading the
last truck for the day, the consignor must retain one copy of the
single transfer record and one copy of any accompanying document and
forward the original single transfer record and accompanying document
to the consignee.
(d) Packages. When a consignor transfers spirits in packages, the
consignor must weigh each package except in the following
circumstances:
(1) When transferring the spirits in a secured conveyance;
(2) When the consignor has securely sealed the individual packages;
or
(3) When the appropriate TTB officer waives this requirement upon a
finding that there will be no jeopardy to the revenue.
(e) Temporary serial numbers. When packages are weighed at the time
of shipment, the consignor must assign temporary serial numbers to the
packages and show for each package its gross shipment weight on a
package gauge record prepared in accordance with Sec. 19.619. A copy
of the package gauge record must accompany each original or copy of the
transfer record.
(f) Bulk conveyances and pipelines. When a consignor transfers
spirits, denatured spirits, or wines in bulk conveyances or by
pipelines, the consignor must gauge the spirits, denatured spirits, or
wines and record the quantity determined on the transfer record
required under Sec. 19.620 or Sec. 24.309 of this chapter. The
consignor must secure bulk conveyances of spirits or denatured spirits
pursuant to Sec. 19.441 of this part.

(26 U.S.C. 5212, 5362)

Sec. 19.406 Reconsignment of in-bond shipments.

A consignor may reconsign an in-bond shipment of spirits, denatured
spirits, or wines prior to, or upon, arrival of the shipment at the
premises of the consignee for any good faith reason. The consignor may
reconsign the shipment to himself or to another consignee who is
qualified to receive the shipment and has an adequate bond. In either
case, an Application for Transfer of Spirits and/or Denatured Spirits
in Bond on TTB F 5100.16 must have been previously approved for the new
consignee, except that an approved form TTB F 5100.16 is not required
for the transfer of wine. The bond of the new consignee will cover the
shipment while in transit after reconsignment. When a consignor
reconsigns a shipment, the consignor must prepare a new transfer record
prominently marked with the word ``Reconsignment''. The consignor must
also notify the original consignee that the transfer has been
cancelled.

(26 U.S.C. 5212, 5362)

[[Page 26271]]

Sec. 19.407 Consignee premises.

(a) General. A proprietor who receives spirits, denatured spirits,
or wines by transfer in bond is the ``consignee'' of the shipment for
purposes of this part. Upon arrival of an in-bond shipment at the
consignee's premises or at the destination point specified in the
carrier's transportation documents, the consignee must:
(1) Examine each conveyance to determine whether the securing
devices, if any, are intact upon arrival. If the securing devices are
not intact, the consignee must immediately notify the appropriate TTB
officer before removal of any spirits from the conveyance;
(2) Determine, record, and report any losses as required by subpart
R of this part;
(3) Acknowledge receipt of the shipment on the transfer record as
required by Sec. 19.621 or Sec. 24.309 of this chapter and retain the
original of the transfer record and any accompanying documents for his
files. Retained copies of transfer records will become deposit records
for purposes of this part; and
(4) Identify separately any spirits that were produced at an
alcohol fuel plant. Those spirits may not be withdrawn, used, sold or
otherwise disposed of for other than fuel use.
(b) Packages. When a consignee receives spirits in packages, the
consignee must weigh each package. The consignee must record the
receiving weight of each package on the accompanying package gauge
record or on a list according to temporary package serial numbers
prepared by the consignor. A copy of the package gauge record or list
must remain with the original transfer record. However, the consignee
is not required to weigh each package when:
(1) The transfer is made in a secured conveyance and the securing
devices are intact on arrival;
(2) The individual packages were sealed by the consignor and are
intact on arrival; or
(3) The requirement for weighing the packages at the consignor
premises has been waived under Sec. 19.405(d)(3).
(c) Bulk conveyances and pipelines. When a consignee receives
spirits, denatured spirits, or wines by bulk conveyance or by pipeline,
the consignee must:
(1) Make a gauge and record the results on the transfer record in
accordance with Sec. 19.621 or Sec. 24.309 of this chapter. However,
the appropriate TTB officer may waive the gauging requirement for
receipts by pipeline upon a finding that there will be no jeopardy to
the revenue; and
(2) Ensure that each conveyance is empty and has been thoroughly
drained.

(26 U.S.C. 5204, 5213, 5362)

Receipt of Spirits from Customs Custody

Sec. 19.409 General.

A proprietor may withdraw from customs custody spirits imported or
brought into the United States in bulk containers for transfer of those
spirits without payment of tax to the bonded premises of the
proprietor's distilled spirits plant. The proprietor may receive these
spirits either in bulk containers or by pipeline. Spirits received on
bonded premises under this section may be:
(a) Withdrawn for any purpose authorized by chapter 51 of the IRC
in the same manner as domestic spirits; or
(b) Redistilled or denatured only at 185 degrees or more of proof.
For the requirements regarding transfers of bulk spirits from customs
custody to the bonded premises of a distilled spirits plant, see
subpart L of part 27 of this chapter.

(26 U.S.C. 5232)

Sec. 19.410 Age and fill date.

For purposes of this part, the age and fill date for spirits
imported or brought into the United States will be:
(a) The claimed age, as shown on the documentation required under
part 5 of this chapter; and
(b) The date that packages of spirits are released from customs
custody or are filled on the bonded premises of a distilled spirits
plant.

(26 U.S.C. 5201)

Sec. 19.411 Recording gauge.

(a) Receipts into storage. When a proprietor receives into the
storage account packages of spirits from customs custody, the
proprietor must use the last official gauge to compute and record the
average content of the packages received in the storage records
required under Sec. 19.590. That gauge also will constitute the basis
for entries on the package summary records required under Sec. 19.591.
If the last official gauge indicates a substantial variation in the
contents of the packages, the proprietor must group the packages into
lots according to their approximate contents and assign a separate lot
identification to each group of packages, based on the date the
packages were received on bonded premises.
(b) Receipts into processing. When a proprietor receives into the
processing account packages of spirits from customs custody, the
proprietor must determine the proof gallons of spirits received in each
package. The determination may be made by using the last official
gauge.

(26 U.S.C. 5232)

Marking Requirements for Imported Spirits

Sec. 19.414 Marks on containers of imported spirits.

(a) General. Except as provided in paragraph (c) of this section,
when a proprietor receives imported bulk containers of spirits on
bonded premises under Sec. 19.409 or fills packages from imported bulk
containers on the proprietor's bonded premises, each container or
filled package must be marked with:
(1) The name of the importer;
(2) The country of origin of the spirits;
(3) The kind of spirits;
(4) In the case of filled packages, the package identification
number as required under Sec. 19.485 or the package serial number as
required under Sec. 19.490. Package identification numbers and package
serial numbers must be preceded by the symbol ``IMP'';
(5) If the package is filled on bonded premises, the date of fill;
(6) The proof; and
(7) The proof gallons of spirits in the package.
(b) Responsibility for marks. Except as otherwise provided in
paragraph (c) of this section, the proprietor who receives packages of
imported spirits under Sec. 19.409 is responsible for ensuring that
the required marks are placed on the packages and for preparing the
required deposit records.
(c) Exception. A proprietor is not required to place or ensure the
placement of prescribed marks on packages when the spirits will be
removed from the packages within 30 days after receipt at the distilled
spirits plant. However, the proprietor must still assign package
identification numbers or package serial numbers for use on deposit
records and other transaction forms, records, or reports.

(26 U.S.C. 5206)

Sec. 19.415 Marks on containers of Puerto Rican and Virgin Islands
spirits.

(a) Packages from Puerto Rico. When a proprietor receives packages
of Puerto Rican spirits on bonded premises under the provisions of this
subpart, the markings required under Sec. 26.40 of this chapter will
be acceptable in place of the markings required under Sec. 19.414.
However, the proprietor still must mark each package to show the date
of fill as required under Sec. 19.410, and must include on each
package the words ``Puerto Rican'' or the abbreviation ``P.R.''.

[[Page 26272]]

(b) Packages from the Virgin Islands. When a proprietor receives
packages of Virgin Islands spirits on bonded premises under the
provisions of this subpart, the markings required under Sec. 26.206 of
this chapter will be acceptable in place of the markings required under
Sec. 19.414. However, the proprietor still must mark each package to
show the date of fill as required under Sec. 19.410, and must include
on each package the words ``Virgin Islands'' or the abbreviation
``V.I.''.
(c) Portable bulk containers. Portable bulk containers of Puerto
Rican or Virgin Islands spirits that are filled on premises bonded
under this part must be marked in accordance with Sec. 19.484. In
addition, those containers must be marked with the serial number of any
approved formula under which they were produced and with the words
``Puerto Rican'' or the abbreviation ``P.R.'' or ``Virgin Islands'' or
the ``V.I.'', as applicable.
(d) Cases of bottled alcohol. Alcohol from Puerto Rico or the
Virgin Islands that is bottled and cased on bonded premises must be
marked as required by Sec. 19.496. In addition, the words ``Puerto
Rican'' or ``Virgin Islands'' or the abbreviation ``P.R.'' or ``V.I.'',
respectively, must precede the word ``alcohol'' designation on the
cases.

(26 U.S.C. 5206, 5235)

Spirits Withdrawn Without Payment of Tax

Sec. 19.418 Authorized withdrawals without payment of tax.

(a) A proprietor may withdraw spirits from bonded premises without
payment of tax for:
(1) Export, as authorized under 26 U.S.C. 5214(a)(4);
(2) Transfer to customs manufacturing bonded warehouses, as
authorized under 19 U.S.C. 1311;
(3) Transfer to foreign-trade zones, as authorized under 19 U.S.C.
81c;
(4) Supplies for certain vessels and aircraft, as authorized under
19 U.S.C. 1309;
(5) Transfer to customs bonded warehouses, as authorized under 26
U.S.C. 5066 or 5214(a)(9);
(6) Use in wine production, as authorized under 26 U.S.C. 5373;
(7) Transfer to any university, college of learning, or institution
of scientific research for experimental or research use as authorized
under 26 U.S.C. 5312(a);
(8) Research, development or testing, as authorized under 26 U.S.C.
5214(a)(10); or,
(9) Use on bonded wine cellar premises in the production of wine
and wine products which will be rendered unfit for beverage use, as
authorized under 26 U.S.C. 5362(d).
(b) If a proprietor withdraws spirits for any of the purposes
listed under paragraphs (a)(1) through (a)(5) of this section, the
proprietor must do so in accordance with the provisions of part 28 of
this chapter.

(19 U.S.C. 1311), (26 U.S.C. 5066, 5214, 5312, 5373)

Sec. 19.419 Withdrawals of spirits for use in wine production.

A proprietor may withdraw wine spirits without payment of tax for
transfer in bond to a bonded wine cellar for use in wine production.
The proprietor, as consignor, must prepare a transfer record in
accordance with Sec. 19.620. In addition, the proprietor must prepare
a package gauge record in accordance with Sec. 19.619 and must attach
it to the transfer record, unless the wine spirits are already in
packages and are being withdrawn on the production or filling gauge.

(26 U.S.C. 5214, 5373)

Sec. 19.420 Withdrawals of spirits without payment of tax for
experimental or research use.

A scientific university, college of learning, or institution of
scientific research qualified under Sec. 19.35 may withdraw spirits
from bonded premises without payment of tax for experimental or
research use. In order to withdraw a specific quantity of spirits for
experimental or research use, the qualified institution must file a
letterhead application with, and receive written approval from, the
appropriate TTB officer.

(26 U.S.C. 5312)

Sec. 19.421 Withdrawals of spirits for use in production of
nonbeverage wine and nonbeverage wine products.

A proprietor may withdraw spirits without payment of tax for
transfer to a bonded wine cellar for use in the production of
nonbeverage wine and nonbeverage wine products in accordance with part
24 of this chapter. The proprietor, as consignor, must prepare a
transfer record in accordance with Sec. 19.620. In addition, the
proprietor must prepare a package gauge record in accordance with Sec.
19.619 and must attach it to the transfer record, unless the wine
spirits are already in packages and are being withdrawn on the
production or filling gauge.

(26 U.S.C. 5214)

Spirits Withdrawn Free of Tax

Sec. 19.424 Authorized withdrawals free of tax.

A proprietor may withdraw spirits from bonded premises free of tax
as provided in this chapter:
(a) Upon receipt of a signed photocopy of a permit to withdraw and
use alcohol free of tax issued on TTB F 5150.9 under part 22 of this
chapter;
(b) Upon receipt of a signed photocopy of a permit to procure
spirits free of tax for use of the United States or any governmental
agency, any State, any political division of a State, or the District
of Columbia for nonbeverage purposes as provided in 26 U.S.C.
5214(a)(2) issued on TTB F 5150.33 under part 22 of this chapter;
(c) Upon receipt of a valid permit issued under this part to
procure spirits by and for the use of the United States under the
provisions of 26 U.S.C. 7510 for purposes other than those specified in
paragraph (b) of this section;
(d) If the spirits are specially denatured--
(1) Upon receipt of a signed photocopy of a permit to procure
specially denatured spirits issued on TTB F 5150.9 under part 20 of
this chapter; or
(2) For export;
(e) If the spirits are completely denatured, for any lawful
purpose; or
(f) If the spirits are contained in an article.

(26 U.S.C. 7510), (26 U.S.C. 5214)

Sec. 19.425 Withdrawal of spirits free of tax.

When a proprietor ships tax free spirits to a permit holder as
provided under Sec. 19.424, the proprietor must:
(a) Ship the spirits to the consignee designated in the permit;
(b) Ship the spirits in approved containers;
(c) Gauge each container, unless the spirits are in cases or are
withdrawn based on the production or filling gauge;
(d) Prepare a package gauge record in accordance with Sec. 19.619,
and attach it to the record of shipment if the spirits are in packages
that are to be gauged;
(e) Prepare a record of shipment (shipping invoice, bill of lading,
or other document serving the same purpose) for each shipment and
forward the original to the consignee as provided in Sec. 19.625; and
(f) Secure all bulk conveyances as provided in Sec. 19.441.

(26 U.S.C. 5214)

Sec. 19.426 Withdrawal of spirits by the United States.

(a) Withdrawal for nonbeverage use--(1) Permit required. Agencies
of the

[[Page 26273]]

United States Government that wish to obtain either specially denatured
spirits or spirits free of tax for nonbeverage purposes must apply for
and receive a permit on TTB F 5150.33 or must have a previously issued
permit on ATF Form 1444. TTB issues permits to Government agencies for:
(i) Withdrawal and use of specially denatured spirits under part 20
of this chapter;
(ii) Withdrawal and use of alcohol free of tax for nonbeverage
purposes under part 22 of this chapter; and
(iii) Importation and use of alcohol free of tax for nonbeverage
purposes under part 27 of this chapter.
(2) Orders and shipments. In order to obtain spirits under this
section, the United States Government agency must forward a copy of a
signed permit to the distilled spirits plant for the initial purchase.
Later orders with the same plant may refer to that permit number. In
the case of a Government agency holding a single permit for use by its
sub-agencies, the copy of the signed permit must contain an attachment
listing all sub-agencies authorized to obtain spirits under that
permit. For each shipment that a proprietor makes to a Government
agency under this section, the proprietor must prepare a record of
shipment and forward the original to the Government agency as provided
in Sec. 19.625.
(b) Withdrawal for beverage use. Agencies of the United States
Government that wish to obtain distilled spirits free of tax for
beverage purposes under 26 U.S.C. 7510 must provide a proper purchase
order signed by the head of the agency or an authorized designee. Each
case of spirits withdrawn must bear a plain mark ``For Use of the
United States'' in addition to the marks required by subpart S of this
part. For each withdrawal under this paragraph, the proprietor must
prepare a record containing the information required by Sec. 19.611
for a record of tax determination and must mark this record ``Free of
Tax For Use of the United States.''

(26 U.S.C. 7510), (26 U.S.C. 5271, 5313)

Sec. 19.427 Removal of denatured spirits and articles.

(a) Specially denatured spirits.
(1) Specially denatured spirits withdrawn by a proprietor free of
tax under Sec. 19.424(d) must be shipped in the type of containers
authorized under subpart S to the consignee designated on the permit.
Bulk conveyances used to transport specially denatured spirits must be
secured as required by Sec. 19.441, and the proprietor must prepare a
record of shipment in accordance with Sec. 19.625. If a proprietor
withdraws specially denatured spirits for export or for transfer to a
foreign-trade zone for export or for storage pending export, the
provisions of part 28 of this chapter will apply to the withdrawal.
(2) A proprietor may transfer domestic specially denatured spirits
to qualified users located in a foreign-trade zone for use in the
manufacture of articles under part 20 of this chapter. The ``alcohol'',
as defined in part 20 of this chapter, that is contained in domestic
specially denatured spirits must have been produced entirely in the
United States or Puerto Rico.
(b) Completely denatured alcohol. No permit, application, or notice
is required for the removal of completely denatured alcohol from bonded
premises.
(c) Samples of denatured spirits.
(1) A proprietor may take samples of denatured spirits free of tax
that are necessary for the conduct of business. A proprietor may
furnish samples of specially denatured spirits:
(i) To dealers in, and users of, specially denatured spirits in
advance of sales; or
(ii) To applicants or prospective applicants for permits to use
specially denatured spirits for experimental purposes or for use in
preparing samples of a finished product for submission to TTB.
(2) A proprietor must maintain records to ensure that samples of
specially denatured spirits furnished to each nonpermittee do not
exceed five gallons per calendar year. However, a proprietor may
furnish samples in excess of five gallons to a nonpermittee if the
consignee has provided the proprietor with a letterhead application
approved under Sec. 20.252 of this chapter. The proprietor must retain
the approved letterhead application on file as a part of the record of
transaction. For each shipment of a sample over the five gallon limit,
the proprietor must prepare a record of shipment and forward the
original to the consignee as provided in Sec. 19.625. Each such sample
must bear a label showing the word ``Sample'', the words ``Specially
Denatured Alcohol'' or ``Specially Denatured Rum'' as applicable, the
formula number, and the proprietor's name, address, and plant number.
The proprietor must maintain records of samples of less than five
gallons as provided in Sec. 19.616.
(d) Articles. A proprietor may remove articles from bonded premises
in accordance with part 20 of this chapter.

(19 U.S.C. 81c), (26 U.S.C. 5214, 5271)

Sec. 19.428 Reconsignment.

(a) A consignor may reconsign a shipment of spirits or specially
denatured spirits withdrawn free of tax under Sec. 19.424. The
shipment may be reconsigned while in transit or upon arrival at the
consignee's premises for any bona fide reason. The consignor may
reconsign the shipment:
(1) To himself;
(2) To a proprietor for return to bonded premises under Sec.
19.454; or
(3) To another consignee holding a valid permit issued under part
20 or 22 of this chapter.
(b) In the case of reconsignment to a proprietor for return to
bonded premises under Sec. 19.454, the distilled spirits plant
proprietor who will return the spirits to bond must file a consent of
surety on TTB F 5000.18 to extend the terms of the operations or unit
bond to cover the return of the spirits.
(c) When a consignor reconsigns a shipment, the consignor must
cancel the initial record of shipment and prepare a new record of
shipment marked ``Reconsignment''. The consignor must annotate the
copies of the canceled record of shipment and the new record of
shipment to cross-reference each other.

(26 U.S.C. 5201)

Spirits Withdrawn on Production Gauge

Sec. 19.431 Withdrawal of spirits on production gauge.

A proprietor may withdraw spirits from bonded premises for any
lawful purpose based on the production gauge when it is made in
accordance with Sec. 19.289(b). Spirits may be withdrawn without
payment of tax for export based on the production gauge when it is made
under Sec. 19.289(c). When spirits that are to be withdrawn on
determination of tax on the original gauge are transferred in bond, all
copies of the transfer record required by Sec. 19.620 must be marked
``Withdrawal on Original Gauge''.

(26 U.S.C. 5204)

Rules for Taking Samples of Spirits

Sec. 19.434 Spirits withdrawn from bonded premises.

(a) Laboratory samples. A proprietor may withdraw spirits without
payment of tax, or may withdraw wine spirits or brandy free of tax, to
the proprietor's laboratory, to the laboratory of an affiliated or
subsidiary corporation, or, if approved by the appropriate TTB officer,
to a recognized commercial laboratory. The samples must be used only
for testing or analysis to determine the quality or character of the
finished product and must be withdrawn in the minimum amounts necessary
for the purpose.

[[Page 26274]]

(b) Customer samples. If a bona fide purchase agreement exists that
is contingent upon quality approval, a proprietor may furnish to a
prospective customer a sample of spirits not exceeding 1 liter for
quality testing. A proprietor may furnish a sample not to exceed 1
liter to a prospective customer for quality testing in anticipation of
a purchase agreement if the customer is authorized to receive bulk
spirits for industrial use.
(c) Research or development. A proprietor may withdraw spirits
without payment of tax for research or development testing, for testing
of processes, systems, or materials, or for the testing of equipment
relating to distilled spirits or distilled spirits plant operations.
The amount withdrawn must be limited to the amount reasonably necessary
to conduct the test. If the test is to be conducted by someone other
than the proprietor, the proprietor must obtain a written statement,
executed by the consignee, agreeing to maintain records of the receipt,
use, and disposition of all spirits received for purposes of the test.
The statement must specify that records of operations will be available
during regular business hours for inspection by TTB officers.
(d) Conditions. The following conditions apply to the withdrawal
and testing of samples under this section:
(1) The spirits may not be used for consumer testing or other
market analysis;
(2) The proprietor must maintain the records specified in Sec.
19.616; and
(3) Remnants or residues of spirits not used during testing must be
destroyed or returned to the bonded premises of the proprietor.
(e) Liability for tax. The proprietor must pay the tax on any
samples of spirits withdrawn, used, or disposed of in a manner not
authorized by this section.
(f) Losses. When spirits are lost before use for a purpose
authorized under this section, the proprietor must pay the tax or must
file a claim for remission of tax liability in accordance with Sec.
19.263.

(26 U.S.C. 5214, 5173)

Sec. 19.435 Samples used on bonded premises.

A proprietor may take samples of spirits for research, development,
testing, or laboratory analysis conducted in a laboratory located on
the bonded premises. The purposes, conditions, and limitations
specified for samples under Sec. 19.434 will also apply to samples
used under this section.

(26 U.S.C. 5008)

Sec. 19.436 Taxpayment of samples.

When a proprietor is required to pay tax on samples under Sec.
19.434(f), the proprietor may include the tax on the next semimonthly
or quarterly tax return, as appropriate, if qualified to defer payment
of tax. If a proprietor is not qualified to defer payment of tax, the
proprietor must prepay the tax on TTB F 5000.24. See subpart I of this
part for rules regarding the payment of taxes.

(26 U.S.C. 5005, 5061)

Sec. 19.437 Labels.

(a) On each container of spirits withdrawn under Sec. 19.434, the
proprietor must affix a label showing the following information:
(1) The proprietor's name and plant number;
(2) The date withdrawn;
(3) The purpose for which withdrawn;
(4) The kind of spirits;
(5) The size and the proof of the sample, if known; and
(6) The name and address of the consignee, if the spirits are
removed other than to the proprietor's adjacent or contiguous premises.
(b) The labeling prescribed under paragraph (a) of this section is
not required when the sample container bears a label approved under
part 5 of this chapter and subpart S of this part and the sample is
removed from bonded premises to the general premises of the same
distilled spirits plant or to any laboratory owned and operated by the
proprietor of that distilled spirits plant.

(26 U.S.C. 5206, 5214, 5373)

Securing Conveyances

Sec. 19.441 Securing of conveyances.

(a) Construction for securing. When the securing of a conveyance is
required by this part, the conveyance must be constructed so that all
openings, including valves, may be closed and secured.
(b) Approval of securing devices. Seals, locks or other devices on
conveyances used to transport taxpaid spirits, denatured spirits
transferred in bond, or denatured spirits withdrawn free of tax do not
require approval by TTB. On the other hand, all seals, locks, or
devices used on conveyances in which spirits are transferred in bond,
withdrawn free of tax, or withdrawn without payment of tax, require
approval by the appropriate TTB officer before use. However, cap seals
at least 3/4 of an inch in diameter, ball-strap-type (railroad) seals
with a strap at least 5/16 of an inch wide, and locking security cable
with at least 1/16 of an inch cable may be used on conveyances without
approval by TTB. Such seals must:
(1) Be made of durable materials;
(2) Bear the plant registration number or the name, or readily
recognizable abbreviation of the name, of the proprietor;
(3) Bear a serial number, including letter prefixes or suffixes,
that will not be repeated within the following six month period;
(4) Be durably and legibly marked; and
(5) Be constructed to show evidence of tampering.
(c) Furnishing and affixing securing devices. The proprietor must
furnish and affix any seals, locks or other devices used on
conveyances. However, TTB may require any conveyance in which spirits
are transferred in bond, withdrawn free of tax, or withdrawn without
payment of tax, to be secured by a device furnished by TTB and affixed
by a TTB officer. The securing of a conveyance will be done:
(1) As soon as the conveyance is loaded for shipment; and
(2) In such a manner that access to the contents of the conveyance
cannot be gained without leaving evidence of tampering.

(26 U.S.C. 5206, 5682)

Subpart Q--Return of Spirits to Bonded Premises and Voluntary
Destruction

Sec. 19.451 Scope.

The IRC allows a proprietor of a distilled spirits plant to return
distilled spirits, denatured spirits, and articles to the bonded
premises of that plant under certain conditions. This subpart covers
the types of returns allowed, sets forth the procedures that the
proprietor must follow when returning these products to bonded
premises, and prescribes rules for voluntary destruction on or off
bonded premises.

Conditions for Return of Spirits to Bond

Sec. 19.452 Return of taxpaid spirits to bonded premises for
destruction, denaturation, redistillation, reconditioning, or
rebottling.

(a) Allowable returns. A proprietor may return spirits to bonded
premises if the spirits were taxpaid or tax determined by him, by
another distilled spirits plant proprietor, or by an importer upon
importation through U.S. Customs and Border Protection. However, under
section 5215(a) of the IRC the proprietor may return such spirits to
bond only for one of the following reasons:
(1) Destruction, in accordance with Sec. 19.459;

[[Page 26275]]

(2) Denaturation, in accordance with subpart O of this part;
(3) Redistillation, in accordance with subpart L of this part;
(4) Reconditioning; or
(5) Rebottling.
(b) Dump and gauge of returned spirits. The proprietor must
immediately dump spirits returned to bonded premises under this section
unless the spirits are returned in the sealed metal drums in which they
were withdrawn. The proprietor must gauge spirits returned under this
section upon their receipt. The proprietor may gauge spirits in bottles
based upon the case markings and label information in accordance with
Sec. 19.286.
(c) Claims for credit or refund of tax. A proprietor may file a
claim under Sec. 19.264 for credit or refund of tax on spirits
returned to bonded premises under this section. In addition to the
information specified in Sec. 19.264, a proprietor filing a claim for
credit or refund of tax must have on file at the plant where spirits
are returned to bond the following documentation for each lot of
spirits returned:
(1) Documentation that establishes the amount of tax for which the
claim for credit or refund is filed. If the spirits contain eligible
wine or eligible flavors, the proprietor must have on file a copy of
the record of tax determination as prescribed by Sec. 19.611, or other
documentation that establishes the rate of tax that was paid on the
product. In lieu of establishing the actual effective tax rate of the
product, the proprietor may claim a credit or refund based on the
lowest effective tax rate applied to the product; and
(2) Credit memoranda or comparable financial records evidencing the
return of each lot of spirits.
(d) Applicability of IRC Chapter 51. All provisions of Chapter 51
of the IRC and of this part that apply to spirits under TTB bond also
apply to spirits when returned to bond under this section.

(26 U.S.C. 5008, 5010, 5201, 5207, 5215)

Sec. 19.453 Return of bottled spirits for relabeling or reclosing.

A proprietor may return bottled distilled spirits to his bonded
premises for relabeling or reclosing. When bottled spirits are returned
for relabeling or reclosing, the proprietor may not claim credit or
refund of tax on the returned spirits, and no tax will be due on their
subsequent removal. The proprietor must relabel or reclose the bottles
immediately and must promptly remove the spirits from bonded premises.
The provisions of Sec. 19.363 apply to relabeling and reclosing
performed under this section.

(26 U.S.C. 5215)

Sec. 19.454 Other authorized returns to bonded premises.

In addition to the returns to bonded premises specified in
Sec. Sec. 19.452 and 19.453, there are other distilled spirits
products that a proprietor may return to his bonded premises. These
other products, the purposes for which they may be returned, and the
conditions for their return are listed in the table below. All of these
products must be gauged upon receipt.

------------------------------------------------------------------------
Type of product Purpose of return Conditions
------------------------------------------------------------------------
SDA withdrawn free of tax (1) For To any DSP
under part 20 of this redistillation. authorized to
chapter. produce or process.
(2) For subsequent To any DSP. The DSP
lawful withdrawal. proprietor must
file a consent of
surety, form TTB F
5000.18, to extend
the terms of the
operations or unit
bond to cover the
return of spirits.
Recovered denatured spirits. For restoration or --To any DSP
redenaturation. authorized to
denature.
--If SDA needs to be
redistilled, the
DSP must be
authorized to
produce or process
spirits.
--Returns must be in
accordance with
part 20 of this
chapter.
Recovered articles.......... For restoration or --To any DSP
redenaturation. authorized to
denature.
--If recovered
articles need to be
redistilled, the
DSP must be
authorized to
produce or process
spirits.
--Returns must be in
accordance with
part 20 of this
chapter.
Articles manufactured under For recovery by To a DSP authorized
part 20 of this chapter and redistillation. to produce or
spirits residues from process spirits.
manufacturing processes.
SDA withdrawn free of tax (1) For To any DSP
for export under part 28 of redistillation. authorized to
this chapter. produce or process.
(2) For subsequent To any DSP. The DSP
lawful withdrawal. proprietor must
file a consent of
surety, form TTB F
5000.18, to extend
the terms of the
operations or unit
bond to cover the
return of spirits
Tax-free spirits withdrawn (1) For To any DSP
under part 22 of this redistillation. authorized to
chapter. produce or process.
(2) For subsequent To any DSP. The DSP
lawful withdrawal. proprietor must
file a consent of
surety, form TTB F
5000.18, to extend
the terms of the
operations or unit
bond to cover the
return of spirits.
Recovered tax-free spirits (1) For To any DSP
withdrawn under part 22 of redistillation. authorized to
this chapter. produce or process.
(2) For restoration To any DSP. The DSP
(not including proprietor must
redistillation). file a consent of
surety, form TTB F
5000.18, to extend
the terms of the
operations or unit
bond to cover the
return of spirits.

[[Page 26276]]

Spirits withdrawn without (1) For For (1)--To any DSP
payment of tax under part redistillation. authorized to
28 of this chapter for (2) For later lawful produce or process
export, for transfer to a removal. spirits.
customs bonded storage, For (2)--To the
manipulation, or bonded premises
manufacturing warehouse, from which
for deposit in an FTZ, or withdrawn for later
for use on vessels or lawful removal.
aircraft, and not so For (1) and (2)--
exported, transferred, Returns must be
deposited, or used. made in accordance
with the provisions
of part 28 of this
chapter.
Wine spirits withdrawn Any lawful purpose.. --To any DSP.
without payment of tax for --The proprietor
use in wine production. must obtain
approval as
provided in Sec.
19.403.
--Removal of wine
spirits from a
winery must be in
accordance with
part 24 of this
chapter.
Spirits withdrawn without For destruction, or To the DSP from
payment of tax for return to which the spirits
research, development, or containers, or were withdrawn.
testing. return to the
distilling system.
------------------------------------------------------------------------

(19 U.S.C. 81(c), 26 U.S.C. 5001, 5062, 5066, 5214, 5215, 5223,
5273, 5373)

Sec. 19.455 Return of spirits withdrawn for export with benefit of
drawback.

(a) Subject to the provisions of Sec. Sec. 28.197 through 28.199
of this chapter, whole or partial shipments of spirits withdrawn for
export with benefit of drawback may be returned to:
(1) The bonded premises of the distilled spirits plant, pursuant to
Sec. 19.452; or
(2) To a wholesale liquor dealer or taxpaid storeroom.
(b) Claims for export drawback filed by proprietors on form TTB F
5110.30 which include the returned spirits shall be reduced by the
amount of tax paid or determined on the returned spirits.

(26 U.S.C. 5215)

Sec. 19.457 Receipt of spirits abandoned to the United States.

Spirits abandoned to the United States may be sold, without payment
of the tax, to a proprietor of a distilled spirits plant for
denaturation or for redistillation and denaturation, provided that the
plant is authorized to denature or redistill and denature spirits. The
proprietor must gauge the spirits upon receipt and must keep the
spirits apart from all other spirits or denatured spirits until
denatured.

(26 U.S.C. 5243)

Rules for Voluntary Destruction

Sec. 19.459 Voluntary destruction.

(a) General. A proprietor may voluntarily destroy spirits,
denatured spirits, articles, or wines on bonded premises as provided in
this section. There is no tax liability on spirits, denatured spirits,
articles, or wines destroyed in accordance with this section.
(b) Wine notice. A proprietor may destroy wine held on bonded
premises only after the proprietor has filed a notice of intent to
destroy with the appropriate TTB officer stating the kind and quantity
of wine to be destroyed and the date and manner in which the wine is to
be destroyed. The wine may be destroyed after the filing of the notice.
(c) Gauging. A proprietor must gauge all spirits, denatured
spirits, articles, or wines to be destroyed. The proprietor may
establish the gauge of spirits in bottles on the basis of legible case
markings and label information in accordance with Sec. 19.286. The
proprietor must individually count bottles in partial cases.
(d) Destruction off bonded premises. If a proprietor intends to
remove spirits, denatured spirits, articles, or wines from bonded
premises in order to destroy them at a location off bonded premises,
the proprietor must file a consent of surety to cover the removal. When
the destruction takes place off plant premises, the proprietor must
comply with applicable Federal, State, and local environmental laws and
regulations.
(e) Record of destruction. The proprietor must record the
destruction of spirits, denatured spirits, articles, or wines as
provided in Sec. 19.617.

(26 U.S.C. 5008, 5370)

Subpart R--Losses and Shortages

Sec. 19.461 Losses and shortages in general.

(a) Allowable losses and shortages. Except as otherwise provided in
paragraph (b) of this section, TTB will not collect tax on spirits,
denatured spirits, or wines that are lost, destroyed, or otherwise
unaccounted for while in bond, and if the tax has already been paid,
TTB will refund the tax.
(b) Exceptions. TTB will collect the tax in the case of:
(1) Theft, unless the appropriate TTB officer finds that the theft
occurred without connivance, collusion, fraud or negligence on the part
of the proprietor, owner, consignor, consignee, bailee, or carrier, or
any employee or agent of any of them;
(2) Voluntary destruction carried out other than as provided in
subpart Q of this part;
(3) An unexplained shortage of bottled spirits.
(c) Burden of proof. When it appears that a theft occurred, the
burden of proof will be on the proprietor or other person liable for
the tax to establish to the satisfaction of the appropriate TTB officer
that the theft did not result from connivance, collusion, fraud, or
negligence on the part of the proprietor, owner, consignor, consignee,
bailee, or carrier, or any employee or agent of any of them.
(d) Claims. Claims for losses and shortages allowable under this
section must be filed in accordance with the provisions of subpart J of
this part.
(e) Limitations. TTB will abate, remit, credit, or refund taxes on
spirits, denatured spirits, or wines lost by theft only to the extent
that the claimant is not indemnified against, or recompensed for, the
taxes paid or owed.

(26 U.S.C. 5008, 5370)

Sec. 19.462 Determination of losses in bond.

(a) Times for determining losses. A proprietor must determine at
any of the following times whether a loss of spirits, denatured
spirits, or wines has occurred:
(1) Each time a tank or bulk conveyance is emptied;
(2) Upon discovery of an accident or an unusual variation in a
gauge; and
(3) When required to take a physical inventory.
(b) Losses from theft, tampering, or unauthorized voluntary
destruction. Whenever any spirits, denatured spirits, or wines are lost
or destroyed in bond, whether by theft, tampering, or unauthorized
voluntary destruction, the proprietor may elect voluntarily to pay the
tax on the quantity lost. If the

[[Page 26277]]

proprietor does not elect to pay the tax, the proprietor must promptly
report the loss or destruction to the appropriate TTB officer. TTB may
require that the proprietor file any claim for relief from the tax in
accordance with Sec. 19.263.
(c) Missing packages. When a proprietor cannot locate or otherwise
account for any packages of spirits, denatured spirits, or wine
recorded as deposited on bonded premises, the proprietor must promptly
report that fact to the appropriate TTB officer. In such case the
proprietor must either pay the tax on the lost spirits, denatured
spirits, or wines or file a claim for relief from the tax in accordance
with Sec. 19.263.
(d) Excessive in-transit losses. A proprietor must promptly report
excessive in-transit losses to the appropriate TTB officer. As a
general rule, when spirits, denatured spirits, or wines are received in
bond in bulk conveyances TTB will consider as excessive a loss that
exceeds one percent of the quantity consigned. However, in the case of
transcontinental transfers of wine in bond, TTB will consider as
excessive only a loss in excess of two percent of the quantity of wine
consigned.
(e) Excessive storage losses. A proprietor must pay the tax on
excessive storage account losses of spirits unless the proprietor files
a claim for remission in accordance with Sec. 19.263 and TTB allows
the claim under Sec. 19.268. TTB will consider a storage account loss
as excessive when the quantity of spirits lost during a calendar
quarter from all storage tanks and stored bulk conveyances exceeds 1\1/
2\ percent of the total quantity contained in the tanks and stored bulk
conveyances during the calendar quarter.

(26 U.S.C. 5008, 5370)

Sec. 19.463 Loss of spirits from packages.

(a) Tampering or theft. The appropriate TTB officer may require
that a proprietor pay the tax on any loss caused by tampering or theft
of spirits from packages in storage unless the proprietor establishes
to the satisfaction of the appropriate TTB officer that the loss was
not due to connivance, collusion, fraud or negligence on the part of
the proprietor. As a general rule, the tax will be assessed on the
quantity of spirits that represents the difference between the quantity
originally entered in the package and the quantity remaining after
discovery of the tampering or theft. However, if the proprietor can
show that the package had already sustained normal storage losses
before the tampering or theft occurred, the proprietor may exclude the
amount of the normal storage losses from the quantity to be taxpaid.
(b) Alternative method of tax assessment. If tampering or theft has
occurred at a proprietor's plant and the proprietor has failed to use
effective controls to prevent it, the appropriate TTB officer may use
an alternative to the general method of tax assessment specified in
paragraph (a) of this section. In this case, the appropriate TTB
officer may assess on each package showing evidence of tampering or
theft an amount equal to the tax on 5 proof gallons of spirits.

(26 U.S.C. 5006)

Sec. 19.464 Losses after tax determination.

If a proprietor sustains a loss of spirits after tax determination
but prior to completion of physical removal of the spirits from bonded
premises, the proprietor may file a claim in accordance with subpart J
of this part.

(26 U.S.C. 5008)

Sec. 19.465 Shortages of bottled spirits.

(a) Determination of shortage. The determination of whether an
unexplained shortage of bottled distilled spirits exists must be made
by comparing the spirits recorded as being on hand to either the
results of the physical inventory required by Sec. 19.372 or the
results of any other complete physical inventory taken by the
proprietor. When the recorded quantity is greater than the quantity
determined by physical inventory, the difference is an unexplained
shortage. The proprietor must adjust his records to reflect the results
of the physical inventory.
(b) Payment of tax on shortage. A proprietor must pay the tax on
any unexplained shortage of bottled distilled spirits:
(1) Immediately on a prepayment return on TTB F 5000.24, Excise Tax
Return; or
(2) On a deferred payment return on TTB F 5000.24 for the period
during which the shortage was determined.

(26 U.S.C. 5008)

Subpart S--Containers and Marks

Sec. 19.471 General.

The proprietor of a distilled spirits plant must comply with the
container and marking requirements that apply to both industrial and
nonindustrial spirits. This subpart covers those requirements. For the
requirements that apply to articles made with denatured spirits, see
part 20 of this chapter. For the requirements that apply to wine, see
part 24 of this chapter.

(26 U.S.C. 5206)

Sec. 19.472 Need to determine use of spirits: industrial or
nonindustrial.

Many of the container and marking requirements set forth in this
subpart are based on the intended use of the spirits, that is, whether
they are for ``industrial'' or ``nonindustrial'' use. For purposes of
this subpart, the terms ``industrial'' use and ``nonindustrial'' use
refer to the uses specified in paragraphs (a) and (b) of this section.
(a) Industrial use. The word ``industrial'' when used with
reference to the use of spirits has the same meaning as in Sec. Sec.
1.60 and 1.62 of this chapter. Those uses are as follows:
(1) Free of tax by, and for the use of, the United States or any
governmental agency thereof, any State, any political subdivision of a
State, or the District of Columbia, for nonbeverage purposes;
(2) Free of tax for nonbeverage purposes and not for resale or use
in the manufacture of any product for sale--
(i) For the use of any educational organization described in 26
U.S.C. 170(b)(1)(A)(ii) which is exempt from income tax under 26 U.S.C.
501(a), or for the use of any scientific university or college of
learning;
(ii) For any laboratory for use exclusively in scientific research;
(iii) For use at any hospital, blood bank, or sanitarium (including
use in making analysis or test at such hospital, blood bank, or
sanitarium), or at any pathological laboratory exclusively engaged in
making analyses, or tests, for hospitals or sanitariums; or
(iv) For the use of any clinic operated for charity and not for
profit (including use in compounding of bona fide medicines for
treatment outside of such clinics of patients thereof);
(3) Free of tax, after denaturation of such spirits in the manner
prescribed by law for--
(i) Use in the manufacture of ether, chloroform, or other definite
chemical substance where such distilled spirits are changed into some
other chemical substance and do not appear in the finished product; or
(ii) Any other use in the arts and industries (except for uses
prohibited by 26 U.S.C. 5273(b) or (d)) and for fuel, light, and power;
and
(4) The use of distilled spirits for experimental purposes and in
the manufacture of--
(i) Medicinal, pharmaceutical, or antiseptic products, including
prescriptions compounded by retail druggists;
(ii) Toilet preparations;
(iii) Flavoring extracts, syrups, or food products; or
(iv) Scientific, chemical, mechanical, or industrial products,
provided such products are unfit for beverage use.

[[Page 26278]]

(b) Nonindustrial use. The word ``nonindustrial'' when used with
reference to the use of spirits refers to any use not listed as an
``industrial'' use in paragraph (a) of this section. Nonindustrial uses
include the following:
(1) For beverage purposes;
(2) In the manufacture, rectification, or blending of alcoholic
beverages; or in the preparation of food or drink by a hotel,
restaurant, tavern, or similar establishment; or as a medicine; and
(3) Distilled spirits in containers with a capacity of 1 wine
gallon or less, other than anhydrous alcohol and alcohol that may be
withdrawn from bond free of tax.

(26 U.S.C. 5206, 5301)

Requirements for Containers

Sec. 19.473 Authorized containers.

(a) General. A proprietor may only use containers that are
authorized under this part for use in containing, storing,
transferring, conveying, removing, or withdrawing spirits or denatured
spirits.
(b) Approval of other containers. The appropriate TTB officer may
approve the use of another type of container for a particular purpose
in place of a type of container specifically authorized in this part
for that purpose if the use of that container:
(1) Will provide protection to the revenue equal to or greater than
that provided by the authorized container; and
(2) Will not hinder the effective administration of this part.
(c) Approval of other container materials. The appropriate TTB
officer may approve the use of a container made of a material other
than one prescribed in this subpart if he finds the other material to
be suitable for the intended purpose. If the appropriate TTB officer
approves another material for a container, the approval may also
specify how the container must be constructed, protected, marked, and
used.

(26 U.S.C. 5002, 5206, 5212, 5213, 5214, 5301)

Sec. 19.474 Spirits for nonindustrial use.

(a) Containers. A proprietor may fill spirits for nonindustrial use
into packages or into other containers that are filled during
processing operations, if consistent with the provisions of part 5 of
this chapter.
(b) Bottles and labels. The provisions of subpart T of this part
and part 5 of this chapter govern the liquor bottles and labels that a
proprietor must use in bottling spirits for nonindustrial domestic use.
(c) Cases. If spirits for nonindustrial use are in containers with
a capacity of one gallon or less the proprietor must place the
containers in cases constructed to afford reasonable protection against
breakage.

(26 U.S.C. 5206, 5212, 5301)

Sec. 19.475 Spirits for industrial use.

(a) Containers. A proprietor may fill denatured spirits or other
spirits for industrial use into suitable containers. The proprietor
must ensure that all containers for spirits that will be used in food
products comply with applicable U.S. Food and Drug Administration
health and safety laws and regulations.
(b) Encased containers. A proprietor may encase unlabeled
containers of denatured spirits and other spirits for industrial use in
wood, fiberboard or similar material if:
(1) The cases are constructed so that the surface, including the
opening of the container, is not exposed;
(2) Required marks are applied to an exterior surface of the case;
(3) The case is constructed so that the portion containing marks
will remain attached to the inner container until all the contents have
been removed; and
(4) A statement reading, ``Do not remove inner container until
emptied'' or a statement of similar meaning appears on the portion of
the case bearing the marks.
(c) Cases. With the exception of encased containers covered in
paragraph (b) of this section, if the containers for denatured spirits
and spirits for industrial use have a capacity of not more than 1
gallon, the proprietor must place the containers in cases that provide
reasonable protection against breakage.

(26 U.S.C. 5206, 5301)

Sec. 19.476 Packages.

A proprietor may use packages on bonded premises for original entry
of spirits, and for packaging from tanks, storing, transferring in
bond, and withdrawing spirits and denatured spirits from bonded
premises. Packages must be constructed so as to be capable of secure
closure.

(26 U.S.C. 5206)

Sec. 19.477 Use of bulk conveyances.

If a bulk conveyance meets the construction requirements of Sec.
19.478 or is approved under Sec. 19.473(b), a proprietor may use the
bulk conveyance on bonded premises for the original entry of spirits,
and for filling from tanks, storing, transferring in bond, and
withdrawing taxpaid spirits and denatured spirits. A proprietor may use
such a bulk conveyance to withdraw spirits free of tax, in accordance
with the provisions of this part, for use of the United States or to a
specified consignee if so authorized by the appropriate TTB officer
under Sec. 19.473(b). A proprietor may also use such a bulk conveyance
to withdraw spirits without payment of tax, in accordance with the
provisions in this part, for any one of the following purposes:
(a) Export, as authorized under 26 U.S.C. 5214(a)(4);
(b) Transfer to customs manufacturing bonded warehouses, as
authorized under 19 U.S.C. 1311;
(c) Transfer to foreign-trade zones, as authorized under 19 U.S.C.
81c;
(d) Transfer to customs bonded warehouses, as authorized under 26
U.S.C. 5066 or 5214(a)(9); or
(e) Use in wine production, as authorized under 26 U.S.C. 5373.

(26 U.S.C. 5206)

Sec. 19.478 Construction requirements for bulk conveyances.

(a) Construction. The following standards apply to bulk conveyances
authorized by this part:
(1) If the conveyance consists of two or more compartments, each
compartment must be constructed or arranged so that the emptying of any
compartment does not provide access to the contents of any other
compartment;
(2) The conveyance (or in the case of compartmented conveyances,
each compartment) must be arranged so that it can be completely
drained;
(3) Each tank car or tank truck must have permanently and legibly
marked thereon its number, its capacity in wine gallons, and the name
or symbol of its owner;
(4) If the conveyance consists of two or more compartments, each
compartment must be identified by a number and the capacity in wine
gallons of each shall be marked thereon;
(5) The conveyance must have a route board or other suitable device
for carrying required marks or brands; and
(6) Calibrated charts, showing the capacity of each compartment in
wine gallons for each inch of depth, must be available for use in
measuring the contents of each tank truck, tank ship, or barge.
(b) Proprietor's responsibility. Before filling any bulk
conveyance, a proprietor must examine it to verify that it meets the
requirements of this section or of an approval under Sec. 19.473(b)
and that it is otherwise suitable for receiving the spirits or
denatured spirits. A proprietor must refrain from using, or discontinue
use of, any conveyance

[[Page 26279]]

found by him or by the appropriate TTB officer not to meet the
applicable requirements.

(26 U.S.C. 5206, 5212, 5213, 5214)

Sec. 19.479 Restrictions on dispositions of bulk spirits.

(a) Bulk spirits for nonindustrial use. A proprietor may sell or
dispose of spirits for nonindustrial use in containers holding more
than one wine gallon only to the persons and for the purposes specified
in Sec. 1.80 of this chapter.
(b) Bulk spirits for industrial use. If a proprietor withdraws
spirits (other than alcohol or neutral spirits) from bond in containers
holding more than one wine gallon for industrial use, the proprietor
must ship or deliver the spirits directly to the user of the spirits as
provided in Sec. 1.95 of this chapter.

(26 U.S.C. 5201)

Marking Requirements for Spirits

Sec. 19.482 General.

A proprietor must mark, identify, and label all containers of
spirits or denatured spirits as provided in this part. For information
regarding liquor bottle label requirements, see subpart T of this part
and part 5 of this chapter.

(26 U.S.C. 5204, 5206)

Sec. 19.483 Specifications for marks.

(a) Basic requirements. A proprietor must place the marks
prescribed by this subpart on cases, encased containers, and packages
of spirits and denatured spirits so that they are:
(1) Of adequate size to be easily read;
(2) Of a color in distinct contrast to the color of the background;
(3) Legible; and
(4) Durably affixed.
(b) Use of labels. A proprietor may use labels as the means for
applying prescribed marks if the labels meet the requirements of
paragraph (a) of this section.
(c) Location. A proprietor must place the prescribed marks on one
side of the case or encased container, or on the head of the package.

(26 U.S.C. 5206)

Sec. 19.484 Marks on packages filled in production or storage.

(a) Packages filled in production or storage. Except as otherwise
provided in this part, a proprietor must mark packages of spirits
filled in production or storage with:
(1) The name of the producer, or the producer's trade name, in
accordance with paragraph (b) of this section;
(2) The distilled spirits plant number of the producer, such as
``DSP-KY-708'';
(3) The kind of spirits or, in the case of distillates removed
under Sec. 19.307, the kind of distillate such as ``Grape Distillate''
or ``Peach Distillate'';
(4) The package identification number;
(5) ``BSA'' or ``OC'' when spirits are treated with caramel (burnt
sugar) or oak chips, as the case may be;
(6) The rated capacity of the package in gallons shown as ``RC-G'';
and
(7) The name or trade name and the plant number of the packaging
proprietor in place of the name or trade name and plant number of the
producer if packages of spirits of 190[deg] or more of proof are filled
by a proprietor other than the producer.
(b) Real or trade names. The producer's or other proprietor's real
name or the authorized trade name used in accordance with Sec. 19.94
at the time of production, may be placed on any package filled at the
time of the production gauge, or at the time of the original packaging
of the spirits in wood when, as provided in Sec. 19.305, the spirits
were not filled into wooden packages at the time of production gauge.
When spirits have been mingled in accordance with Sec. 19.326, the
proprietor may use only a producer name associated with any portion of
the mingled spirits on packages filled with such mingled spirits.

(26 U.S.C. 5206)

Sec. 19.485 Package identification numbers in production and storage.

(a) General. A proprietor must mark with a lot identification
number each package of spirits filled during production or storage
operations. The lot identification number shows when the package is
filled and must consist of, in order, the following:
(1) The last two digits of the calendar year;
(2) An alphabetical designation for the month from ``A'' through
``L'', representing, in order, January through December;
(3) Two digits corresponding to the day of the month; and
(4) When more than one lot is filled into packages during the same
day, for successive lots after the first lot, a letter suffix sequence
starting with ``A'' representing the second lot, with ``B''
representing the third lot, and so forth. For example: The first three
lots filled into packages on January 2, 2002, would be identified as
``02A02'', ``02A02A'', and ``02A02B''.
(b) Packages constituting a lot. Packages of spirits, including any
remnant package, received from customs custody or filled during any one
day will receive the same lot identification number, subject to the
following conditions:
(1) They are of the same type and either are of the same rated
capacity or are uniformly filled with the same quantity by weight or
other measurement method prescribed in Sec. 19.289;
(2) They are filled with spirits of the same kind and same proof;
(3) If they are filled with mingled spirits, the mingling was
conducted in accordance with Sec. 19.326; and
(4) In the case of spirits imported or brought into the United
States, they are filled with imported spirits, Puerto Rican spirits or
Virgin Island spirits, as applicable.
(c) Serial numbers. At the time of filling, receipt on bonded
premises, or withdrawal from bond, the appropriate TTB officer may
require serial numbers on packages of spirits within the same lot in
conjunction with the lot identification number. The proprietor must
assign temporary serial numbers to packages for control purposes when
they are transferred in bond in an unsecured conveyance or gauged after
tampering within the storage account.

(26 U.S.C. 5206)

Sec. 19.486 Change of packages in storage.

When a proprietor transfers spirits from one package to another as
permitted in Sec. 19.325, the proprietor must give the new package the
same package identification number and marks as the original package.
The proprietor must also prepare and sign a label to be affixed to the
head of each new package. The label must be in the following form:

The spirits in this -------- [kind of cooperage: barrel or drum],
package identification No. --------, were transferred from a --------
[kind of cooperage: barrel or drum], on -------- [Date], --------
[Proprietor]

(26 U.S.C. 5206)

Sec. 19.487 Kind of spirits.

(a) Designation. The designations of kind of spirits required for
packages filled on bonded premises must be consistent with the classes
and types of spirits set forth in part 5 of this chapter subject to the
following exceptions or conditions:
(1) A proprietor may designate as ``Alcohol'' spirits distilled at
more than 160[deg] proof, which lack the taste, aroma, and other
characteristics generally attributed to whisky, brandy, rum, or gin,
and which are substantially neutral in character. When alcohol so
designated is withdrawn on determination of tax, the designation

[[Page 26280]]

must consist of the word ``Alcohol'' preceded or followed by a word or
phrase that describes the material from which the alcohol was produced;
(2) The designation for vodka, neutral spirits, or gin must include
a word or phrase that describes the material from which the spirits
were produced;
(3) A proprietor may designate as ``Spirits'', preceded or followed
by a word or phrase that describes the material from which the spirits
were produced, those distilled spirits that are distilled at less than
190[deg] proof which lack the taste, aroma, and other characteristics
generally attributed to whisky, brandy, rum, or gin. However, the
proprietor may not designate such spirits as ``Spirits grain'' or
``Grain spirits'';
(4) A proprietor must designate spirits distilled from fruit at or
above 190[deg] proof, if intended for use in wine production, as
``Neutral Spirits-Fruit'', preceded or followed by the name of the
fruit from which the spirits were produced;
(5) A proprietor may designate as ``Whisky'' spirits distilled at
not more than 160[deg] proof from a fermented mash of not less than 51
percent rye, corn, wheat, malted barley, or malted rye grain, packaged
in reused cooperage, provided that the designation is further qualified
with the words ``Distilled from rye mash'' (or bourbon, wheat, malt, or
rye malt mash, as the case may be). However, spirits designated as
``Whisky'' must, if distilled from a fermented mash of not less than 80
percent corn, carry the designation ``Corn Whisky.''
(b) Change of designation. After written application to, and
approval of, the appropriate TTB officer, a proprietor may at any time
before their withdrawal from bonded premises, change the original
designation for spirits to a new designation properly describing the
spirits in accordance with the provisions of this section.
(c) Other designations. If a proprietor proposes to produce spirits
for which a designation has not been prescribed in this section or in
part 5 of this chapter, the proprietor must first make written
application to the appropriate TTB officer for a designation for such
spirits, and the proprietor must then designate the spirits
accordingly.
(d) Spirits for nonindustrial use. A proprietor may not treat the
provisions of this section as constituting authorization to apply
designations to spirits withdrawn for nonindustrial use if those
designations do not conform to the requirements of part 5 of this
chapter.

(26 U.S.C. 5206)

Sec. 19.488 Marks on packages filled in processing.

(a) Packages filled in processing. Except as otherwise provided in
this part, a proprietor must mark packages of spirits filled in
processing with:
(1) The name of the processor, or the processor's trade name;
(2) The distilled spirits plant number of the processor, such as
``DSP-KY-708'';
(3) The kind of spirits in accordance with Sec. 19.487 or, in the
case of an intermediate product, the product name shown on form TTB F
5110.38, Formula for Distilled Spirits Under the Federal Alcohol
Administration Act;
(4) The serial number or lot identification number, in accordance
with Sec. 19.490, and the date of filling;
(5) The proof of the spirits; and
(6) The serial number of the formula if it was manufactured under
an approved formula.
(b) Real or trade names. The proprietor's real name or any trade
name used in accordance with Sec. 19.94 may be placed on any package
filled with spirits during processing operations.

(26 U.S.C. 5206)

Sec. 19.489 Marks on cases filled in processing.

(a) Mandatory marks. Except for cases marked in accordance with
Sec. 19.496, a proprietor must mark in accordance with Sec. 19.483
the following information on each case of spirits filled in processing:
(1) Serial number in accordance with Sec. 19.490;
(2) Kind of spirits in accordance with the classes and types of
spirits set forth in part 5 of this chapter;
(3) The distilled spirits plant number where bottled;
(4) Date filled;
(5) Proof; and
(6) Liters or proof gallons.
(b) Export marks. In addition to the marks referred to in paragraph
(a) of this section, the proprietor must include the marks required by
part 28 of this chapter on cases removed for export, for transfer to
any customs bonded warehouses, for transfer to foreign-trade zones, or
for use as supplies on certain vessels and aircraft.
(c) Other marks. A proprietor may include other marks on cases
filled in processing in addition to the marks prescribed under this
section. Any additional marks must not interfere with, or detract from,
the marks prescribed in this section. The proprietor may include other
marks such as:
(1) The name or trade name, and the location if desired, of the
bottler, displayed with the word ``Bottler'';
(2) For products distilled or processed by the proprietor, the
proprietor's name or trade name, and the location of the distilled
spirits plant, if desired, displayed with the words ``Distiller'' or
``Processor'', as applicable;
(3) For products imported and bottled by the proprietor, the words
``Imported and Bottled By'', followed by the proprietor's name or trade
name the and location of the distilled spirits plant if desired;
(4) For products bottled for a dealer, the words ``Bottled For'',
followed by the name of that dealer;
(5) Any material required by Federal or State law and regulations;
and
(6) Labels or data describing the contents for commercial
identification or accounting purposes or indicating payment of State or
local taxes.

(26 U.S.C. 5206, 5066)

Sec. 19.490 Numbering of packages and cases filled in processing.

(a) Packages of spirits and denatured spirits filled during
processing operations. When a proprietor fills packages of spirits and
denatured spirits during processing, the proprietor must identify the
packages consecutively beginning with ``1'' and continuing the series
until the number ``1,000,000'' is reached, except that any series of
such numbers already in use may be continued to that limit. When the
identification in any series reaches ``1,000,000'', the proprietor may
begin a new series with ``1'' but must add an alphabetical prefix or
suffix to the new series number. For example, the first identifier in
the second series of 1,000,000 packages filled might be ``1A'' or
``A1''.
(b) Cases containing bottles or other containers of spirits and
denatured spirits. When a proprietor fills cases containing bottles or
other containers of spirits and denatured spirits during processing,
the proprietor must identify the cases consecutively beginning with
``1'' and continuing the series until the number ``1,000,000'' is
reached, except that any series of such numbers already in use may be
continued to that limit. When the identification in any series reaches
``1,000,000'', the proprietor may begin a new series with ``1''. This
series of identifiers for cases containing bottles or other containers
must be distinct from the series of serial numbers required for
packages under paragraph (a) of this section.
(c) Additional identification. A proprietor may establish separate
series of identifiers, distinguished from each

[[Page 26281]]

other by the use of alphabetical prefixes or suffixes, to identify the
size of bottles, the brand names, or other information, on written
notice to the appropriate TTB officer. The proprietor must identify
remnant cases by placing the identifier of the last full case followed
by the letter ``R'' on the remnant case. When there is a change in the
name, or trade name of the proprietor, all series in use may be
continued. However, if there is a change in proprietorship, a new
series must be commenced.
(d) Alternative marking for spirits for industrial use. A
proprietor may mark packages and cases of spirits for industrial use,
including denatured spirits, filled in processing with the lot
identification numbers specified in Sec. 19.485 instead of using the
identifiers specified in paragraphs (a), (b) and (c) of this section.

(26 U.S.C. 5206)

Sec. 19.491 Marks on containers of specially denatured spirits.

(a) General. A proprietor must mark or label each package, case, or
encased container of specially denatured spirits filled on bonded
premises to show:
(1) The quantity in gallons;
(2) The serial number or lot identification number;
(3) The plant number of the proprietor;
(4) The designation or abbreviation of the specially denatured
spirits by kind (alcohol or rum);
(5) The applicable formula number; and
(6) The proof of the spirits, if they were denatured at other than
190 proof.
(b) Bottles. A proprietor must mark or label each bottle to show
the information prescribed in paragraphs (a)(1), (3), (4), (5), and (6)
of this section.
(c) Alternate formulations. When spirits are denatured under a
formula authorizing a choice of types and quantities of denaturants,
the proprietor must mark the container or case to show the actual types
and quantities of denaturants used.

(26 U.S.C. 5206)

Sec. 19.492 Marks on containers of completely denatured alcohol.

Except in the case of completely denatured alcohol transported by
pipelines and bulk conveyances, a proprietor must mark each container
of completely denatured alcohol on the head of the package or on the
side of the can or carton with:
(a) The name of the proprietor who filled the containers;
(b) The plant number where the container was filled;
(c) The container's contents in wine gallons;
(d) The apparent proof;
(e) The words ``Completely Denatured Alcohol''; and
(f) The applicable formula number.
(26 U.S.C. 5206)

Sec. 19.493 Caution label for completely denatured alcohol.

A proprietor must place a label containing the words ``Completely
Denatured Alcohol'' and the statement ``Caution--contains poisonous
ingredients'' on each container of completely denatured alcohol
containing five gallons or less that is sold or offered for sale. The
label must be written in plain, legible letters. The proprietor may
print the name and address of the denaturer on such label, but may not
include any other non-essential matter on the label without approval
from the appropriate TTB officer. The word ``pure'' may not appear on
the label or the container.

(26 U.S.C. 5206)

Sec. 19.494 Additional marks on portable containers.

(a) In addition to the other marks prescribed in this part, a
proprietor must mark portable containers of spirits or denatured
spirits (other than bottles enclosed in cases) that will be withdrawn
from the bonded premises as follows:
(1) Without payment of tax, for export, for transfer to customs
manufacturing bonded warehouses, for transfer to foreign-trade zones,
or as supplies for certain vessels and aircraft, in accordance with the
provisions in 27 CFR part 28; or
(2) If tax-free, with the word ``Tax-Free.''
(b) A proprietor may show other optional information such as brand
or trade name; a caution notice, or other information required by
Federal, State, or local law or regulations; wine or proof gallons; and
plant control data. However, any such mark must not conceal, obscure,
interfere with, or conflict with the markings required by this subpart.

(26 U.S.C. 5206)

Sec. 19.495 Marks on bulk conveyances.

(a) A proprietor must securely attach a label identifying each
conveyance or compartment to the route board, or to another equivalent
device, for each bulk conveyance used to transport spirits or denatured
spirits setting forth the following information:
(1) The name, plant number, and location of the consignor;
(2) The name, distilled spirits plant number, permit number, or
registry number (as applicable), and the location of the consignee;
(3) The date of shipment;
(4) The quantity (proof gallons for spirits, wine gallons for
denatured spirits); and
(5) The formula number for denatured spirits.
(b) If the conveyance is accompanied by documentation containing
the information specified in paragraph (a) of this section, the
proprietor is not required to label each conveyance or compartment.
(c) Export shipments must conform to the requirements of part 28 of
this chapter.

(26 U.S.C. 5206)

Sec. 19.496 Cases of industrial alcohol.

(a) Mandatory marks. A proprietor must mark each case and each
encased container of alcohol bottled for industrial use under the
provisions of subpart N of this part to show the following information:
(1) The designation ``Alcohol'';
(2) The serial number or lot identification number;
(3) The distilled spirits plant number of the proprietor;
(4) The proof;
(5) The proof gallons;
(6) The designation ``Tax-Free''; and
(7) Any information required by part 28 of this chapter, for cases
that are withdrawn for export, transferred to customs bonded
warehouses, transferred to foreign-trade zones, or are for use on
vessels and aircraft.
(b) Other marks. A proprietor may mark cases of industrial alcohol
with other marks, provided that they do not interfere with, or detract
from, mandatory case marks in the manner permitted under Sec. 19.489.

(26 U.S.C. 5206, 5235)

Sec. 19.497 Obliteration of marks.

Except as otherwise provided in Sec. 19.487(b), the marks required
to be placed on any container or case under this part must not be
destroyed or altered before the container or case is emptied.

(26 U.S.C. 5206)

Sec. 19.498 Relabeling and reclosing off bonded premises.

The proprietor of a distilled spirits plant may relabel, affix
brand labels, or reclose bottled taxpaid spirits on wholesale liquor
dealer premises or at a taxpaid storeroom on, contiguous to, adjacent
to, or in the immediate vicinity of the proprietor's distilled spirits
plant,

[[Page 26282]]

provided that the wholesale liquor dealer premises or taxpaid storeroom
is operated in connection with the distilled spirits plant. If products
relabeled under this section were originally bottled by another
proprietor, the relabeling proprietor must have on file a statement
from the original bottler consenting to the relabelling.

(26 U.S.C. 5201)

Sec. 19.499 Authorized abbreviations to identify marks.

In addition to the other abbreviations and symbols authorized under
this part for use in marking containers, a proprietor may use the
following abbreviations to identify the following marks:

------------------------------------------------------------------------
Mark Abbreviation
------------------------------------------------------------------------
Completely Denatured Alcohol............. CDA
Gallon or Wine Gallon.................... WG
Gross Weight............................. G
Proof.................................... P
Specially Denatured Alcohol.............. SDA
Specially Denatured Rum.................. SDR
Tare..................................... T
Tax Determined........................... TD
Wine Spirits Addition.................... WSA
------------------------------------------------------------------------

(26 U.S.C. 5206)

Subpart T-Liquor Bottle, Label, and Closure Requirements

Authorized Liquor Bottles

Sec. 19.511 Bottles authorized.

Each liquor bottle for nonindustrial distilled spirits for domestic
use must conform to a bottle size specified in the standards of fill
set forth in subpart E of part 5 of this chapter. This rule applies to
liquor bottles intended for distribution in both interstate and
intrastate commerce.

(26 U.S.C. 5301)

Sec. 19.512 Bottles not constituting approved containers.

A proprietor may not use any liquor bottle that the appropriate TTB
officer finds is misleading within the meaning of Sec. 5.46 of this
chapter. Misleading liquor bottles do not constitute approved
containers for the purposes of this part, and a proprietor may not use
them for packaging distilled spirits for domestic purposes.

(26 U.S.C. 5301)Sec. 19.513 Distinctive liquor bottles.

(a) Application. A proprietor must submit form TTB F 5100.31,
Application for and Certification/Exemption of Label/Bottle Approval,
to the appropriate TTB officer in order to obtain approval to use
domestic liquor bottles of distinctive shapes or designs. The
proprietor must certify as to the total capacity of a representative
sample bottle before closure (expressed in milliliters) on each copy of
the form. In addition, the proprietor must affix a readily legible
photograph (showing both front and back of the bottle) to the front of
each copy of TTB F 5100.31 along with the label(s) to be used on the
bottle. The proprietor must submit to TTB an actual bottle or accurate
model only when specifically requested to do so.
(b) Approval. The appropriate TTB officer will approve a
distinctive liquor bottle on a properly completed TTB F 5100.31 if the
bottle is found to:
(1) Meet the requirements of part 5 of this chapter;
(2) Be distinctive;
(3) Be suitable for its intended purpose;
(4) Not jeopardize the revenue; and
(5) Be not misleading to the consumer.
(c) Retention. A proprietor must keep on file at his premises a
copy of the complete approved TTB F 5100.31 for the distinctive liquor
bottle.
(d) Cross reference. For procedures regarding issuance, denial and
revocation of distinctive liquor bottle approvals, as well as appeal
procedures, see part 13 of this chapter.

(26 U.S.C. 5301)

Labeling Requirements

Sec. 19.516 Certificate of label approval or exemption.

A proprietor must obtain a certificate of label approval or an
exemption from label approval under part 5 of this chapter on form TTB
F 5100.31 for any label that the proprietor will use on bottles of
spirits for domestic use. Upon request by the appropriate TTB officer,
the proprietor must provide evidence of label approval, or of exemption
from label approval, for a label used on a bottle of spirits for
domestic use. For procedures regarding the issuance, denial and
revocation of certificates of label approval and certificates of
exemption from label approval, as well as appeal procedures, see part
13 of this chapter.

(26 U.S.C. 5201)

Sec. 19.517 Statements required on labels under an exemption from
label approval.

If a proprietor bottles spirits for domestic use under a
certificate of exemption from label approval on form TTB F 5100.31, the
following information must appear on the label used on the bottle, in
the manner indicated:
(a) Brand name. The brand name on the label must conform to the
requirements of Sec. 5.34 of this chapter;
(b) Kind. The class and type of the spirits identified on the label
must conform to the requirements of Sec. 5.35 of this chapter;
(c) Alcohol content. The alcohol content on the label must conform
to the requirements of Sec. 5.37(a) of this chapter;
(d) State of distillation. In the case of whisky, the state of
distillation statement on the label must conform to the requirements of
Sec. 5.36(d) of this chapter;
(e) Net contents. The label must show the net contents, unless the
statement of net contents is permanently marked on the side, front, or
back of the bottle;
(f) Name and address of bottler. The name and address of the
bottler must conform to the requirements of Sec. 19.518;
(g) Age of whisky containing no neutral spirits. In the case of
whisky containing no neutral spirits, statements of age and percentage
by volume on the label must conform to the requirements of Sec. 5.40
of this chapter;
(h) Age of whisky containing neutral spirits. In the case of whisky
containing neutral spirits, the label must state the age of the whisky
or whiskies and the respective percentage by volume of whisky or
whiskies and neutral spirits in accordance with Sec. 5.40 of this
chapter;
(i) Age of brandy. In the case of brandy aged for a period of less
than two years, the label must state the age.
(j) Presence of neutral spirits or coloring, flavoring, or blending
material. The label must indicate the presence of neutral spirits or
coloring, flavoring, or blending material in accordance with Sec. 5.39
of this chapter; and
(k) Country of origin. Labels of imported spirits must state the
country of origin in substantially the following form: ``Product of --
------,'' with the blank filled in with the name of the country of
origin.

(26 U.S.C. 5201)

Sec. 19.518 Name and address of bottler.

In setting forth the name and address of the bottler required by
Sec. 19.517(f), the label must contain the words ``Bottled by'',
``Packed by'', or ``Filled by'' followed immediately by the name (or
trade name) of the bottler and the place where the bottling takes
place. If the bottler is the proprietor of more than one distilled
spirits plant engaged in bottling operations, the label may include the
addresses of all such plants immediately following the name (or trade
name) of the bottler. The following additional rules apply to name and
address labeling under this section:
(a) Where distilled spirits are bottled by or for the distiller of
the spirits, the label may state, in lieu of the words

[[Page 26283]]

``Bottled by'', ``Packed by'', or ``Filled by'', followed by the
bottler's name (or trade name) and address or addresses, the words
``Distilled by'', followed immediately by the name (or trade name)
under which the particular spirits were distilled, or by any trade name
shown on the distiller's permit covering the premises where the
particular spirits were distilled, and the address (or addresses) of
the distiller;
(b) Where ``straight whiskies'' of the same type produced in the
same State by two or more different distillers are combined (either at
time of bottling or at a warehouseman's bonded premises for further
storage) and are subsequently bottled and labeled as ``straight
whisky'', that ``straight whisky'' must be labeled as provided in the
introductory paragraph of this section. However, where that combined
``straight whisky'' is bottled by or for the distillers of the
whiskies, the label may contain, in lieu of the wording specified in
that introductory paragraph, the words ``Distilled by'', followed
immediately by the name (or trade name) of each distiller that
distilled a portion of the ``straight whisky'', the address of each of
the of the distilled spirits plants where a portion of the ``straight
whisky'' was distilled, and the percentage of ``straight whisky''
distilled by each distiller (with a tolerance of plus or minus 2
percent). In addition, where ``straight whisky'' is made up of a
mixture of ``straight whiskies'' of the same type distilled at two or
more distilled spirits plants of the same proprietor located within the
same State, and where that ``straight whisky'' is bottled by or for
that proprietor, the label for the ``straight whisky'' may contain, in
lieu of the wording specified in the introductory paragraph of this
section, the words ``Distilled by'' followed by the name (or trade
name) of the proprietor and the address of each of the distilled
spirits plants that distilled a portion of the ``straight whisky'';
(c) Where distilled spirits are bottled by or for the proprietor of
a distilled spirits plant, the label may state, in lieu of the words
``Bottled by'', ``Packed by'', or ``Filled by'' followed by the
bottler's name (or trade name) and address, the words ``Blended by'',
``Made by'', ``Prepared by'', ``Manufactured by'', or ``Produced by''
(whichever is appropriate to the process involved), followed by the
name (or trade name) and the address (or addresses) of the distilled
spirits plant proprietor;
(d) In the case of labels of distilled spirits bottled for a
retailer or other person who is not the proprietor of the distilled
spirits plant where the distilled spirits were distilled, the label may
also state the name and address of that retailer or other person,
preceded immediately by the words ``Bottled for'', ``Distributed by'',
or other similar statement; and
(e) The label may state the address of the proprietor's principal
place of business in lieu of the place where the bottling, distilling
or processing operation occurred, provided that the address where the
bottling, distilling, or other operation occurred is indicated by
printing, coding, or other markings, on the label or on the bottle. The
coding system employed must permit TTB to determine where the operation
stated on the label occurred. Prior to using such a label or bottle
coding system, the proprietor must send a notice to the appropriate TTB
officer explaining the coding system.

(26 U.S.C. 5201)

Sec. 19.519 Labels for export spirits.

(a) Required information. If a proprietor bottles spirits for
export, the bottles must have a securely affixed label showing:
(1) The kind (class and type) of spirits;
(2) The percent-alcohol-by-volume of the spirits;
(3) The net contents, unless the markings on the bottle indicate
such contents; and
(4) The name (or trade name) of the bottler.
(b) Additional information. The bottler may place additional
information on the export label if it is not inconsistent with the
information required under paragraph (a) of this section.
(c) Language. The export label information may appear in the
language of the country to which the spirits are to be exported
provided that the proprietor maintains on file an English translation
of that information. The export label may state the net contents and
percent-alcohol-by-volume in the units of measurement of the foreign
country, provided that the proprietor maintains a record of the
equivalent units as required for labels of spirits bottled for domestic
consumption.
(d) Waiver. The appropriate TTB officer may waive the requirement
to show any information required by this section, other than the kind
of spirits, upon a showing that the country to which the spirits are to
be exported prohibits the showing of such information. In regard to
kind (class and type) of spirits, the appropriate TTB officer may waive
the designation required by Sec. 5.22 of this chapter, only to the
extent that the label need not bear the word ``diluted'' for distilled
spirits bottled below the minimum bottling proof, and provided that
this is in accordance with the rules of the country to which the
product is to be exported.

(26 U.S.C. 5201, 5301)

Sec. 19.520 Spirits for shipment to Puerto Rico.

Spirits removed for shipment to Puerto Rico with benefit of
drawback or without payment of tax in accordance with part 28 of this
chapter are subject to the provisions of part 5 of this chapter in
regard to labeling and standards of fill for bottles.

(26 U.S.C. 5201)

Closure Requirements

Sec. 19.523 Affixing closures.

Each bottle or other container of spirits having a capacity of one
gallon (3.785 liters) or less must have a closure or other device
securely affixed to the container prior to withdrawal from bond or
customs custody. The closure or other device must be constructed in
such a manner as to require breaking in order to gain access to the
contents of the container.

(26 U.S.C. 5301)

Sec. 19.525 Reclosing.

A proprietor may reclose bottles of distilled spirits filled on
bonded premises as provided in subpart N of this part. A proprietor may
also reclose bottles of distilled spirits to which closures or other
devices have been affixed as provided in Sec. 19.498.

(26 U.S.C. 5215)

Subpart U--[Reserved]

Subpart V--Records and Reports

General Rules for Records

Sec. 19.571 Records in general.

Each proprietor of a distilled spirits plant must maintain records
that accurately reflect the operations and transactions occurring at
the plant. This subpart specifies the types of records that a
proprietor must maintain. In general, a proprietor is responsible for
recording activities and transactions related to the three primary
operational accounts at a plant: production, storage, and processing. A
proprietor's records must show receipts in each account, movement from
one account to another, transfers in bond, and withdrawals of spirits,
denatured spirits, articles, or wines. The types of records that a
proprietor must keep include:
(a) All individual transaction forms, records, and summaries that
are specifically required by this part;

[[Page 26284]]

(b) All supplemental, auxiliary, and source data that a proprietor
uses to compile required forms, records, and summaries, and to prepare
reports, returns and claims; and
(c) Copies of notices, reports, returns, and approved applications
and other documents relating to operations and transactions.

(26 U.S.C. 5207)

Sec. 19.572 Format of records.

As a general rule, the provisions of this subpart do not require
proprietors to keep their records in any particular format or medium.
For example, a proprietor may keep required records on paper, on
microfilm or microfiche, or on a computer or other electronic medium,
so long as the records are readily retrievable in hard-copy format for
review by TTB officers as necessary. The required records may consist
of documents created in the ordinary course of business, rather than
documents created expressly to meet the requirements of this part,
provided that those documents:
(a) Contain all of the relevant information required under this
part;
(b) Are consistent with the general standards of clarity and
accuracy; and
(c) Can be readily understood by TTB personnel.

(26 U.S.C. 5207)

Sec. 19.573 Location of required records.

A proprietor may keep the records required by this part at the
distilled spirits plant where operations or transactions occur or at a
central recordkeeping location maintained by the proprietor. If a
proprietor keeps the required records at any location other than the
distilled spirits plant where operations or transactions occur, the
proprietor must notify the Director, National Revenue Center, of the
location where the records are kept.

(26 U.S.C. 5207)

Sec. 19.574 Availability of records.

The records required by this part must be available for inspection
by the appropriate TTB officer during normal business hours. If a
proprietor keeps the records at a location other than the distilled
spirits plant where operations or transactions occur, the proprietor
upon request must make them available at the distilled spirits plant
premises undergoing a TTB audit or inspection. The records must be
produced within two days of the request except that data accumulated on
cards, tapes, discs, or other accepted record media must be retrievable
within five business days. Applicable data processing programs must be
made available for examination if requested by any authorized TTB
officer.

(26 U.S.C. 5207)

Sec. 19.575 Retention of records.

A proprietor must retain any records required by this part for a
period of not less than three years from the date of the record or the
date of the last entry required to be made, whichever is later.
However, the appropriate TTB officer may require a proprietor to keep
records for an additional period not exceeding three years in any case
where such retention is deemed appropriate for the protection of the
revenue.

(26 U.S.C. 5207)

Sec. 19.576 Preservation of records.

A proprietor must maintain required records to ensure their
readability and availability for inspection. Whenever the condition of
any record will render it unsuitable for its intended or continued use,
the proprietor must create an accurate and legible reproduction of the
original record. TTB will treat the reproduced record as an original
record, and all of the provisions of law that would apply to the
original record also will apply to the reproduced record.

(26 U.S.C. 5207, 5555)

Sec. 19.577 Documents that are not records.

The term ``records'' as used in this subpart does not include
qualifying documents required under subpart D of this part, or bonds
required under subpart F of this part. Approved active formulas, plant
registrations and similar records are permanent in nature and must be
maintained in a permanent file.

(26 U.S.C. 5207)

Sec. 19.578 Financial records and books of account.

See 27 CFR 70.22 for information regarding TTB examination of
financial records and books of account.

(26 U.S.C. 7602)

Sec. 19.580 Time for making entries in records.

(a) Daily record entries. A proprietor must make entries required
by this part in records on a daily basis for each transaction or
operation and not later than the close of the next business day after
the transaction or operation occurred. However, if a proprietor
prepares supplemental or auxiliary records when an operation or
transaction occurs and those records contain all of the required
information, the proprietor may make entries into the daily records not
later than the close of business on the third business day following
the day on which the transaction or operation occurred.
(b) Tax records. A proprietor must enter the tax determination and
the taxable removal of distilled spirits in the proprietor's records on
the day on which tax determination and taxable removal occurs.

(26 U.S.C. 5207)

Sec. 19.581 Details of daily records.

The daily records required by this part must include the following
information:
(a) The date of each operation or transaction;
(b) For spirits, the kind and the quantity in proof gallons;
(c) For denatured spirits, the formula number and the quantity in
wine gallons;
(d) For distilling materials produced on the premises, the kind and
the quantity in wine gallons. For chemical byproducts containing
spirits, articles, spirits residues, and distilling material received
on the premises, the kind, the percent of alcohol by volume, and the
quantity in wine gallons;
(e) For wines, the kind, the quantity in wine gallons and the
percent of alcohol by volume;
(f) For alcoholic flavoring materials, the kind, formula number (if
any), and the quantity in proof gallons;
(g) For containers (other than those bearing lot identification
numbers) or cases, the type, serial number, and the number of
containers (including identifying marks on bulk conveyances), or cases.
However, a proprietor may withdraw spirits in cases without recording
the serial numbers of the cases, unless the appropriate TTB officer
requires such recording. A proprietor must record package
identification numbers, number of packages, and proof gallons per
package on deposit records in the storage account reflecting production
gauges or filling of packages from tanks; however, the proprietor need
show only the lot identification, number of packages, and proof gallons
per package for transactions in packages of spirits unless package
identification numbers are specifically required by this part;
(h) For materials intended for use in the production of spirits,
the kind and the quantity, with liquids recorded in gallons and other
nonliquid materials recorded by weight;
(i) For each receipt or removal of material, spirits, denatured
spirits, articles, spirits residues, and wine, the name and address of
the consignee or consignor, and, if any, the plant number

[[Page 26285]]

or industrial use permit number of such person;
(j) The serial number of any tank used;
(k) On the transaction record, the rate of duty paid on imported
spirits;
(l) Identification of imported spirits, spirits from Puerto Rico,
and spirits from the Virgin Islands, or a showing that a distilled
spirits product contains such spirits; and
(m) Identification of spirits that are to be used exclusively for
fuel use.

(26 U.S.C. 5207)

Sec. 19.582 Conversion from metric to U.S. units.

When liters are converted to wine gallons, the proprietor must
multiply the quantity in liters by 0.264172 to determine the equivalent
quantity in wine gallons. If cases contain the same quantity of spirits
of the same proof in metric bottles, the proprietor must convert the
cases to U.S. units by multiplying the liters in one case by the number
of cases to be converted, as follows:
(a) If the conversion from liters to U.S. units is made before
multiplying by the number of cases, the quantity in U.S. units must be
rounded to the sixth decimal; or
(b) If the conversion is made after multiplying by the number of
cases, the quantity in U.S. units must be rounded to the nearest
hundredth. Once converted to wine gallons, the proprietor must
determine the proof gallons of spirits in cases as provided in Sec.
30.52 of this chapter.

(26 U.S.C. 5201)

Production Records

Sec. 19.584 Materials for the production of distilled spirits.

A proprietor must maintain daily records of materials produced or
received for, or used in, the production of distilled spirits. This
includes records covering:
(a) Receipt and use of fermenting material or other nonalcoholic
materials for the production of distilled spirits;
(b) Receipt and use of spirits, denatured spirits, articles, and
spirits residues for redistillation;
(c) Distilling materials produced, received for production, and
used in the production of distilled spirits;
(d) Receipt of beer from brewery premises without payment of tax,
and receipt of beer removed from brewery premises upon determination of
tax as authorized by 26 U.S.C. 5222(b);
(e) Distilling material destroyed in, or removed from the premises
before distillation, including residue of beer returned to the
producing brewery;
(f) The quantity of fusel oils or other chemicals removed from the
production system, including the disposition thereof, with the name of
the consignee, if any, together with the results of alcohol content
tests performed on those fusel oils or chemicals; and
(g) The kind and quantity of distillates removed from the
production system pursuant to Sec. 19.307.

(26 U.S.C. 5207)

Sec. 19.585 Production and withdrawal records.

(a) Production of spirits. The following rules apply to the
maintenance of production records:
(1) A proprietor must maintain daily production account records of
the kind and quantity of distilled spirits produced. The records must
show the gauge of spirits in each receiving tank and the production
gauge (in proof gallons) of spirits removed from each tank. If packages
are filled according to the production gauge for immediate withdrawal
from bond, the proprietor must record the details of the individual
packages filled;
(2) A proprietor must maintain daily records of spirits lost or
destroyed prior to the production gauge; and
(3) A proprietor must maintain production account records in a
manner that will ensure the tracing of spirits through the distilling
system to the mash or other material from which the spirits were
produced and that will clearly establish the identity of the spirits.
(b) Withdrawals from production. A proprietor must maintain daily
records of the distilled spirits withdrawn from the production account.
This includes withdrawals for:
(1) Tax payment;
(2) Use of the United States;
(3) Hospital, scientific or educational use;
(4) Export;
(5) Transfer to a foreign trade zone;
(6) Transfer to customs bonded manufacturing warehouse;
(7) Use as supplies on vessels and aircraft;
(8) Use in wine production;
(9) Transfer in bond to other bonded premises;
(10) Transfer to storage operations;
(11) Transfer to processing operations; and
(12) Research, development, or testing.

(26 U.S.C. 5207)

Sec. 19.586 Byproduct spirits production record.

Each proprietor who manufactures substances other than spirits in a
process that produces spirits as a byproduct must maintain daily
production records of:
(a) The kind and quantity of materials received and used in
production;
(b) The kind and quantity of spirits produced and disposed of; and
(c) The kind and quantity of other substances produced.

(26 U.S.C. 5207)

Storage Records

Sec. 19.590 Storage operations.

(a) Receipts. A proprietor must maintain daily records of the kind
and quantity of distilled spirits or wines received in the storage
account. The proprietor must use copies of gauge records, transfer
records, and tank records of wines or spirits to record spirits or
wines received into storage. Receipts into storage include:
(1) Receipts of spirits or wines for deposit into storage;
(2) Receipts by transfer in bond;
(3) Receipts of spirits from customs custody; and
(4) Receipts of spirits returned to bond.
(b) Storage activities. A proprietor must maintain daily records of
the activities and operations within the storage account at the plant,
including records regarding:
(1) The mingling of spirits;
(2) Spirits in tanks;
(3) Spirits or wines filled into packages from tanks and retained
for storage;
(4) Spirits of less than 190 degrees of proof or wines transferred
from one tank to another;
(5) The transfer of spirits or wine from one package to another;
and
(6) The addition of oak chips to spirits and the addition of
caramel to brandy or rum.
(c) Withdrawals from storage. A proprietor must maintain daily
records of the kind and quantity of distilled spirits or wines
withdrawn from the storage account, including records regarding:
(1) Taxpayment;
(2) Use by the United States;
(3) Hospital, scientific or educational use;
(4) Export;
(5) Transfer to a foreign trade zone;
(6) Transfer to a customs bonded manufacturing warehouse;
(7) Use as supplies on vessels and aircraft;
(8) Transfer to a bonded winery;
(9) Transfer to a customs bonded warehouse;
(10) Use for research, development, or testing;

[[Page 26286]]

(11) Transfer to processing operations;
(12) Transfer to production operations;
(13) Transfer in bond to other bonded premises;
(14) Destruction; and
(15) Loss.

(26 U.S.C. 5207)

Sec. 19.591 Package summary records.

(a) General. A proprietor must keep current summary records for
each kind of spirits or wine in packages, showing each spirits or wine
deposited in, withdrawn from, and remaining in, the storage account. A
proprietor must keep separate records for domestic spirits, imported
spirits, Virgin Islands spirits, Puerto Rican spirits, and wine. A
proprietor may keep package records for spirits according to the season
or the year in which the packages were filled with spirits.
(b) Arrangement of records. The proprietor must prepare and arrange
separately package summary records:
(1) For domestic spirits, alphabetically by State and by the plant
number and name of the producer or warehouseman;
(2) For imported spirits, alphabetically by the country of origin
and by the name of the producer;
(3) For Puerto Rican or Virgin Islands spirits, by the name of the
producer in Puerto Rico or the Virgin Islands; and
(4) For wine, by the kind and the tax rate imposed by 26 U.S.C.
5041.
(c) Details of records. Package summary records must show the
following details:
(1) The date on which each of the summarized transactions occurred;
(2) For spirits, the number of packages and the proof gallons
covered by the summary record;
(3) For wine, the number of packages and the wine gallons covered
by the summary record;
(4) Any gains or shortages disclosed by inventory or when an
account is closed; and
(5) The gallon balances on summary records for spirits and wines
remaining in the account at the end of each month.
(d) Consolidation. A proprietor must consolidate package summary
records at the end of each month, or for lesser periods when required
by the appropriate TTB officer, to show, for all types of containers
and kinds of spirits, the total proof gallons received in, withdrawn
from, and remaining in the storage account.

(26 U.S.C. 5207)

Sec. 19.592 Tank record of wine and spirits of less than 190 degrees
of proof.

A proprietor must keep a record for each tank (including each bulk
conveyance) containing wine or spirits of less than 190 degrees of
proof. The record must show deposits into, withdrawals from, and the
balance remaining in, each tank in the storage account. A proprietor
must prepare a new record each time wine or spirits are deposited into
an empty tank and must make entries each day that transactions occur.
Tank records must show the following details:
(a) The identification of the tank;
(b) The tank record serial number, beginning with ``1'' for each
record initiated on or after January 1 of each calendar year;
(c) The date of each transaction;
(d) For spirits, the kind of spirits and, as applicable,--
(1) For domestic spirits, the plant number and name of the
producer, or, for blended rums or brandies, the plant number and name
of the warehouseman;
(2) For imported spirits, the country of origin and the name and
plant number of the warehouseman;
(3) For Puerto Rican or Virgin Islands spirits, the name of the
producer;
(4) The number and average proof gallon content of packages of
spirits dumped in the tank, or a notation indicating the deposit of
spirits in the tank by pipeline; and
(5) If subject to age labeling requirements under part 5 of this
chapter, the age of the youngest spirits in years, months and days,
each time that spirits are deposited;
(e) For wine, the kind and the tax rate imposed by 26 U.S.C. 5041;
(f) The wine gallons of wine, or proof gallons of spirits,
deposited into the tank;
(g) The wine gallons of wine, or proof gallons of spirits,
withdrawn from the tank;
(h) Any related transaction form or record and its serial number
for deposits and withdrawals;
(i) The wine gallons of wine, or proof gallons of spirits,
remaining in the tank, recorded at the end of each month; and
(j) Any gain or loss disclosed by inventory or on emptying of the
tank.

(26 U.S.C. 5207)

Sec. 19.593 Tank summary record for spirits of 190 degrees or more of
proof.

(a) General. A proprietor must keep a tank summary record for
spirits of 190 degrees or more of proof held in storage tanks. The
record must show the proof gallons deposited into, withdrawn from, and
remaining in the tanks in the storage account. The proprietor must
prepare a separate tank summary record for each kind of spirits of 190
degrees or more of proof. The proprietor must make an entry for each
day on which a transaction occurs, and the entry must summarize the
individual transactions shown on the deposit records.
(b) Arrangement of records. The proprietor must prepare and arrange
the tank summary records as follows:
(1) For domestic spirits, by the name of the producer or
warehouseman;
(2) For imported spirits, by the name of the warehouseman who
received the spirits from customs custody; and
(3) For spirits from Puerto Rico or the Virgin Islands, by the name
of the producer in Puerto Rico or the Virgin Islands.
(c) Details of records. Tank summary records must show the
following details:
(1) The kind of spirits;
(2) The date of the transactions summarized;
(3) The proof gallons deposited;
(4) The proof gallons withdrawn;
(5) The proof gallons remaining in tanks; and
(6) Any gain or loss disclosed by inventory or on emptying of the
tanks covered by the tank summary record.

(26 U.S.C. 5207)

Processing Records

Sec. 19.596 Processing records in general.

A proprietor who processes spirits must maintain daily records of
transactions and operations in the processing account relating to:
(a) The manufacture of distilled spirits products;
(b) Finished products;
(c) The denaturation of spirits; and
(d) The manufacture of articles.

(26 U.S.C. 5207)

Sec. 19.597 Manufacturing records.

(a) Receipts. A proprietor must maintain daily records of the
spirits, wines, and alcoholic flavoring materials received into the
processing account for the manufacture of distilled spirits products.
Total receipts must be summarized showing the amount of:
(1) Spirits received from storage or production at the same plant;
(2) Spirits received from other plants by transfer in bond;
(3) Spirits received from customs custody;
(4) Spirits received by return to bond;
(5) Wines received from the storage at the same plant;
(6) Wines received by transfer in bond; and
(7) Alcoholic flavoring materials received.
(b) Additional receipt information. The records described in
paragraph (a) of this section must also show the name and plant number
of the producer or

[[Page 26287]]

processor (or the warehouseman in the case of blended beverage rums or
brandies or spirits of 190 degrees or more of proof received from
storage) for domestic spirits, the name of the importer and the country
of origin for imported spirits, and the name and address of the
producer for wines and alcoholic flavoring materials.
(c) Usage. A proprietor must maintain daily records of the spirits,
wines, and alcoholic flavoring materials and other ingredients used in
the manufacture of distilled spirits products as provided in Sec.
19.598.
(d) Bottling or packaging. A proprietor must maintain daily records
of the bottling or packaging of each batch of spirits as provided in
Sec. 19.599.
(e) Other dispositions. A proprietor must maintain daily records of
all other dispositions of spirits, wines and alcoholic flavoring
materials, including, but not limited to, records regarding the
following:
(1) Spirits, wines, and alcoholic flavoring materials removed from
the distilled spirits plant premises;
(2) Transfers in bond;
(3) Spirits transferred to the production account for
redistillation;
(4) Redistillation of spirits, including the production of gin or
vodka by other than original and continuous distillation;
(5) Voluntary destruction of spirits or wines; and
(6) Losses of spirits, wines and alcoholic flavoring materials.

(26 U.S.C. 5207)

Sec. 19.598 Dump/batch records.

A proprietor who processes, mixes, or blends spirits in the
processing account must maintain ``dump/batch'' records setting forth
detailed information regarding the processing of the spirits. The dump/
batch records must contain each of the following items of information
that applies to the processing in question:
(a) Serial number of the record or batch number;
(b) Name and distilled spirits plant number of the producer;
(c) Kind and age of the spirits used, together with a notation, if
applicable, that the spirits--
(1) Were treated with oak chips;
(2) Contain added caramel;
(3) Were imported; or
(4) Are from Puerto Rico or the Virgin Islands;
(d) Serial number of the tank or container to which ingredients are
added for use;
(e) Serial or identification number of the tank or container from
which spirits are removed;
(f) Quantity by ingredient of other alcoholic ingredients used,
showing wine in wine gallons, the percentage of alcohol by volume and
proof, and alcoholic flavoring materials in proof gallons;
(g) Serial number of the source transaction record (for example,
the record for spirits previously dumped);
(h) Date of each transaction;
(i) Quantity, by ingredient (other than water), of nonalcoholic
ingredients used;
(j) Formula number;
(k) Quantity of ingredients used in the batch that have been
previously dumped, reported on dump records, and held in tanks or
containers;
(l) Total quantity in proof gallons of all alcoholic ingredients
used;
(m) Identification of each record to which spirits are transferred;
(n) Quantity of each lot transferred;
(o) Date of each transfer;
(p) Total quantity in proof gallons of the product transferred;
(q) Batch gain or loss; and
(r) For each batch to be tax determined in accordance with Sec.
19.247, the effective tax rate.

(26 U.S.C. 5207)

Sec. 19.599 Bottling and packaging record.

A proprietor who bottles or packages spirits must prepare a
``bottling and packaging'' record for each lot of spirits bottled or
packaged. The bottling and packaging record must contain the following
information:
(a) Bottling tank number;
(b) Serial number of the record (beginning with ``1'' at the start
of each calendar or fiscal year);
(c) Formula number (if any) under which the batch was produced;
(d) Serial number of the dump/batch record from which the spirits
were received;
(e) Kind of distilled spirits product (including age, if claimed);
(f) Details of the tank gauge (including proof, wine gallons, proof
gallons, and, if applicable, obscuration);
(g) The date the bottles or packages were filled;
(h) The size of the bottles or packages filled, the number of
bottles per case, and the number of cases or packages filled;
(i) Serial numbers by brand name of the cases or other containers
filled;
(j) Proof of the spirits bottled or packaged (if different from the
proof recorded under paragraph (f) of this section);
(k) Total quantity bottled, packaged or otherwise disposed of in
bulk;
(l) Losses or gains of the distilled spirits product; and
(m) If labeled as bottled in bond, a statement to that effect.

(26 U.S.C. 5207)

Sec. 19.600 Alcohol content and fill test record.

A proprietor must maintain a record of the results of all tests of
alcohol content and quantity (fill) conducted. The record must include
information that will enable TTB officers to determine whether the
proprietor is complying with the requirements of Sec. 19.356. The
record of alcohol content and fill tests must contain, at a minimum,
the following information:
(a) Date and time of the test;
(b) Bottling tank number;
(c) Serial number of the bottling record;
(d) Bottling line designation;
(e) Size of the bottle filled;
(f) Number of bottles tested;
(g) Labeled alcohol content;
(h) Alcohol content found by the test;
(i) Percentage of variation from 100 percent fill; and
(j) Corrective action taken, if any.

(26 U.S.C. 5207, 5555)

Sec. 19.601 Finished products records.

(a) Bottling and packaging. A proprietor must maintain daily
transaction records and a daily summary record of the kind and quantity
of finished products bottled or packaged within the processing account
at the distilled spirits plant. These records must show:
(1) The beginning and ending quantity of bottled or packaged
spirits on hand;
(2) The spirits bottled or packaged; and
(3) Inventory overages.
(b) Disposition of finished products. A proprietor must also
maintain daily records of the disposition of finished products from the
processing account at the distilled spirits plant. These disposition
records must show any spirits:
(1) Transferred in bond (packages);
(2) Withdrawn tax determined;
(3) Withdrawn free of tax for U.S., hospital, scientific, or
educational use;
(4) Withdrawn without payment of tax for addition to wine;
(5) Withdrawn for exportation, for vessels and aircraft supplies
and for transfer to a customs bonded warehouse;
(6) Transferred to the production account for redistillation;
(7) Withdrawn for research, development or testing (including
government samples);
(8) Voluntarily destroyed;
(9) Dumped for further processing;
(10) Recorded losses or shortages of finished product; and

[[Page 26288]]

(11) Disposed of as samples of the finished product.

(26 U.S.C. 5207)

Sec. 19.602 Redistillation record.

If a proprietor redistills spirits in the processing account (as in
the production of gin or vodka by redistillation), the proprietor must
prepare a record of the redistillation. The record must show the kind
and quantity of the spirits entered into the distilling system and the
kind and quantity of the spirits removed from the distilling system
upon completion of the process.

(26 U.S.C. 5207)

Sec. 19.603 Liquor bottle record.

A proprietor must maintain records of the receipt, use, and
disposition of liquor bottles.

(26 U.S.C. 5207)

Sec. 19.604 Rebottling, relabeling, and reclosing records.

(a) If a proprietor dumps spirits for rebottling, the proprietor
must prepare in accordance with Sec. 19.599 a bottling and packaging
record that covers the rebottling operation.
(b) If a proprietor relabels or recloses bottled products in
accordance with Sec. 19.363, the proprietor must maintain records of
the operation that reflect the following:
(1) The identity of the spirits relabeled or reclosed;
(2) The date of the transaction;
(3) The serial numbers of any cases involved; and
(4) The total number of bottles.

(26 U.S.C. 5207)

Denaturation and Article Manufacture Records

Sec. 19.606 Denaturation records.

(a) General. A processor who is authorized to denature spirits must
maintain daily records of denaturation showing the following
information:
(1) Spirits that are received for, and used in, denaturation;
(2) Spirits, denatured spirits, recovered denatured spirits,
spirits residues, and articles that are redistilled in the processing
account for denaturation;
(3) Kind and quantity of denaturants received and used in
denaturation of spirits or otherwise disposed of;
(4) Conversion of denatured alcohol formulas in accordance with
Sec. 19.392;
(5) Denatured spirits produced, received, stored in tanks, filled
into containers, removed, or otherwise disposed of;
(6) Recovered denatured spirits or recovered articles received,
restored, or redenatured;
(7) Packages of denatured spirits filled, with a separate record
for each formula number and filed in numerical order according to the
serial number or lot identification number of the packages;
(8) Losses of denatured spirits; and
(9) Disposition of denatured spirits.
(b) Record of denaturation. Each time that a proprietor denatures
spirits, the proprietor must prepare a record that shows the formula
number, the tank in which denaturation takes place, the proof gallons
of the spirits before denaturation, the quantity of each denaturant
used (in gallons, or in pounds or ounces), and the wine gallons of
denatured spirits produced.

(26 U.S.C. 5207)

Sec. 19.607 Article manufacture records.

A processor who is authorized to manufacture articles must maintain
daily records arranged by the name and authorized use code of the
article and showing the following:
(a) Quantity, by formula number of denatured spirits used in the
manufacture of the article;
(b) Quantity of each article manufactured; and
(c) Quantity of each article removed, or otherwise disposed of,
including the name and address of the person purchasing or otherwise
disposing of the article.

(26 U.S.C. 5207)

Tax Records

Sec. 19.611 Records of tax determination in general.

(a) Taxable withdrawals. Except as otherwise provided in this part,
a proprietor must gauge and determine the tax on spirits when they are
withdrawn from bond. When spirits are withdrawn from bond, the
proprietor must also prepare a record of the tax determination in
accordance with paragraph (b) of this section.
(b) Form of record. A serially numbered invoice or shipping
document, signed or initialed by an agent or employee of the
proprietor, will constitute the record of tax determination. Although
neither the proof gallons nor the effective tax rate must be shown on
the record of tax determination, each invoice or shipping document must
contain information sufficient to enable TTB officers to determine the
total proof gallons and, if applicable, each effective tax rate and the
proof gallons removed at each effective tax rate. For purposes of this
part, the total proof gallons calculated from each invoice or shipping
document constitutes a single withdrawal.

(26 U.S.C. 5207)

Sec. 19.612 Summary record of tax determinations.

Each proprietor who withdraws distilled spirits on determination of
tax, but before payment of tax, must maintain a daily summary record of
tax determinations. The summary record must show for each day on which
tax determinations occur:
(a) The serial numbers of the records of tax determination, the
total proof gallons rounded to the nearest tenth proof gallon on which
tax was determined at each effective tax rate, and the total tax; or
(b) The serial numbers of the records of tax determination, the
total tax for each record of tax determination, and the total tax.

(26 U.S.C. 5207)

Sec. 19.613 Average effective tax rate records.

(a) Daily record. For each distilled spirits product to be tax
determined using an average effective tax rate in accordance with Sec.
19.249, the proprietor must prepare a daily summary record showing:
(1) The serial number of the batch record of each batch of the
product that will be bottled or packaged, in whole or in part, for
domestic consumption;
(2) The proof gallons in each such batch derived from distilled
spirits, eligible wine, and eligible flavors; and
(3) The tax liability of each such batch determined as follows--
(i) Proof gallons of all distilled spirits (exclusive of distilled
spirits derived from eligible flavors), multiplied by the tax rate
prescribed in 26 U.S.C. 5001;
(ii) Wine gallons of each eligible wine, multiplied by the tax rate
which would be imposed on the wine under 26 U.S.C. 5041(b)(1), (2), or
(3) but for its removal to bonded premises; and
(iii) Proof gallons of all distilled spirits derived from eligible
flavors, to the extent that those distilled spirits exceed 2\1/2\% of
the proof gallons in the product, multiplied by the tax rate prescribed
in 26 U.S.C. 5001.
(b) Monthly records. At the end of each month during which the
product is manufactured, the proprietor must:
(1) Determine the total proof gallons and total tax liability for
each summary record prescribed by paragraph (a) of this section;
(2) Add the sums derived under paragraph (b)(1) of this section to
the like sums determined for each of the preceding five months; and
(3) Divide the total tax liabilities by the total proof gallons.

(26 U.S.C. 5207)

[[Page 26289]]

Sec. 19.614 Inventory reserve records.

(a) General. For each eligible distilled spirits product to be tax
determined in accordance with Sec. 19.250, the proprietor must
establish an inventory reserve account, in accordance with this
section.
(b) Deposit records. For each batch of the bottled or packaged
product, the proprietor must enter into the inventory reserve account a
deposit record, which may be combined with the bottling and packaging
record required by Sec. 19.599, showing:
(1) The name of the product;
(2) The bottling and packaging record serial number;
(3) The date the bottling or packaging was completed;
(4) The total proof gallons bottled and packaged; and
(5) The effective tax rate of the product computed in accordance
with Sec. 19.246.
(c) Depletions. The inventory reserve account for each product must
be depleted in the same order in which the deposit records were entered
into the account. The proprietor must record a depletion for each
disposition (for example, a taxable removal, an exportation, an
inventory shortage or breakage) by entering on the deposit record:
(1) The transaction date;
(2) The transaction record serial number;
(3) The proof gallons disposed of; and
(4) The proof gallons remaining. If any depletion exceeds the
quantity of product remaining on the deposit record, the proprietor
must deplete the remaining quantity, close the deposit record, and
deplete the remainder of the transaction from the next deposit record.

(26 U.S.C. 5207)

Sec. 19.615 Standard effective tax rate records.

For each product to be tax determined using a standard effective
tax rate in accordance with Sec. 19.248, a proprietor must prepare a
record of the standard effective tax rate computation showing, for one
proof gallon of the finished product, the following information:
(a) The name of the product;
(b) The least quantity of each eligible flavor that will be used in
the product, in proof gallons, or 0.025 proof gallon, whichever is
less;
(c) The least quantity of each eligible wine that will be used in
the product, in proof gallons;
(d) The greatest effective tax rate applicable to the product,
calculated in accordance with Sec. 19.246 with the values indicated in
paragraphs (a) and (b) of this section; and
(e) The date on which the use of the standard effective tax rate
commenced.

(26 U.S.C. 5207)

Other Required Records

Sec. 19.616 Record of samples.

(a) Required records. A proprietor must maintain records of all
samples taken under Sec. Sec. 19.434 and 19.435. The sample record
must show the:
(1) The date that the samples were taken;
(2) The account from which taken;
(3) The purpose for which taken;
(4) The size and number of samples taken;
(5) The kind of spirits;
(6) The disposition of each sample (for example, destroyed,
returned to containers or the distilling system, retained for library
purposes); and
(7) The name and address of the recipient of the sample if a sample
is to be analyzed or tested elsewhere than at the distilled spirits
plant where taken.
(b) Sample schedule. When a proprietor takes samples pursuant to an
established schedule, the proprietor may maintain the schedule as the
required record if it contains the information required by paragraphs
(a)(2) through (a)(7).

(26 U.S.C. 5207)

Sec. 19.617 Destruction record.

Each time that a proprietor voluntarily destroys spirits, denatured
spirits, articles, or wines, the proprietor must prepare a record of
the destruction that sets forth:
(a) The identification of the spirits, denatured spirits, articles,
or wines, including kind, quantity, elements of gauge, name and permit
number of the producer, warehouseman or processor, and identity and
type of container;
(b) The date, time, place and manner of the destruction;
(c) A statement that the spirits had, or had not, previously been
withdrawn and returned to bond; and
(d) The name and title of any representative of the proprietor who
accomplished or supervised the destruction.

(26 U.S.C. 5207)

Sec. 19.618 Gauge record.

When a gauge record is required by this part, the proprietor must
prepare the gauge record in a manner that shows:
(a) The serial number of the gauge record, commencing with ``1'' at
the start of each calendar or fiscal year;
(b) From the following, the applicable circumstances requiring the
gauge--
(1) Production gauge and entry for deposit in the storage or
processing account at the distilled spirits plant where the spirits
were produced;
(2) Packaging of spirits or wine filled from a tank in the storage
account at the same distilled spirits plant;
(3) Transfer from the processing or storage account to the
production account for redistillation;
(4) Repackaging of spirits of 190 degrees or more of proof; or
(5) Gauge on return to bond in production or processing operations
of spirits, denatured spirits, recovered spirits, recovered denatured
spirits, articles, recovered articles, or spirits residues;
(c) The date of the gauge;
(d) Any related form or record (identification, serial number and
date);
(e) The kind of spirits or formula number for denatured spirits;
(f) The proof of distillation (not required for denatured spirits,
spirits for redistillation, or spirits of 190 degrees or more of
proof);
(g) When containers are to be filled, the type and number of
containers;
(h) The age of the spirits;
(i) The name and distilled spirits plant number of the producer or
warehouseman; and
(j) The following gauge data--
(1) Package identification, tank number, volumetric or weight gauge
details, proof, and wine gallons;
(2) Cooperage identification (``C'' for charred, ``REC'' for
recharred, ``P'' for plain, ``PAR'' for paraffined, ``G'' for glued, or
``R'' for reused, and ``PS'' if a barrel has been steamed or water
soaked before filling);
(3) Entry proof for whiskey;
(4) Proof gallons per filled package; and
(5) Total proof gallons of spirits or wine gallons of denatured
spirits, recovered denatured spirits, articles, spirits residues, or
wine.

(26 U.S.C. 5207)

Sec. 19.619 Package gauge record.

When this part or part 28 of this chapter requires a proprietor to
gauge packages of spirits, the proprietor must prepare a package gauge
record in a manner that shows:
(a) The date the record is prepared;
(b) The identity of the related transaction form or record, and its
serial number;
(c) The name and distilled spirits plant number of the producer or
processor. For blended rums or brandies the proprietor must enter the
name and plant number of the blending warehouseman. For spirits of 190
degrees or more of proof, the proprietor

[[Page 26290]]

must enter the name and plant number of the producer or warehouseman,
as appropriate and, where the packages have already been marked, the
name and distilled spirits plant number marked thereon. For imported
spirits, the proprietor must enter the name of the warehouseman who
received the spirits from customs custody and the name of the importer.
For Virgin Islands or Puerto Rican spirits, the proprietor must enter
the name of the producer in the Virgin Islands or Puerto Rico;
(d) The proof of distillation for spirits not over 190 degrees
proof; and
(e) For each package--
(1) The serial or identification number;
(2) The designation for wooden barrels (``C'' for charred, ``REC''
for recharred, ``P'' for plain, ``PAR'' for paraffined, ``G'' for
glued, ``R'' for reused, and ``PS'' if a barrel has been steamed or
water soaked before filling);
(3) The kind of spirits;
(4) The gross weight determined at the time of the original gauge
or regauge or at the time of shipment;
(5) The present tare on regauge;
(6) The net weight for filling gauge or regauge;
(7) The proof;
(8) The proof gallons for regauge;
(9) The original proof gallons; and
(10) The receiving weights, when a material difference appears on
receipt after transfer in bond of weighed packages.

(26 U.S.C. 5207)

Sec. 19.620 Transfer record--consignor's responsibility.

When this part requires a consignor proprietor to prepare a
transfer record covering spirits, denatured spirits, or wines shipped
in bond from his distilled spirits plant, the transfer record must
include:
(a) A serial number, commencing with ``1'' on January 1 of each
year;
(b) The serial number and date of TTB Form 5100.16 (not required
for wine spirits withdrawn without payment of tax for use in wine
production);
(c) The name and distilled spirits plant number of the consignor
proprietor;
(d) The name and distilled spirits plant number or bonded wine
cellar number of the consignee;
(e) The account from which the spirits or wines were removed for
transfer (that is, the production, storage, or processing account);
(f) A description of the spirits, denatured spirits, or wine,
including--
(1) The name and plant number of the producer, warehouseman, or
processor (not required for denatured spirits or wine). For imported
spirits transferred in bond between distilled spirits plants, the
transfer record must show the name and plant number of the warehouseman
or processor who received the spirits from customs custody. For Virgin
Islands or Puerto Rican spirits, the transfer record must show the name
of the producer in the Virgin Islands or Puerto Rico. For spirits of
different producers or warehousemen that have been mixed in the
processing account, the transfer record must show the name of the
processor;
(2) The kind of spirits or wines. For denatured spirits, the
transfer record must show the kind and formula number. For alcohol, the
transfer record must show the material from which it was produced. For
bulk spirits and for alcohol in packages, the transfer record must show
the kind and proof. For other spirits and wines, the transfer record
must show the kind designation as specified in part 4 or part 5 of this
chapter, as appropriate;
(3) The age (in years, months, and days) and year of production;
(4) The number of packages or cases with their lot identification
numbers or serial numbers and dates of fill;
(5) The type of container (if the spirits, denatured spirits or
wines are to be transferred by pipeline, the transfer record must show
``P/L'');
(6) The proof gallons for distilled spirits, or wine gallons for
denatured spirits or wine; and
(7) For distilled spirits products that contain eligible wine or
eligible flavors, the transfer record must show the elements necessary
to compute the effective tax rate as follows--
(i) Proof gallons of distilled spirits (exclusive of distilled
spirits derived from eligible flavors);
(ii) Wine gallons of each eligible wine and the percentage of
alcohol by volume of each; and
(iii) Proof gallons of distilled spirits derived from eligible
flavors;
(g) A notation to indicate when spirits are being transferred in
bond from a production facility to another distilled spirits plant;
(h) The identification of the conveyance;
(i) The identity of the seals, locks or other devices affixed to
the conveyance or package (permanent seals affixed to a conveyance that
remain intact need not be recorded on the transfer record when a
permanent record is maintained);
(j) The date of transfer; and
(k) The signature and title of the consignor, with a penalties of
perjury statement as prescribed in Sec. 19.45.

(26 U.S.C. 5207)

Sec. 19.621 Transfer record--consignee's responsibility.

(a) When a proprietor receives wine by transfer in bond from a
bonded wine cellar as the consignee, that proprietor must complete the
transfer record covering the transfer in accordance with Sec. 24.284
of this chapter.
(b) When a proprietor receives spirits from an alcohol fuel plant
or from customs custody, or receives spirits, denatured spirits, and
wines from the bonded premises of another distilled spirits plant as
the consignee, that proprietor must record the results of the receipt
by including the following on the related transfer record:
(1) The date of receipt;
(2) A notation that the securing devices on the conveyance were, or
were not, intact on arrival (not applicable to denatured spirits or
spirits transferred in unsecured conveyances);
(3) The gauge of spirits, denatured spirits, or wine showing the
tank number, proof (percent of alcohol by volume for wine) and
specifications of the weight or volumetric determination of quantity,
wine gallons or proof gallons received, and any losses or gains;
(4) A notation of any excessive in-transit loss, missing packages,
tampering, or apparent theft;
(5) The account into which the spirits, denatured spirits, or wines
were deposited (that is, production, storage or processing); and
(6) The signature and title of the consignee proprietor, with a
penalties of perjury statement as prescribed in Sec. 19.45.
(c) When spirits are transferred from customs custody as provided
in subpart P of this part, the transfer record must contain the
information specified in Sec. 27.138 of this chapter.

(26 U.S.C. 5207)

Sec. 19.622 Daily record of wholesale liquor dealer and taxpaid
storeroom operations.

(a) General. If a proprietor in connection with plant operations
conducts wholesale liquor dealer operations, or operates a taxpaid
storeroom on, or in the immediate vicinity of, general plant premises,
or operates taxpaid storage premises at another location from which
distilled spirits are not sold at wholesale, that proprietor must
maintain daily records covering the receipt and disposition of all
distilled spirits and wines and all reclosing and relabeling operations
at those premises. The proprietor must keep separate records for each
of those premises.
(b) Receipt and disposition records. The records covering receipt
and

[[Page 26291]]

disposition of distilled spirits and wines required under paragraph (a)
of this section must show:
(1) The date of the transaction (or date of discovery in the case
of casualty or theft);
(2) The name and address of each consignor or consignee, as the
case may be;
(3) The brand name;
(4) The kind of spirits;
(5) The actual quantity of distilled spirits involved (proof and
proof gallons if in packages, wine gallons or liters and proof if in
bottles);
(6) The package identification or serial numbers of the packages
involved;
(7) The name of the producer; and
(8) The country of origin in the case of imported spirits.
(c) Case dispositions. In addition to the records required under
paragraph (b) of this section, the appropriate TTB officer may, upon
notice, require the proprietor to record the case serial numbers for
dispositions.
(d) Reclosing or relabeling. The records of reclosing and
relabeling required under paragraph (a) of this section must include:
(1) The date of the transaction;
(2) The serial numbers of the cases involved;
(3) The total number of bottles; and
(4) The name of the bottler.

(26 U.S.C. 5114, 5555)

Sec. 19.623 Record of inventories.

(a) General. When conducting an inventory required by this part,
the proprietor must prepare a record of the inventory taken. The record
must include the following:
(1) The date of the inventory;
(2) The identity of the container(s);
(3) The kind and quantity of spirits, denatured spirits, and wines;
(4) Any losses (whether by theft, voluntary destruction or
otherwise), gains or shortages; and
(5) The proprietor's signature, or the signature of the person
taking the inventory, with the penalties of perjury statement as
prescribed in Sec. 19.45.
(b) Overages, gains, or losses. A proprietor must record in the
daily records of operations, tank records, dump/batch records, bottling
and packaging records, or denaturation records, as appropriate, any
overages, gains, or losses disclosed by an inventory.
(c) Retention. A proprietor must retain inventory records and make
them available for inspection by TTB officers.

(26 U.S.C. 5207)

Sec. 19.624 Removal of Puerto Rican and Virgin Islands spirits and
rum imported from all other areas.

(a) General. A proprietor must maintain separate accounts, in proof
gallons, of Puerto Rican spirits having an alcoholic content of at
least 92 percent rum, of Virgin Islands spirits having an alcoholic
content of at least 92 percent rum, and of rum imported from all other
areas removed from the processing account on determination of tax. A
proprietor may determine the quantities of spirits in these categories
that are contained in products mixed in processing with other alcoholic
ingredients by using one of the methods referred to in paragraph (b),
(c), or (d) of this section. The proprietor must report these
quantities on the monthly report of operations referred to in Sec.
19.632.
(b) Standard method. For purposes of maintaining the separate
accounts referred to in paragraph (a) of this section, a proprietor may
determine the quantities of spirits in those specified categories based
on the least amount of those spirits that may be used in each product
as stated in the approved TTB F 5110.38, Formula for Distilled Spirits
Under the Federal Alcohol Administration Act.
(c) Averaging method. For purposes of the separate accounts
referred to in paragraph (a) of this section, a proprietor may
determine the quantities of spirits in those specified categories by
computing the average quantity of those spirits contained in all
batches of the same product formulation manufactured during the
preceding 6-month period. The average must be adjusted at the end of
each month in order to include only the preceding 6-month period.
(d) Alternative method. If a proprietor wishes to use a method for
determining the quantities of spirits as an alternative for a method
prescribed in paragraphs (b) or (c) of this section, the proprietor
must file an application with the appropriate TTB officer. The written
application must specifically describe the proposed alternative method
and must explain the reasons for using the alternative method.

(26 U.S.C. 5555, 7652)

Sec. 19.625 Shipping record for spirits and specially denatured
spirits withdrawn free of tax.

(a) General. A proprietor must prepare a shipping record when:
(1) Spirits are withdrawn free of tax in accordance with Sec. Sec.
19.424(a) through (c);
(2) Specially denatured spirits are withdrawn free of tax in
accordance with Sec. Sec. 19.424(d) and 19.427; and
(3) Samples of specially denatured spirits in excess of five
gallons are withdrawn in accordance with Sec. 19.427(c);
(b) Form of record. The shipping record referred to in paragraph
(a) of this section may be any commercial document, such as an invoice
or bill of lading, so long as it reflects the following information:
(1) The name and address of the consignor;
(2) A serial number;
(3) The date of shipment;
(4) The name, address, and permit number of consignee;
(5) The kind of spirits;
(6) The proof of the spirits;
(7) The formula number(s), for specially denatured spirits;
(8) The number and size of the shipping containers;
(9) The package identification numbers or serial numbers of the
shipping containers; and
(10) The total wine gallons (specially denatured spirits) or the
total proof gallons (tax-free alcohol).
(c) Disposition of the shipping record. The proprietor must forward
a copy of the shipping record to the company that receives the spirits
and must retain a copy for his files.

(26 U.S.C. 5207)

Sec. 19.626 Record of distilled spirits shipped to manufacturers of
nonbeverage products.

(a) General. When a proprietor ships distilled spirits to a
manufacturer of nonbeverage products, the proprietor must prepare a
record of the shipment, forward the original to the consignee, and
retain a copy.
(b) Form of record. The record of shipment referred to in paragraph
(a) of this section may consist of either the record of tax
determination required by Sec. 19.611 or any other document that
contains the necessary information specified in paragraph (c) of this
section.
(c) Required information. The record of shipment required under
this section must contain the following information:
(1) The name, address, and registry number of the proprietor;
(2) The date of shipment;
(3) The name and address of the consignee;
(4) The kind, proof, and quantity of distilled spirits in each
container;
(5) The number of shipping containers of each size;
(6) The package identification numbers or serial numbers of
containers;
(7) The serial number of the applicable record of tax
determination; and

[[Page 26292]]

(8) For distilled spirits containing eligible wine or eligible
flavors, the effective tax rate.

(26 U.S.C. 5201, 5207)

Sec. 19.627 Alternating premises record.

When distilled spirits plant bonded premises are alternated to or
from bonded or taxpaid wine, brewery, manufacturer of nonbeverage
products, or general premises, under an approved alternation plan
described in the plant registration, the proprietor must record in a
logbook, or must maintain in commercial records retrievable and
available for TTB inspection upon request, the following information:
(a) The date and hour of the alternation;
(b) The kind of premises being curtailed, including the plant
identification number, if applicable;
(c) The kind of premises being extended, including the plant
identification number, if applicable;
(d) The identity of the special diagrams in the registration
documents depicting the premises before and after the alternation; and
(e) The purpose of the alternation.

(26 U.S.C. 5555)

Filing Forms and Reports

Sec. 19.631 Submission of transaction forms.

When required to submit a transaction form to the appropriate TTB
officer under this part, the proprietor must submit the form no later
than the close of business of the third business day following the day
on which the transaction took place.

(26 U.S.C. 5207)

Sec. 19.632 Submission of monthly reports.

(a) Each proprietor must submit monthly reports of his distilled
spirits plant operations to TTB in accordance with paragraph (b) of
this section. The proprietor must submit the original reports to TTB
and must retain a copy for his records. The required monthly report
forms are as follows:
(1) Monthly Report of Production Operations, TTB F 5110.40, except
that no report is required when production operations are suspended as
provided in Sec. 19.292;
(2) Monthly Report of Storage Operations, TTB F 5110.11;
(3) Monthly Report of Processing Operation, TTB F 5110.28; and
(4) Monthly Report of Processing (Denaturing) Operations, TTB F
5110.43.
(b) Each proprietor must submit the monthly reports specified in
paragraph (a) of this section to the Director, National Revenue Center,
not later than the 15th day of the month following the close of the
reporting period. A proprietor may submit monthly reports in either
paper format or electronically via TTB Pay.gov.

(26 U.S.C. 5207)

Sec. 19.634 Computer-generated reports and transaction forms.

TTB will accept computer-generated reports of operations and
transaction forms made using a computer printer on plain white paper
without pre-approval from TTB if they conform to the following
standards:
(a) The computer-generated report or form must approximate the
physical layout of the corresponding TTB report or form, although the
typeface may vary;
(b) The text of the computer-generated report or form including
each line entry, must exactly match the official TTB report or form;
and
(c) Each penalty of perjury statement specified for the TTB report
or form must be reproduced in its entirety.

(26 U.S.C. 5207)

Subpart W--Production of Vinegar by the Vaporizing Process

Vinegar Plants in General

Sec. 19.641 Application.

(a) In general. This subpart covers the production of vinegar by
the vaporizing process. It prescribes rules regarding the
qualification, location, construction, and operation of vinegar plants
and the maintenance of records of operations at vinegar plants.
(b) Application of other regulations. As a general rule, the
provisions of subparts A through V and subpart X of this part do not
apply to vinegar plants using the vaporizing process. However, the
following sections do apply to vinegar plants using the vaporizing
process: Sec. 19.1 (definitions); Sec. 19.11 (right of entry and
examination); Sec. 19.12 (furnishing facilities and assistance); Sec.
19.52 (restriction on locations of plants); Sec. 19.55 (other
businesses); Sec. 19.79 (registry of stills); Sec. 19.573 (location
of required records); Sec. 19.574 (availability of records); Sec.
19.575 (retention of records); Sec. 19.576 (preservation of records).

(26 U.S.C. 5501-5505)

Qualification, Construction, and Equipment Requirements for Vinegar
Plants

Sec. 19.643 Qualification requirements.

Before beginning the business of manufacturing vinegar by the
vaporizing process, a person must make written application to the
appropriate TTB officer and receive approval of the application from
TTB. The application must include:
(a) The applicant's name and principal business address (including
the plant address if different from the applicant's principal business
address);
(b) A description of the plant premises;
(c) A description of the operations to be conducted; and
(d) A description of each still, including the name and address of
the owner, the kind of still and its capacity, and the purpose for
which the still was set up.

(26 U.S.C. 5502)

Sec. 19.644 Changes after original qualification.

If there is any change in the information that was provided in an
approved application, the proprietor of the vinegar plant must
immediately notify the appropriate TTB officer in writing of the
change. The notice must identify the change and the effective date of
the change.

(26 U.S.C. 5502)

Sec. 19.645 Notice of permanent discontinuance of business.

If the proprietor of a vinegar plant decides to permanently
discontinue operations, the proprietor must so notify the appropriate
TTB officer in writing. The proprietor must include in the notice a
statement regarding the status of each still.

(26 U.S.C. 5502)

Sec. 19.646 Construction and equipment requirements.

The proprietor of a vinegar plant must construct and equip the
plant to ensure that:
(a) The distilled spirits vapors that are separated by the
vaporizing process from the mash are condensed only by introducing them
into the water or other liquid used in making the vinegar; and
(b) The distilled spirits produced are accurately accounted for and
are secure from unlawful removal from the premises or from unauthorized
use.

(26 U.S.C. 5502)

Rules for Operating Vinegar Plants

Sec. 19.647 Authorized operations.

After approval of an application by TTB, a plant qualified for the
production of vinegar may only:
(a) Produce vinegar by the vaporizing process; and
(b) Produce distilled spirits of 30 degrees of proof or less for
use in the manufacture of vinegar on the vinegar plant premises.

(26 U.S.C. 5501)

[[Page 26293]]

Sec. 19.648 Conduct of operations.

A vinegar manufacturer qualified under this subpart may:
(a) Separate by a vaporizing process the distilled spirits from a
mash; and
(b) Condense the distilled spirits vapors by introducing them into
the water or other liquid to make the vinegar.

(26 U.S.C. 5504)

Sec. 19.649 Restrictions on alcohol content.

No person may remove from the vinegar plant premises vinegar or
other fluid or any other material containing more than 2 percent
alcohol by volume.

(26 U.S.C. 5504)

Required Records for Vinegar Plants

Sec. 19.650 Daily records.

Each manufacturer of vinegar by the vaporizing process must keep
accurate and complete daily records of production operations. It is not
necessary to create records to satisfy this requirement if the records
kept by the manufacturer in the ordinary course of business contain all
required information. The required information consists of the
following:
(a) The kind and quantity of fermenting or distilling materials
received on the premises;
(b) The kind and quantity of materials fermented or mashed;
(c) The proof gallons of distilled spirits produced;
(d) The proof gallons of distilled spirits used in the manufacture
of vinegar;
(e) The wine gallons of vinegar produced; and
(f) The wine gallons of vinegar removed from the premises.

(26 U.S.C. 5504)

Liability for Distilled Spirits Tax

Sec. 19.651 Liability for distilled spirits tax.

The distilled spirits excise tax imposed by 26 U.S.C. 5001 must be
paid on any distilled spirits produced in, or removed from, the
premises of a vinegar plant in violation of law or regulations.

(26 U.S.C. 5505)

Subpart X--Distilled Spirits for Fuel Use

Sec. 19.661 Scope.

This subpart covers the establishment and operation of alcohol fuel
plants.

(26 U.S.C. 5181)

General

Sec. 19.662 Definitions.

As used in this subpart, the following terms have the meanings
indicated.
Alcohol fuel plant. A special type of distilled spirits plant
authorized under 26 U.S.C. 5181 and established under this subpart
solely for producing, processing, and storing, and using or
distributing distilled spirits to be used exclusively for fuel use.
Bonded premises. The premises of an alcohol fuel plant where
distilled spirits are produced, processed, and stored, and used or
distributed as described in the application for alcohol fuel producer
permit. The term includes the premises of small alcohol fuel plants
exempt from bonding requirements under Sec. 19.673(e).
Fuel alcohol. Distilled spirits that have been made unfit for
beverage use at an alcohol fuel plant as provided in this subpart.
Large plant. An alcohol fuel plant that produces (including
receives) more than 500,000 proof gallons of spirits per calendar year.
Make unfit for beverage use. Add materials to distilled spirits
that will preclude their beverage use without impairing their quality
for fuel use as prescribed and authorized by the provisions of this
subpart.
Medium plant. An alcohol fuel plant that produces (including
receives) more than 10,000 but not more than 500,000 proof gallons of
spirits per calendar year.
Permit. The document issued pursuant to 26 U.S.C. 5181 and this
subpart authorizing the person named to engage in business as an
alcohol fuel plant.
Plant. An alcohol fuel plant.
Proprietor. The person qualified under this subpart to operate an
alcohol fuel plant.
Small plant. An alcohol fuel plant that produces (including
receives) not more than 10,000 proof gallons of spirits per calendar
year.
Spirits or distilled spirits. The substance known as ethyl alcohol,
ethanol, or spirits of wine in any form (including all dilutions and
mixtures thereof, from whatever source or by whatever process
produced), but not fuel alcohol unless specifically stated. The term
does not include spirits produced from petroleum, natural gas, or coal.
Transfer in bond. The transfer of spirits between alcohol fuel
plants or between a distilled spirits plant qualified under 26 U.S.C.
5171 and an alcohol fuel plant.

(26 U.S.C. 5181)

Sec. 19.663 Application of other provisions.

The provisions of 26 U.S.C. Chapter 51 and the regulations in
subparts A through W of this part do not apply to alcohol fuel plants
except for the following:
(a) 26 U.S.C. 5181;
(b) The definitions contained in Sec. 19.1, unless the same term
is defined in this subpart;
(c) Any provision incorporated by reference in this subpart;
(d) Any provision requiring the payment of tax; and
(e) Any provision applicable to distilled spirits that deals with
penalty, seizure, or forfeiture.

(26 U.S.C. 5181)

Sec. 19.665 Alternate methods or procedures.

(a) General. The appropriate TTB officer may approve the use of an
alternate method or procedure that varies from the regulatory
requirements in this subpart or from any regulatory requirements in
subparts A through W of this part that have been incorporated by
reference in this subpart. The appropriate TTB officer may approve the
use of an alternate method or procedure only if the proprietor shows
good cause for its use and the alternate method or procedure:
(1) Is not contrary to law;
(2) Will not have the effect of merely waiving an existing
regulatory requirement;
(3) Is consistent with the purpose and effect of the method or
procedure prescribed in this subpart;
(4) Provides equal security to the revenue; and
(5) Will not cause an increase in cost to the Government and will
not hinder TTB's administration of this subpart.
(b) Exceptions. TTB will not authorize the use of an alternate
method or procedure relating to the giving of any bond, or to the
assessment, payment, or collection of tax.

(26 U.S.C. 5181)

Sec. 19.666 Application for and use of an alternate method or
procedure.

(a) Application. If a proprietor wishes to use an alternate method
or procedure as described in Sec. 19.665, the proprietor must submit a
written letterhead application to the appropriate TTB officer for
approval. The application must identify the method or procedure
specified in the regulation, must describe the proposed alternate
method or procedure in detail, and must explain why the alternate
method or procedure is needed.
(b) Approval and use. The proprietor may not use an alternate
method or procedure until the appropriate TTB officer has in writing
approved the proprietor's letterhead application. During the period
that the proprietor is authorized to use the alternate method

[[Page 26294]]

or procedure, the proprietor must comply with any conditions imposed on
its use by TTB. TTB may withdraw the approval to use the alternate
method or procedure if TTB finds that the revenue is jeopardized, that
the alternate method or procedure hinders effective administration of
the laws or regulations, that the proprietor has violated any of the
conditions imposed by TTB, or that the circumstances that gave rise to
the need for the alternate method or procedure no longer exist.
(c) Retention. The proprietor must retain each alternate method or
procedure approval as part of the proprietor's records and must make
the approval available for examination by TTB officers upon request.

(26 U.S.C. 5181)

Sec. 19.667 Emergency variations from requirements.

(a) Application. A proprietor may request emergency approval of the
use of a method or procedure relating to construction, equipment, and
methods of operation that represents a variance from the requirements
of this subpart or from any regulatory requirement in subparts A
through W of this part that have been incorporated by reference in this
subpart. When a proprietor wishes to use an emergency method or
procedure, the proprietor must submit a written letterhead application
to the appropriate TTB officer for approval; the proprietor may send
the application via regular mail, e-mail, or facsimile transmission.
The application must describe the proposed emergency method or
procedure and the emergency situation it will address. For purposes of
this section, an emergency is considered to exist only if it results
from a weather or other natural event or from an accident or other
event not involving an intentional act on the part of the proprietor.
(b) Approval. The appropriate TTB officer may approve in writing
the use of an emergency method or procedure if the proprietor
demonstrates that an emergency exists and the proposed method or
procedure:
(1) Is not contrary to law;
(2) Is necessary to address the emergency situation;
(3) Will afford the same security and protection to the revenue as
intended by the regulations; and
(4) Will not hinder the effective administration of this subpart.
(c) Terms of emergency method or procedure approval and use.
(1) The proprietor may not use an emergency method or procedure
until the application has been approved by TTB except when the
emergency method or procedure requires immediate implementation to
correct a situation that threatens life or property. In a situation
involving a threat to life or property, the proprietor may implement
the corrective action while concurrently notifying the appropriate TTB
officer by telephone of the action and filing the required written
application. Use of the emergency method or procedure must conform to
any conditions specified in the approval.
(2) The proprietor must retain the emergency method or procedure
approval as part of the proprietor's records and must make the approval
available for examination by TTB officers upon request.
(3) The emergency method or procedure will automatically terminate
when the situation that created the emergency no longer exists. TTB may
withdraw the approval to use the emergency method or procedure if TTB
finds that the revenue is jeopardized, that the emergency method or
procedure hinders effective administration of the laws or regulations,
or that the proprietor has failed to follow any of the conditions
specified in the approval. When use of the emergency method or
procedure terminates, the proprietor must revert to full compliance
with all applicable regulations.

(26 U.S.C. 5181)

Liability for Taxes

Sec. 19.669 Distilled spirits taxes.

(a) Proprietors may withdraw distilled spirits free of tax from an
alcohol fuel plant if the spirits are withdrawn exclusively for fuel
use in accordance with this subpart. However, TTB will require payment
of the tax if the spirits are diverted to beverage use or to another
use not authorized by this subpart.
(b) The following provisions of this part apply to distilled
spirits for fuel use:
(1) Imposition of tax liability (Sec. Sec. 19.222, 19.223,
19.225);
(2) Assessment of tax (Sec. Sec. 19.253, 19.254); and
(3) Claims for tax (Sec. Sec. 19.262 and 19.263).

(26 U.S.C. 5001, 5181)

Sec. 19.670 Special (occupational) tax.

(a) General rule. Except during the suspension period described in
Sec. 19.201(b) when special tax stamps are not issued, the proprietor
of an alcohol fuel plant established under this subpart is subject to a
special (occupational) tax as prescribed in subpart H this part and
must hold a separate special tax stamp to cover the alcohol fuel
operations.
(b) Exemption for small plants. The proprietor of a small plant
exempt from bonding requirements under Sec. 19.673(e) is not required
to pay special (occupational) tax. However, once the proprietor's
annual production (including receipts) exceeds 10,000 proof gallons in
any calendar year, the proprietor must pay special tax as provided in
subpart H of this part. The proprietor must pay the special
(occupational) tax for the tax year (July 1-June 30) that starts during
the calendar year in which production (including receipts) exceeds
10,000 proof gallons. The proprietor must pay the tax regardless of
whether an application for change of plant type under Sec. 19.685 has
been filed or approved.
(c) Medium or large plants. If a proprietor operates a medium plant
or a large plant with bona fide production operations at which annual
production (including receipts) is 10,000 proof gallons or less in any
calendar year, the proprietor is exempt from special (occupational) tax
for the tax year (July 1 through June 30) that starts during the
calendar year in which production (including receipts) is 10,000 proof
gallons or less. This exemption applies regardless of whether an
application for change of plant type under Sec. 19.685 has been filed
or approved.

(26 U.S.C. 5081)

Obtaining a Permit

Sec. 19.672 Types of plants.

There are three types of alcohol fuel plants: small plants, medium
plants, and large plants. All alcohol fuel plants are classified
according to the amount of spirits that they will produce and receive
during each calendar year. When applying for a permit, an applicant
should apply for the type of permit that fits the applicant's needs
based on the type of alcohol fuel plant the applicant intends to
operate.

(26 U.S.C. 5181)

Sec. 19.673 Small plant permit applications.

(a) General. Any person wishing to establish a small plant must
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer. Except
as otherwise provided in Sec. 19.674(d), a person may not commence
operations before issuance of the permit.
(b) Application information. The applicant for a small plant permit
must include the following information with the application:

[[Page 26295]]

(1) Name and mailing address of the applicant, and the location of
the plant if not the same as the mailing address;
(2) A diagram of the plant premises;
(3) A statement regarding ownership of the premises. If the
premises are not owned by the applicant, the owner's consent for access
by TTB officers must be furnished;
(4) A description of the stills on the premises and a statement of
the maximum capacity of each;
(5) A description of the materials from which spirits will be
produced; and
(6) A description of the security measures to be used to protect
the premises, buildings, and equipment where spirits are produced,
processed, and stored.
(c) Information already on file. If any of the information required
by this section is already on file with TTB and the information is
accurate and complete, the applicant may advise the appropriate TTB
officer that the information on file is incorporated by reference and
made part of the application, unless the applicant will not conduct
bona fide production operations.
(d) Additional information. When required by the appropriate TTB
officer, the applicant must furnish, as part of the application for a
permit under this section, any additional information required by TTB
to determine whether the application should be approved.
(e) Bonds. The applicant is not required to provide a bond in order
to establish a small plant, unless the applicant will not conduct bona
fide production operations. Plants for the receipt of spirits without
production must furnish a bond in accordance with Sec. 19.699 with a
penal sum as prescribed in Sec. 19.700. The appropriate TTB officer
must approve the bond before issuance of the permit.

(26 U.S.C. 5181)

Sec. 19.674 TTB action on small plant applications.

(a) Notice of receipt. Within 15 days of receipt of an application
for a small plant permit, the appropriate TTB officer will send a
written notice of receipt to the applicant. The notice will include a
statement as to whether the application meets the requirements of Sec.
19.673. If the application does not meet the requirements of Sec.
19.673, the appropriate TTB officer will return the application to the
applicant, and a new 15-day period will commence upon receipt of an
amended or corrected application.
(b) Action on application. Within 45 days from the date that the
appropriate TTB officer sent the applicant a notice of receipt of a
completed application for a small plant permit, the appropriate TTB
officer will either issue the permit or give notice in writing to the
applicant stating in detail the reason that a permit will not be
issued. Denial of an application will not prejudice any later
application for a permit by the same applicant.
(c) Failure to give notice. If the notice of receipt required by
paragraph (a) is not sent, and the applicant has a receipt indicating
that the appropriate TTB officer received the application, the 45-day
period provided for in paragraphs (b) and (d) of this section will
commence on the fifteenth day after the date the appropriate TTB
officer received the application.
(d) Presumption of approval. If, within 45 days from the date of
the notice to the applicant of receipt of a completed application for a
small plant permit, the appropriate TTB officer has not notified the
applicant of issuance of the permit or denial of the application, the
application will be deemed approved and the applicant may proceed as if
a permit had been issued.
(e) Limitation. The provisions of paragraphs (a) and (c) of this
section apply only to the first application submitted for any one small
plant in any calendar quarter and to an amended or corrected first
application.

(26 U.S.C. 5181)

Sec. 19.675 Medium plant permit applications.

(a) General. Any person wishing to establish a medium plant must
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer.
(b) Application information. The applicant for a medium plant
permit must include the following information with the application:
(1) Name and mailing address of the applicant, and the location of
the plant if not the same as the mailing address;
(2) A diagram of the plant premises;
(3) A statement regarding ownership of the premises. If the
premises are not owned by the applicant, the owner's consent for access
by TTB officers must be furnished;
(4) A description of the stills on the premises and a statement of
the maximum capacity of each;
(5) A description of the materials from which spirits will be
produced;
(6) A description of the security measures to be used to protect
the premises, buildings, and equipment where spirits are produced,
processed, and stored;
(7) A statement of the maximum total proof gallons of spirits that
will be produced and received during a calendar year;
(8) Information identifying the principal persons involved in the
business. This identifying information must include the person's name,
address, title, social security number, date of birth, and place of
birth;
(9) A statement indicating whether or not the applicant or any
other person involved in the business has been convicted of a felony or
misdemeanor under Federal or State law. The statement may exclude
convictions for misdemeanor traffic violations; and
(10) A statement of the amount and source of funds invested in the
business.
(c) Bond. The applicant for a medium plant permit must provide a
bond in accordance with Sec. 19.699 with a sufficient penal sum as
prescribed in Sec. 19.700. The applicant must submit the bond on form
TTB F 5110.56, Distilled Spirits Bond, and the appropriate TTB officer
must approve the bond before issuance of the permit.
(d) Information already on file. If any of the information required
by this section is already on file with TTB and the information is
accurate and complete, the applicant may advise the appropriate TTB
officer that the information on file is incorporated by reference and
made part of the application.
(e) Additional information. When required by the appropriate TTB
officer, the applicant must furnish, as part of the application for a
permit under this section, any additional information required by TTB
to determine whether the application should be approved.
(f) Approval of permit. The applicant may not commence operations
before approval of the application and issuance of the medium plant
permit.

(26 U.S.C. 5181)

Sec. 19.676 Large plant permit applications.

(a) General. Any person wishing to establish a large plant must
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer.
(b) Application information. The applicant for a large plant permit
must include the following information with the application:
(1) Name and mailing address of the applicant, and the location of
the plant if not the same as the mailing address;
(2) A diagram of the plant premises;
(3) A statement regarding ownership of the premises. If the
premises are not owned by the applicant, the owner's consent for access
by TTB officers must be furnished;

[[Page 26296]]

(4) A description of the stills on the premises and a statement of
the maximum capacity of each;
(5) A description of the materials from which spirits will be
produced;
(6) A description of the security measures to be used to protect
the premises, buildings, and equipment where spirits are produced,
processed, and stored;
(7) A statement of the maximum total proof gallons of spirits that
will be produced and received during a calendar year;
(8) Information identifying the principal persons involved in the
business. This identifying information must include the person's name,
address, title, social security number, date of birth and place of
birth;
(9) A statement indicating whether or not the applicant or any
other person involved in the business has been convicted of a felony or
misdemeanor under Federal or State law. The statement may exclude
convictions for misdemeanor traffic violations;
(10) A statement of the amount and source of funds invested in the
business; and
(11) A statement identifying the type of business organization and
the persons having an interest in the business. The applicant must
support this statement by providing the information specified in Sec.
19.677.
(c) Bond. The applicant for a large plant permit must provide a
bond in accordance with Sec. 19.699 with a sufficient penal sum as
prescribed in Sec. 19.700. The applicant must submit the bond on form
TTB F 5110.56, Distilled Spirits Bond, and the appropriate TTB officer
must approve the bond before issuance of the permit.
(d) Power of attorney. The applicant for a large plant permit, or
the proprietor of the plant if different from the applicant, must
execute and file with the appropriate TTB officer form TTB F 5000.8,
Power of Attorney, for each person authorized to sign or act on behalf
of the proprietor unless that authority has been furnished elsewhere in
the application.
(e) Information already on file. If any of the information required
by this section is already on file with TTB and the information is
accurate and complete, the applicant may advise the appropriate TTB
officer that the information on file is incorporated by reference and
made part of the application.
(f) Additional information. When required by the appropriate TTB
officer, the applicant must furnish as part of the application for a
permit under this section, any additional information required by TTB
to determine whether the application should be approved.
(g) Approval of permit. The applicant may not commence operations
before approval of the application and issuance of the large plant
permit.

(26 U.S.C. 5181)

Sec. 19.677 Large plant applications--organizational documents.

In addition to the information required by Sec. 19.676, any person
who wants to establish a large plant must provide with the application
the documents and other information specified in paragraphs (a) through
(d) of this section, as applicable, and must make those and related
documents available for inspection by TTB as provided in paragraph (e)
of this section.
(a) Corporate documents. If the applicant is a corporation, the
applicant must provide the following:
(1) The corporate charter or a certificate of corporate existence
or incorporation;
(2) A list of officers and directors with their names and
addresses, other than officers and directors who will have no
responsibilities in connection with the operation of the alcohol fuel
plant;
(3) Certified minutes or extracts of board of directors meetings,
showing those individuals authorized to sign for the corporation;
(4) A statement showing the number of shares of each class of stock
or other basis of ownership, authorized and outstanding, and the voting
rights of the respective owners or holders; and
(5) A list of the offices or positions, the incumbents of which are
authorized by the articles of incorporation or the board of directors
to act on behalf of the proprietor or to sign the proprietor's name.
(b) Partnership documents. If the applicant is a partnership, the
applicant must provide a copy of the articles of partnership or
association, or certificate of partnership or association if required
to be filed by any State, county, or municipality.
(c) Limited liability company/limited liability partnership
documents. If the applicant is a limited liability company or limited
liability partnership or other entity recognized by law as a person,
the applicant must provide a copy of the articles of organization, the
operating agreement and the names and addresses of all members and
managers.
(d) Statement of interest.
(1) The application must include the names and addresses of the 10
persons that have the largest stock ownership, by stock class, or other
interest in the corporation, limited liability company/limited
liability partnership, or other legal entity, and the nature and amount
of the stock or other interest of each, whether the interest is
recorded in the name of the interested party or in the name of another
for the interested party. If a corporation is wholly owned or
controlled by another corporation, the appropriate TTB officer may
request that the applicant furnish the same information for persons of
the parent corporation.
(2) In the case of an individual owner or a partnership, the
application must include the name and address of each person interested
in the large plant, whether the interest is recorded in the name of the
interested party or in the name of another for the interested party.
(e) Availability of documents. An applicant must make available to
any appropriate TTB officer upon request all originals of documents
submitted under this section and any additional related organizational
documents such as articles of incorporation, by-laws, operating
agreements and State certifications.

(26 U.S.C. 5181, 5271)

Sec. 19.678 Criteria for issuance of permit.

As a general rule, the appropriate TTB officer will issue an
alcohol fuel plant permit to any person who completes the required
application for a permit and, when required, furnishes a bond. However,
the appropriate TTB officer may begin proceedings to deny an
application for a permit, in accordance with part 71 of this chapter,
if the appropriate TTB officer determines that
(a) The applicant (including, in the case of a corporation, any
officer, director, or principal stockholder, and, in the case of a
partnership, a partner) is, by reason of business experience, financial
standing, or trade connections, not likely to maintain operations in
compliance with 26 U.S.C. Chapter 51, or the regulations issued
thereunder;
(b) The applicant failed to disclose any material information
required with the application, or has made any false statement as to
any material fact in connection with the application; or
(c) The premises where the applicant proposes to conduct the
operations are not adequate to protect the revenue.

(26 U.S.C. 5181, 5271)

Sec. 19.679 Duration of permit.

The proprietor of an alcohol fuel plant may conduct the operations
authorized by the permit on a continuing basis unless:
(a) The proprietor voluntarily surrenders the permit;
(b) TTB suspends or revokes the permit pursuant to Sec. 19.697; or

[[Page 26297]]

(26 U.S.C. 5181)

Sec. 19.680 Registration of stills.

The description of stills provided with the application for an
alcohol fuel plant permit under this subpart will fulfill the
requirement to register a still under Sec. 29.55 of this chapter.

(26 U.S.C. 5179, 5181)

Changes to Permit Information

Sec. 19.683 Changes affecting permit applications.

(a) General. If there is a change relating to any of the
information contained in, or considered a part of, the application on
form TTB F 5110.74, Application and Permit for an Alcohol Fuel Producer
Under 26 U.S.C. 5181, the proprietor must amend the information
previously submitted within 30 days of the change unless another time
period is specified in this subpart.
(b) Amended TTB F 5110.74. Except when a letterhead application or
letterhead notice procedure is followed under this subpart, the
proprietor must submit an amended application to the appropriate TTB
officer on form TTB F 5110.74 within 30 days of a change referred to in
paragraph (a) of this section if the change affects the terms and
conditions of the permit.
(c) Letterhead applications. For the changes specified in
Sec. Sec. 19.685(c), 19.686, and 19.690 of this subpart, the
proprietor may submit a letterhead application to the appropriate TTB
officer for a change instead of filing an amended form TTB F 5110.74. A
letterhead application must be on letterhead signed by an authorized
representative of the permit holder. The letterhead application must
identify the alcohol fuel plant to which the application applies. The
letterhead application change is subject to TTB approval. The
appropriate TTB officer may, at any time, require that the proprietor
submit an amended application on form TTB F 5110.74 if administrative
difficulties occur as a result of the letterhead application.
(d) Letterhead Notices. For the changes specified in Sec. Sec.
19.687 and 19.695 of this subpart only a letterhead notice to the
appropriate TTB officer is required. A letterhead notice must be on
letterhead signed by an authorized representative of the permit holder.
A letterhead notice does not require approval action by TTB. The
appropriate TTB officer may, at any time, require that the proprietor
submit an amended application on form TTB F 5110.741 if administrative
difficulties occur as a result of the letterhead notice.

(26 U.S.C. 5172, 5271, 5181)

Sec. 19.684 Automatic termination of permits.

(a) Permits not transferable. An alcohol fuel plant permit is not
transferable and, except as otherwise provided in paragraph (b) of this
section, will automatically terminate if:
(1) The operations that are authorized by the permit are leased,
sold, or transferred to another person; or
(2) The permit holder is dissolved on a date certain or upon an
event specified by the laws of the State where the permit holder
operates.
(b) Corporations. In the case of a corporation holding a permit
under this subpart, if actual or legal control of that corporation
changes, directly or indirectly, whether by reason of change in stock
ownership or control (in the permittee corporation or in any other
corporation), by operation of law, or in any other manner, the permit
may remain in effect until the expiration of 30 days after the change,
whereupon the permit will automatically terminate. However, if
operations are to be continued after the change in control, and an
application for a new permit is filed within 30 days of the change, the
outstanding permit may remain in effect until final action is taken on
the new application. When final action is taken on the application, the
outstanding permit will automatically terminate.

(26 U.S.C. 5181, 5271)

Sec. 19.685 Change in type of alcohol fuel plant.

(a) Small plants. If the proprietor of a small plant intends to
increase production (including receipts) to more than 10,000 proof
gallons of spirits per calendar year, the proprietor must first obtain
an amended permit by filing an application for a medium plant or a
large plant, as appropriate, under Sec. 19.675 or Sec. 19.676. If any
of the required information is already on file with TTB, that
information may be incorporated by reference in the new application.
The proprietor must also provide a new or strengthening bond in
accordance with Sec. Sec. 19.699 and 19.700.
(b) Medium plants. If the proprietor of a medium plant intends to
increase production (including receipts) to more than 500,000 proof
gallons of spirits per calendar year, the proprietor must first obtain
an amended permit by filing an application for a large plant under
Sec. 19.676. If any of the required information is already on file
with TTB, that information may be incorporated by reference in the new
application. If the penal sum of the proprietor's current bond is below
the amount specified for the new production level, the proprietor must
obtain a new or strengthening bond in accordance with Sec. 19.700.
(c) Curtailment of activities. A proprietor of a medium or large
plant who curtails operations to a level whereby the proprietor is
eligible to requalify as a small or medium plant may so qualify by
submitting a letterhead application to the appropriate TTB officer for
approval. If the appropriate TTB officer approves the application, the
proprietor automatically will be relieved of those regulatory
requirements that apply only to the superseded qualification. In
addition, in the case of a change to small plant status, the proprietor
may be allowed to terminate the bond in accordance with the procedure
set forth in Sec. 19.170 of this part.

(26 U.S.C. 5271, 5181)

Sec. 19.686 Change in name of proprietor.

When there is a change the name of the individual, firm,
corporation, or other entity holding the permit, the proprietor must
file an application to amend the permit on form TTB F 5110.74,
Application and Permit for an Alcohol Fuel Producer Under 26 U.S.C.
5181, or file a letterhead application to amend the permit within 30
days of the change. The proprietor is not required to file a new bond
or consent of surety in this case.

(26 U.S.C. 5172, 5271, 5181)

Sec. 19.687 Changes in officers, directors, members, managers, or
principal persons.

If there is a change in the list of officers, directors, members,
managers, or other principal persons furnished under the provisions of
Sec. Sec. 19.675, 19.676, or Sec. 19.677, the proprietor must submit
a letterhead notice to the appropriate TTB officer within 30 days of
the change. The letterhead notice must identify each change and must
include the following identifying information for each new officer,
director, member, manager, or other principal person: Name, address,
title, social security number, date of birth, and place of birth.

(26 U.S.C. 5181)

Sec. 19.688 Change in proprietorship.

(a) General. If there is a change in proprietorship at an alcohol
fuel plant, the following requirements apply to the outgoing proprietor
and to the new, incoming proprietor:
(1) The outgoing proprietor must comply with the notice
requirements of Sec. 19.695; and

[[Page 26298]]

(2) The incoming successor proprietors must--
(i) File and obtain a permit on form TTB F 5110.74, Application and
Permit for an Alcohol Fuel Producer Under 26 U.S.C. 5181; and
(ii) File the required bond, if any.
(b) Fiduciary responsibilities. A successor to the proprietorship
of an alcohol fuel plant who is an administrator, executor, receiver,
trustee, assignee, or other fiduciary must comply with paragraph (a)(2)
of this section. In addition, the following rules apply to a successor
who is a fiduciary:
(1) The successor may furnish a consent of surety to extend the
terms of the outgoing proprietor's bond instead of filing a new bond;
(2) The successor may incorporate by reference in the application
on form TTB F 5110.74 any information that is still valid and that was
contained in the application filed by the outgoing proprietor;
(3) The successor must furnish a certified copy of the order of the
court or other pertinent document appointing the successor as a
fiduciary; and
(4) The effective dates of the qualifying documents filed will be
the date of the court order, the date specified in the court order for
assuming control or the date control is assumed if the fiduciary was
not appointed by a court.

(26 U.S.C. 5172)

Sec. 19.689 Continuing partnerships.

(a) If there is a death or insolvency of a partner in the business
that holds a permit under this subpart, the surviving partner or
partners may continue to operate under the permit if:
(1) The partnership is not immediately terminated under the laws of
the particular state but continues until the winding up of the
partnership affairs is complete;
(2) The surviving partner or partners have the exclusive right to
control and possession of the partnership assets for purpose of
liquidation and settlement; and
(3) In the case of a plant required to file a bond, a consent of
surety is filed under which the surety and the surviving partner or
partners agree to remain liable on the bond.
(b) If the surviving partner or partners acquire the business upon
settlement of the partnership, the surviving partner or partners must
file an application in their own name and receive a permit in
accordance with Sec. 19.688(a).

(26 U.S.C. 5172, 5181)

Sec. 19.690 Change in location.

If there is a change in the location of the alcohol fuel plant or
of the area included within the plant premises, the proprietor must:
(a) File an application to amend the permit on form TTB F 5110.74,
Application and Permit for an Alcohol Fuel Producer Under 26 U.S.C.
5181, or a letterhead application to amend the permit;
(b) File a new bond on form TTB F 5110.56 or a consent of surety on
form TTB F 5000.18 if a bond is required; and
(c) Not begin operations at the new location prior to approval of
the amended application and issuance of the amended permit.

(26 U.S.C. 5172, 5173, 5181, 5271)

Alternating Proprietorship

Sec. 19.692 Qualifying for alternating proprietorship.

(a) General. A proprietor may alternate use of an alcohol fuel
plant or part of an alcohol fuel plant with one or more proprietors
qualified under this subpart. In order to do so, each proprietor must
file and receive approval of the applications and bonds required by
this subpart. Each proprietor must also conduct operations and keep
records in accordance with this subpart. Where operations by
alternating proprietors will be limited to part of an alcohol fuel
plant, that part must be suitable for qualification as a separate
alcohol fuel plant.
(b) Qualifying documents. Each person desiring to operate an
alcohol fuel plant as an alternating proprietor must file the following
with the appropriate TTB officer:
(1) An application on form TTB F 5110.74, Application and Permit
for an Alcohol Fuel Producer Under 26 U.S.C. 5181, to cover the
proposed alternation;
(2) A diagram of the premises, in duplicate, showing the
arrangement for the alternation of the premises. Where operations by
alternating proprietors are limited to parts of an alcohol fuel plant,
a diagram designating the parts that are to be alternated must be
submitted. A diagram must be submitted for each arrangement under which
the premises will be operated. The diagram must be in sufficient detail
to establish the boundaries of the alcohol fuel plant or any part of it
that will be involved in the alternation;
(3) Evidence of an existing operations bond (if any), consent of
surety, or new operations bond to cover the proposed alternation of
premises; and
(4) Any additional information required by the appropriate TTB
officer.

(26 U.S.C. 5171, 5181, 5271)

Sec. 19.693 Operating requirements for alternating proprietorships.

(a) Alternation journal. Once the applications submitted under
Sec. 19.692 have been approved by the appropriate TTB officer, the
alcohol fuel plant, or parts of the alcohol fuel plant, may be
alternated. The outgoing and incoming proprietor must make entries in
an alternation journal when the alcohol fuel plant, or parts of it are
alternated. The outgoing and incoming proprietor must enter the
following information in the alternation journal:
(1) Name or trade name of the proprietor;
(2) Alcohol fuel plant permit number;
(3) Date and time of alternation;
(4) Quantity of spirits transferred in proof gallons.
(b) Commencement of operations. Except for spirits transferred to
the incoming proprietor, the outgoing proprietor must remove all
spirits from areas, rooms, or buildings to be alternated, prior to the
effective date and time shown in the alternation journal. Fuel alcohol
may be transferred to the incoming proprietor or may be retained by the
outgoing proprietor in areas, rooms, or buildings to be alternated when
the areas, rooms, or buildings are secured with locks, the keys to
which are in the custody of the outgoing proprietor. Whenever operation
of the areas, rooms, or buildings is to be resumed by a proprietor
following suspension of operations by an alternating proprietor, the
outgoing proprietor (except the proprietor of a small plant not
required to file a bond) must furnish a consent of surety on form TTB F
5000.18 to continue in effect the operations bond covering his
operations. The proprietor must do this prior to alternating the
premises.
(c) Records. Each alternating proprietor must maintain separate
records and submit separate reports in accordance with Sec. 19.720.
Entries in each proprietor's records must be in accordance with
Sec. Sec. 19.714 through 19.718 of this subpart. The following
requirements also apply:
(1) Each alternating proprietor must show all transfers of spirits
in the records;
(2) The outgoing proprietor must show in his production and
disposition records the quantity of spirits and fuel alcohol
transferred to the incoming proprietor;
(3) The incoming proprietor must show in his receipt record the
quantity of spirits received by transfer;
(4) Each proprietor must include spirits transferred in the
determinations

[[Page 26299]]

of alcohol fuel plant size and bond amounts; and
(5) The provisions of Sec. 19.685 regarding change of alcohol fuel
plant type apply to each proprietor.

(26 U.S.C. 5171, 5181, 5271)

Discontinuance of Business and Permit Suspension or Revocation

Sec. 19.695 Notice of permanent discontinuance.

When a proprietor permanently discontinues operations as an alcohol
fuel plant, the proprietor must file a letterhead notice with the
appropriate TTB officer along with the following:
(a) The original copy of the alcohol fuel plant permit and the
proprietor's request that the permit be cancelled;
(b) A written statement disclosing whether or not all spirits,
including fuel alcohol, have been lawfully disposed of, and whether or
not there are any spirits in transit to the premises; and
(c) A report on form TTB 5110.75, Alcohol Fuel Plant Report
covering the discontinued operations, with the report marked, ``Final
Report.''

(26 U.S.C. 5172, 5181, 5271)

Sec. 19.697 Permit suspension or revocation.

TTB may begin proceedings to revoke or suspend an alcohol fuel
plant permit in accordance with the procedures in part 71 of this
chapter if the appropriate TTB officer has a reason to believe that a
person holding a permit:
(a) Has not in good faith complied with the provisions of 26 U.S.C.
Chapter 51 or the regulations issued thereunder;
(b) Has violated the conditions of the permit;
(c) Has made any false statement as to any material fact in the
application for the permit;
(d) Has failed to disclose any material information required to be
furnished under this part;
(e) Has violated or conspired to violate any law of the United
States relating to intoxicating liquor;
(f) Has been convicted of any offense under Title 26, U.S.C.,
punishable as a felony or of any conspiracy to commit such offense; or
(g) Has not engaged in any of the operations authorized by the
permit for a period of more than 2 years.

(26 U.S.C. 5271)

Bonds

Sec. 19.699 General bond requirements.

(a) Operations bond. Any person who plans to establish a large
plant, a medium plant, or a small plant without production operations
must provide an operations bond on form TTB F 5110.56, Distilled
Spirits Bond, in duplicate, with the original permit application. If a
proprietor fails to fails to pay any liability covered by the bond, TTB
may seek payment from the proprietor, from the surety on the bond, or
from both the proprietor and the surety. Additional provisions
applicable to bonds for alcohol fuel plants are found in subpart F of
this part Sec. Sec. 19.155 through 19.157 and Sec. Sec. 19.167
through 19.173.
(b) Corporate surety. A company that issues bonds is called a
``corporate surety.'' Proprietors must obtain the surety bonds required
by this subpart from a corporate surety approved by the Secretary of
the Treasury. The Department of the Treasury publishes a list of
approved corporate sureties in Treasury Department Circular No. 570,
``Companies Holding Certificates of Authority as Acceptable Sureties on
Federal Bonds and as Acceptable Reinsuring Companies.'' Circular No.
570 is published annually in the Federal Register. The most current
edition of the circular is posted at the website of the Financial
Management Service, Department of the Treasury, at http://www.fms.treas.gov/c570. Printed copies of Circular No. 570 are
available for purchase from the Government Printing Office.
(c) Alternative to a corporate surety. A proprietor may also
guarantee payment under a bond without using a corporate surety, by
filing a bond that guarantees payment of the liability by pledging and
depositing one or more acceptable negotiable securities having a par
value (face amount) equal to or greater than the penal sums of the
required bonds. Should the proprietor fail to pay one or more of the
guaranteed liabilities, TTB may take action to sell the deposited
securities to satisfy the debt. Pledged securities will be released to
the proprietor if there are no outstanding liabilities when the bond is
terminated; the provisions of Sec. 19.173 apply to the release of
pledged securities under this subpart. A list of securities acceptable
as collateral in lieu of surety bonds is available from the Bureau of
the Public Debt, Office of the Commissioner, Government Securities
Regulations Staff. Current information and guidance from the Bureau of
the Public Debt Web site may be found at http://www.publicdebt.treas.gov.

(31 U.S.C. 9301, 9303, 9304, 9306)

(26 U.S.C. 5173, 5181)

Sec. 19.700 Amount of bond.

A proprietor must determine the penal sum of the bond based on the
total quantity of distilled spirits that will be produced and received
during a calendar year. The method for computing required bond amounts
is as follows:
(a) Small plants without production operations. A proprietor who
operates a small plant that receives not more than 10,00 proof gallons
of spirits per year and does not conduct bona fide production
operations must provide a bond with a penal sum of $1,000.
(b) Medium plants. A proprietor who operates a medium plant that
produces and receives more than 10,000 but not more than 20,000 proof
gallons of spirits per year must provide a bond with a penal sum of at
least $2,000.00. The proprietor must increase the penal sum of the bond
by $1,000 for each additional 10,000 gallons, or fraction of 10,000
gallons, that he will produce and receive over 20,000 gallons. The
maximum bond for a medium plant is $50,000.00, representing the penal
sum applicable to 500,000 proof gallons. The following table provides
examples of required minimum bond amounts:

Annual Production and Receipts in Proof Gallons
------------------------------------------------------------------------
More than But not over Amount of bond
------------------------------------------------------------------------
10,000.................................. 20,000 $2,000
20,000.................................. 30,000 3,000
90,000.................................. 100,000 10,000
190,000................................. 200,000 20,000
490,000................................. 500,000 50,000
------------------------------------------------------------------------

[[Page 26300]]

(c) Large Plants. A proprietor who operates a large plant that
produces and receives more than 500,000 but not more than 510,000 proof
gallons of spirits per year must provide a bond with a penal sum of at
least $52,000.00. The proprietor must increase the penal sum of the
bond by $2,000 for each additional 10,000 gallons, or fraction of
10,000 gallons, that he will produce and receive over 510,000 gallons.
The maximum bond for a large plant is $200,000,00. The following table
provides examples of required minimum bond amounts:

Annual Production and Receipts in Proof Gallons
------------------------------------------------------------------------
More than But not over Amount of bond
------------------------------------------------------------------------
500,000................................. 510,000 $52,000
510,000................................. 520,000 54,000
740,000................................. 750,000 100,000
990,000................................. 1,000,000 150,000
1,240,000............................... .............. 200,000
------------------------------------------------------------------------

(d) New or strengthening bonds. A proprietor must obtain a new bond
or a strengthening bond in accordance with Sec. 19.167 if the level of
production and receipts at the alcohol fuel plant increases so that the
current bond no longer reflects the required minimum penal sum.

(26 U.S.C. 5173, 5181)

Requirements for Construction, Equipment, and Security

Sec. 19.703 Construction and equipment.

A proprietor must construct and arrange the buildings and
enclosures where distilled spirits will be produced, processed, or
stored so as to ensure adequate security and deter the diversion of
spirits. Distilling equipment must be constructed to prevent
unauthorized removal of spirits, from the point where distilled spirits
come into existence until production is complete and the quantity of
spirits has been determined. A proprietor also must equip tanks and
other vessels so that they may be locked and must provide a method for
determining the quantity of spirits in each vessel.

(26 U.S.C. 5178)

Sec. 19.704 Security.

(a) General. The proprietor of an alcohol fuel plant must provide
adequate security measures at the alcohol fuel plant in order to
protect against the unauthorized removal of spirits.
(b) Storage. The proprietor must store spirits in a building or a
storage tank, or within an enclosure, that will be kept locked when
operations are not being conducted.
(c) Additional security. The appropriate TTB officer may require
additional security measures for the premises if the alcohol fuel
plant's security is found to be inadequate. The additional measures
required may depend upon past security problems experienced at the
alcohol fuel plant, the volume of alcohol produced, the risk to tax
revenue, and any safety requirements. Additional security measures may
include, but are not limited to:
(1) A fence around the alcohol fuel plant;
(2) Flood lights;
(3) A security or alarm system;
(4) A guard service; or
(5) Locked or barred windows.

(26 U.S.C. 5178, 5202)

TTB Rights and Authorities

Sec. 19.706 Supervision of operations.

TTB may assign appropriate TTB officers to supervise operations at
an alcohol fuel plant at any time. Appropriate TTB officers may
exercise certain rights and authorities at an alcohol fuel plant. Those
rights and authorities are set forth in the following provisions of
this part: Sec. 19.11 (right of entry and examination); Sec. 19.12
(furnishing facilities and assistance); Sec. 19.13 (assignment of
officers and supervision of operations); Sec. 19.17 (detention of
containers); Sec. 19.18 (samples for the United States); and Sec.
19.282 (general requirements for gauging and measuring equipment).

(26 U.S.C. 5006, 5201, 5202, 5203, 5204, 5207, 5213, 5555)

Accounting for Spirits

Sec. 19.709 Gauging.

(a) Gauging equipment and methods. A proprietor of an alcohol fuel
plant must perform periodic gauges of the distilled spirits and fuel
alcohol at the alcohol fuel plant. The procedures for the gauging of
spirits set forth in part 30 of this chapter also apply under this
subpart. In addition, the following rules for the gauging of distilled
spirits and fuel alcohol under this subpart also apply:
(1) The proprietor must determine the proof of spirits by using a
glass cylinder, hydrometer, and thermometer;
(2) The proprietor must ensure that hydrometers, thermometers, and
other equipment used to determine proof, volume, or weight are
accurate;
(3) The proprietor may determine the quantity of spirits or fuel
alcohol either by volume or weight;
(4) To determine quantity by volume, the proprietor may use a tank
or receptacle with a calibrated sight glass installed, a calibrated
dipstick, conversion charts, an accurate mass flow meter, or other
devices approved by the appropriate TTB officer;
(5) Unless the proprietor chooses to do so, the proprietor is not
required to determine the proof of fuel alcohol manufactured, on hand,
or removed; and
(6) The proprietor may account for fuel alcohol in wine gallons;
(b) Verification by TTB. TTB officers may at any time verify the
accuracy of the gauging equipment used.
(c) When gauges are required. A proprietor must gauge spirits and
record the results in the records required by Sec. 19.718, at the
following times:
(1) Upon completing the production of distilled spirits;
(2) On the receipt of spirits at the plant;
(3) Prior to the addition of materials to render the spirits unfit
for beverage use;
(4) Before withdrawal from plant premises or other disposition of
spirits (including fuel alcohol); and
(5) When spirits are inventoried.

(26 U.S.C. 5201, 5204)

Sec. 19.710 Inventory of spirits.

A proprietor of an alcohol fuel plant must take a physical
inventory of all spirits and fuel alcohol on the bonded premises at the
end of each calendar year. The proprietor must record the results of
this physical inventory in the records required by Sec. 19.718.

(26 U.S.C. 5201)

[[Page 26301]]

Recordkeeping

Sec. 19.714 General requirements for records.

A proprietor of an alcohol fuel plant must maintain records that
accurately reflect the operations and transactions at the alcohol fuel
plant. The records must contain sufficient information that will allow
appropriate TTB officers to determine the quantities of spirits
produced, received, stored, or processed and to verify that all spirits
have been used or otherwise lawfully disposed of.

(26 U.S.C. 5207)

Sec. 19.715 Format of records.

(a) Proprietors of alcohol fuel plants are not required under this
subpart to keep their records in any particular format or media. A
proprietor may keep required records on paper, microfilm or microfiche,
diskette or other electronic medium. However, the records that a
proprietor maintains must be readily retrievable in, or convertible to,
hard-copy format for review by TTB officers as necessary.
(b) Required records may consist of commercial documents maintained
in the ordinary course of business, rather than records prepared
expressly to meet the requirements of this subpart, if those documents:
(1) Contain all of the information required by this subpart;
(2) Reflect general standards of clarity and accuracy; and
(3) Can be readily understood by TTB personnel.
(c) Where the format or arrangement of the record is such that the
information is not readily understandable, the appropriate TTB officer
may require the proprietor to present the information in a format or
arrangement that will facilitate the review of the information.

(26 U.S.C. 5207)

Sec. 19.716 Maintenance and retention of records.

(a) A proprietor of an alcohol fuel plant may keep the records
required by this subpart at the alcohol fuel plant where operations or
transactions occur, or at a central recordkeeping location maintained
by the proprietor. If the proprietor keeps the required records at any
location other than the alcohol fuel plant where operations or
transactions occur, the proprietor must notify the appropriate TTB
officer of the location where the records are kept. The proprietor must
make those records available at the alcohol fuel plant premises to
which they relate during normal business hours for the purpose of a TTB
audit or inspection. The proprietor must produce those records at that
location within two days of notice by the appropriate TTB officer.
(b) A proprietor of an alcohol fuel plant must maintain any records
required by this subpart for a period of not less than three years from
the date of creation of the record or the date of the last entry
required to be made in the record, whichever is later.
(c) A proprietor of an alcohol fuel plant may be required to
reproduce records in order to maintain their readability and
availability for inspection. Whenever any record might become
unreadable or otherwise unsuitable for its intended or continued use,
the proprietor is responsible for reproducing the record by a process
that accurately and legibly reproduces the original record.
(d) For records kept on electronic media, the provisions of Sec.
19.574 apply.

(26 U.S.C. 5207)

Sec. 19.717 Time for making entries in records.

A proprietor of an alcohol fuel plant must record entries required
by this subpart in the proprietor's records on a daily basis, as the
transaction or operation occurs, but not later than the close of the
next business day after the occurrence of the transaction or operation.
However, if a proprietor prepares supplemental or auxiliary records
when an operation or transaction occurs and those records contain all
of the information required under this subpart, the proprietor may make
entries in the required records not later than the close of business on
the third business day following the day on which the transaction or
operation occurred.

(26 U.S.C. 5207)

Sec. 19.718 Required records.

A proprietor of an alcohol fuel plant must maintain records that
accurately reflect the operations and transactions occurring at the
plant. These records must include production, receipt, manufacture, and
disposition records.
(a) Production, receipt, manufacture records. The proprietor must
maintain records of all production, receipts, and manufacture at the
alcohol fuel plant. This includes records of:
(1) The quantity and proof of spirits produced;
(2) The kind and quantity of materials used to produce spirits, if
the proprietor is a medium plant or large plant;
(3) The proof gallons of spirits on-hand;
(4) The proof gallons of spirits received. The proprietor may use a
copy of the consignor's invoice or other document received with the
shipment if the proprietor records the date of receipt and quantity
received;
(5) The quantities and types of materials added to each lot of
spirits to render the spirits unfit for beverage use; and
(6) The quantity of fuel alcohol manufactured. Fuel alcohol may be
recorded in wine gallons.
(b) Disposition records. The proprietor must maintain records of
all dispositions of spirits and fuel alcohol removed from the alcohol
fuel plant. Records for dispositions of fuel alcohol and spirits must
be maintained separately. Required records include:
(1) The amount of fuel alcohol removed. The commercial record or
other document required by Sec. 19.729 will constitute the required
record;
(2) The amount of spirits transferred. For all spirits transferred
to another qualified distilled spirits plant or alcohol fuel plant the
proprietor must maintain the commercial invoice or other documentation
required by Sec. 19.405 and Sec. 19.734;
(3) Record of other dispositions. If the proprietor has other
dispositions of spirits or fuel alcohol such as losses, destruction or
redistillation, the proprietor must keep a record of those
dispositions. The record must include the quantity of spirits (in proof
gallons) or fuel alcohol (in wine gallons), the date of disposition,
and the purpose for which used or the nature of any other disposition;
(4) Testing records. If the proprietor conducts testing and
analysis of samples of spirits or fuel alcohol in accordance with Sec.
19.749, the proprietor must keep a record of the date of the testing
and the amount of spirits (in proof gallons) or fuel alcohol (in wine
gallons) tested.

(26 U.S.C. 5181, 5207)

Sec. 19.719 Spirits made unfit for beverage use in the production
process.

If an alcohol fuel plant makes spirits unfit for beverage use
before the spirits are removed from the production process, for example
by the in-line addition of materials or by the addition of materials to
receptacles where spirits are first deposited, the proprietor must
determine the quantity and proof of the spirits produced for purposes
of the production records by:
(a) Determining the proof of each lot of spirits by procuring a
representative sample of each lot, prior to the addition of any
materials for rendering the spirits unfit for beverage use, and then
proofing the spirits; and
(b) Determining the quantity (proof gallons) of spirits produced by
subtracting the quantity of materials added to render the spirits unfit
for

[[Page 26302]]

beverage use from the quantity of fuel alcohol (in gallons) produced
and multiplying the resulting figure by the proof of the spirits
divided by 100.

(26 U.S.C. 5181, 5207)

Reports

Sec. 19.720 Reports.

Each proprietor of an alcohol fuel plant must submit to the
appropriate TTB officer an annual report of operations on form TTB F
5110.75, Alcohol Fuel Plant Report, for each calendar year. The
proprietor must submit this report by January 30 following the end of
the calendar year.

(26 U.S.C. 5207)

Redistillation

Sec. 19.722 General rules for redistillation of spirits or fuel
alcohol.

The proprietor of an alcohol fuel plant may receive and redistill
spirits. The proprietor may also receive fuel alcohol for
redistillation and recovery of the spirits contained in the fuel
alcohol. The following general rules apply to redistillation activities
at an alcohol fuel plant:
(a) The proprietor must separately identify in the required records
any spirits and fuel alcohol received for redistillation;
(b) The proprietor must keep all spirits and fuel alcohol received
for redistillation physically separate from each other and from other
spirits and fuel alcohol until they are redistilled;
(c) Spirits recovered by redistillation will be treated the same as
spirits that have not been redistilled; and
(d) All provisions of this subpart and 26 U.S.C. Chapter 51,
including provisions regarding liability for tax applicable to spirits
when originally produced, apply to spirits recovered by distillation.

(26 U.S.C. 5181)

Sec. 19.723 Effect of redistillation on plant size and bond amount.

The redistillation of spirits at an alcohol fuel plant may affect
the alcohol fuel plant size category and the resulting bond penal sum
amount. The following rules apply in this regard:
(a) Spirits originally produced by the alcohol fuel plant and
subsequently recovered by redistillation are not includable in the
determination of plant size and bond amount; and
(b) Spirits originally produced elsewhere and subsequently
recovered by redistillation at the alcohol fuel plant are includable in
the determination of plant size and bond amount.

(26 U.S.C. 5181)

Sec. 19.724 Records of redistillation.

(a) Except as otherwise provided in paragraph (b) of this section,
a proprietor must record in a separate record the following information
for spirits and fuel alcohol received at the alcohol fuel plant for
redistillation:
(1) Date of receipt;
(2) Identification as spirits or fuel alcohol;
(3) Quantity received;
(4) From whom received;
(5) Reason for redistillation;
(6) Date redistilled; and
(7) The quantity of spirits recovered by redistillation.
(b) A proprietor may use a document required by Sec. 19.729 or
Sec. 19.734 or any other commercial record covering spirits or fuel
alcohol received in lieu of the record required by paragraph (a) of
this section, provided that it contains all of the information required
by paragraph (a) of this section, including any such information added
to it by the proprietor.

(26 U.S.C. 5181, 5223)

Rules for Use, Withdrawal, and Transfer of Spirits

Sec. 19.726 Prohibited uses, transfers, and withdrawals.

No person may withdraw, use, sell or otherwise dispose of distilled
spirits, including fuel alcohol, produced under this subpart for any
purpose other than for fuel use. The law imposes criminal penalties on
any person who withdraws, uses, sells or otherwise disposes of
distilled spirits, including fuel alcohol, produced under this subpart
for other than fuel use.

(26 U.S.C. 5181, 5601)

Sec. 19.727 Use on premises.

A proprietor may use spirits as a fuel on the premises of the
alcohol fuel plant where they were produced without having to make them
unfit for beverage use. A proprietor using spirits in this way must
keep the applicable records concerning such use as provided in Sec.
19.718(b)(3).

(26 U.S.C. 5181)

Sec. 19.728 Withdrawal of spirits.

Before withdrawal of spirits from the premises of an alcohol fuel
plant, the proprietor must render the spirits unfit for beverage use as
provided in this subpart. Spirits rendered unfit for beverage use may
be withdrawn free of tax from the alcohol fuel plant premises if they
will be used exclusively for fuel.

(26 U.S.C. 5181, 5214)

Sec. 19.729 Withdrawal of fuel alcohol.

(a) For each shipment or other removal of fuel alcohol from the
alcohol fuel plant premises, the consignor proprietor must prepare a
commercial invoice, sales slip, or similar document that shows:
(1) The date of the withdrawal;
(2) The quantity of fuel alcohol removed;
(3) A description of the shipment that includes the number and size
of containers, tank trucks, etc.; and
(4) The name and address of the consignee.
(b) The consignor proprietor must retain in its records a copy of
the document described in paragraph (a) of this section.

(26 U.S.C. 5181)

Transfer of Spirits Between Alcohol Fuel Plants

Sec. 19.733 Authorized transfers between alcohol fuel plants.

A proprietor may remove spirits from the bonded premises of an
alcohol fuel plant, including the premises of a small plant, for
transfer in bond to another alcohol fuel plant. A proprietor of an
alcohol fuel plant may also receive spirits from another alcohol fuel
plant. The following conditions apply to such transfers:
(a) The transfer of spirits must be pursuant to an approved
application on TTB F 5100.16, Application for Transfer of Spirits and/
or Denatured Spirits in Bond in accordance with Sec. 19.403;
(b) Bulk conveyances in which spirits are transferred must be
secured with locks, seals, or other devices in accordance with Sec.
19.441;
(c) It is not necessary to render the spirits unfit for beverage
use prior to the transfer;
(d) The transferred spirits may not be withdrawn, used, sold, or
disposed of for other than fuel use; and
(e) Each proprietor must adhere to the requirements for transfers
between alcohol fuel plants prescribed in Sec. Sec. 19.734 through
19.736, as applicable.

(26 U.S.C. 5212, 5181)

Sec. 19.734 Consignor for in-bond shipments.

A proprietor who ships distilled spirits in bond to another alcohol
fuel plant is the ``consignor'' of the shipment. When shipping spirits
in bond, the consignor must:
(a) Ship the spirits pursuant to an approved application on TTB F
5100.16, Application for Transfer of Spirits and/or Denatured Spirits
in Bond;
(b) Prepare a duplicate commercial invoice or shipping document for
each shipment of spirits that includes the following:

[[Page 26303]]

(1) The quantity of the spirits transferred;
(2) The proof of the spirits transferred;
(3) A description of the shipment that includes the number and size
of drums, barrels, tank trucks, etc.;
(4) The consignor's name, address, and permit number and the name,
address, and permit number of the proprietor of the alcohol fuel plant
who will receive the spirits; and
(5) The serial numbers of seals, locks or other devices used to
secure the shipment; and
(c) Forward the original invoice or shipping document with the
shipment to the proprietor of the receiving alcohol fuel plant and
retain a copy in the alcohol fuel plant's records.

(26 U.S.C. 5212)

Sec. 19.735 Reconsignment while in transit.

A consignor may reconsign an in-bond shipment of spirits while the
shipment is in transit or upon arrival at the premises of the consignee
for any bona fide reason such as when the spirits transferred in bond
are found to be unsuitable for the intended purpose or the spirits were
shipped in error. The consignor may reconsign the shipment to himself
or to another consignee who is qualified to receive the spirits. In
either case, an Application for Transfer of Spirits and/or Denatured
Spirits in Bond on TTB F 5100.16 must have been previously approved for
the new consignee and must be on file at the alcohol fuel plant. The
bond of the new consignee of the spirits will cover the spirits while
they are in transit after reconsignment. When reconsigning a shipment,
the consignor must notify the original consignee that the transfer has
been cancelled and must make a notation on the original invoice or
shipping document that the shipment was reconsigned. The consignor must
also prepare a new invoice or shipping document for the new consignee
and must mark the new invoice or shipping document ``reconsignment.''

(26 U.S.C. 5181, 5212)

Sec. 19.736 Consignee for in-bond shipments.

(a) General. A proprietor who receives spirits in bond from another
alcohol fuel plant is the ``consignee'' of the shipment. When receiving
spirits in bond, the consignee must:
(1) Examine each conveyance and notify the appropriate TTB officer
immediately if any of the locks, seals, or other devices that secure
each conveyance do not arrive at the premises intact;
(2) Determine the quantity of spirits received and record the
quantity and date of receipt on the invoice or shipping document sent
with the shipment; and
(3) Retain the invoice or shipping document as part of the records
required by Sec. 19.718.
(b) Portable containers. A consignee who receives spirits in
barrels, drums, or other portable containers that are not secured by
seals or other devices must verify the contents of each container. The
consignee must record the quantity received in each container on a list
and must attach the list to the invoice or shipping document received
with the shipment.
(c) Bulk conveyances or pipelines. A consignee who receives spirits
in bulk conveyances or by pipeline must gauge the spirits received and
record the quantity determined on the invoice or shipping document
received with the shipment. The appropriate TTB officer may waive the
requirement for gauging spirits received by pipeline if requested in
writing by the consignee and if there is no jeopardy to the revenue.

(26 U.S.C. 5181, 5204, 5212)

Transfer of Spirits to and From Distilled Spirits Plants

Sec. 19.739 Authorized transfers to or from distilled spirits plants.

Except for spirits produced from petroleum, natural gas, or coal, a
proprietor of an alcohol fuel plant may receive spirits in bond from a
distilled spirits plant qualified under subpart D of this part. A
proprietor of an alcohol fuel plant may also transfer spirits in bond
from the alcohol fuel plant to a distilled spirits plant qualified
under subpart D. The following conditions apply to such transfers:
(a) Bulk conveyances in which spirits are transferred must be
secured with locks, seals, or other devices in accordance with Sec.
19.441;
(b) It is not necessary to render the spirits unfit for beverage
use prior to the transfer;
(c) The transferred spirits may not be withdrawn, used, sold, or
disposed of for other than fuel use;
(d) An alcohol fuel plant proprietor transferring spirits filled
into portable containers to the bonded premises of a distilled spirits
plant must mark the containers as required by Sec. 19.752(b);
(e) The procedures in Sec. Sec. 19.403 through 19.406 and Sec.
19.620 apply to the transfer of spirits from an alcohol fuel plant to a
distilled spirits plant; and
(f) The procedures in Sec. Sec. 19.403, 19.405, 19.407 and Sec.
19.771 apply to the transfer of spirits from a distilled spirits plant
to an alcohol fuel plant.

(26 U.S.C. 5181, 5212)

Receipt of Spirits From Customs Custody

Sec. 19.742 Authorized transfers from customs custody.

A proprietor of an alcohol fuel plant may withdraw from customs
custody spirits imported or brought into the United States in bulk
containers and may transfer those spirits without payment of tax to the
proprietor's alcohol fuel plant subject to the following conditions:
(a) The transfer of the spirits may only be to an alcohol fuel
plant that is required to file, and has filed, a bond;
(b) The spirits must not have been produced from petroleum, natural
gas, or coal;
(c) The alcohol fuel plant must further manufacture or process the
spirits after receipt;
(d) The proprietor of the alcohol fuel plant may only redistill or
denature the spirits if the imported spirits are 185 degrees or more of
proof and will be withdrawn for fuel use; and
(e) The proprietor of the alcohol fuel plant must follow the
procedures for receiving spirits prescribed in Sec. 19.736 and subpart
L of part 27 of this chapter.

(26 U.S.C. 5232)

Materials for Making Spirits Unfit for Beverage Use

Sec. 19.746 Authorized materials.

(a) General. The appropriate TTB officer determines what materials
make spirits unfit for beverage use but do not impair the quality of
the spirits for fuel use. Spirits treated with materials authorized
under this section will be considered rendered unfit for beverage use
and eligible for withdrawal as fuel alcohol.
(b) Authorized materials. Subject to the specifications in
paragraph (c) of this section, proprietors are authorized to render
spirits unfit for beverage use by adding to each 100 gallons of spirits
any of following materials in the quantities specified:
(1) Two gallons or more of--
(i) Gasoline or automotive gasoline (for use in engines that
require unleaded gasoline, the Environmental Protection Agency and
manufacturers specifications may require that unleaded gasoline be used
to render spirits unfit for beverage use);
(ii) Natural gasoline;
(iii) Kerosene;
(iv) Deodorized kerosene;
(v) Rubber hydrocarbon solvent;
(vi) Methyl isobutyl ketone;
(vii) Mixed isomers of nitropropane;
(viii) Heptane;
(ix) Ethyl tertiary butyl ether (ETBE);

[[Page 26304]]

(x) Raffinate;
(xi) Naphtha; or
(xii) Any combination of the materials listed in (b)(1)(i) through
(xi) of this section; or
(2) Five gallons or more of Toluene; or
(3) One-eighth (\1/8\) ounce of denatonium benzoate N.F. and 2
gallons of isopropyl alcohol.
(c) Specifications--(1) Specifications for gasoline, unleaded
gasoline, kerosene, deodorized kerosene, rubber hydrocarbon solvent,
methyl isobutyl ketone, mixed isomers of nitropropane, heptane,
toluene, and isopropyl alcohol are found in part 21, subpart E, of this
chapter.
(2) Natural gasoline must meet the following specifications:
(i) Natural gasoline (drip gas) is a mixture of butane, pentane,
and hexane hydrocarbons extracted from natural gas.
(ii) Distillation range: no more than 10% of the sample may distill
below 97 [deg] F.; at least 50% shall distill at or below 156 [deg] F.;
and at least 90% shall distill at or below 209 [deg] F.
(3) Raffinate must meet the following specifications:
(i) Octane (R+M/2): 66-70;
(ii) Distillation, in Degrees F: 10%: 120-150; 50%: 144-180; 90%:
168-200; end point: 216-285;
(iii) API Gravity: 76-82; and
(iv) Reid Vapor Pressure: 5-11.
(4) Naphtha must meet the following specifications:
(i) API Gravity @ 60/60 Degrees F: 64-70;
(ii) Lb/Gal: 5.845-6.025;
(iii) Density: .7022-.7238;
(iv) Reid Vapor Pressure: 8 P.S.I.A. Max.;
(v) Distillation in Degrees F: I.B.P.: 85 Max.; 10%: 130 Max.; 50%:
250 Max.; 90%: 340 Max.; end point: 380;
(vi) Copper Corrosion: 1; and
(vii) Sabolt Color: 28 Min.
(d) Published list. The appropriate TTB officer periodically
publishes a list of materials that may be used to make spirits unfit
for beverage use in addition to those listed in paragraph (b) of this
section. The list can be found at http://www.ttb.treas.gov. The list
will specify the material name and quantity required to render spirits
unfit for beverage use.

(26 U.S.C. 5181)

Sec. 19.747 Other materials.

If a proprietor wishes to use a material to render spirits unfit
for beverage use that is not authorized under Sec. 19.746 or that is
not on the published list of materials, the proprietor may submit an
application for approval to the appropriate TTB officer. The
application must include the name of the material and the quantity of
material that the proprietor proposes to add to each 100 gallons of
spirits. The appropriate TTB officer may require the proprietor to
submit an eight-ounce sample. The proprietor may not use any proposed
material until the appropriate TTB officer approves its use. Any
material that impairs the quality of the spirits for fuel use will not
be approved. The proprietor must retain as part of the records
available for inspection by appropriate TTB officers any application
approved by the appropriate TTB officer under this section.

(26 U.S.C. 5181)

Rules for Taking Samples

Sec. 19.749 Samples.

The following rules apply to the testing and analysis of samples of
spirits and fuel alcohol for purposes of this subpart:
(a) A proprietor may take samples of spirits and fuel alcohol for
on-site testing and analysis at the proprietor's alcohol fuel plant;
(b) A proprietor may not remove samples of spirits from the
premises of the alcohol fuel plant for testing and analysis;
(c) A proprietor may remove samples of fuel alcohol from the
premises of the alcohol fuel plant for testing and analysis at a
qualified laboratory;
(d) A proprietor of an alcohol fuel plant must account for all
samples in the record required by Sec. 19.718(b)(4); and
(e) A proprietor of an alcohol fuel plant must indicate on each
container that the spirits or fuel alcohol inside is a sample.

(26 U.S.C. 5181)

Marking Requirements

Sec. 19.752 Marks.

(a) Fuel alcohol. A proprietor of an alcohol fuel plant must place
a conspicuous and permanent warning mark or label on each container of
55 gallons or less of fuel alcohol that the proprietor will withdraw
from the plant premises. The proprietor must place the mark or label on
the head or side of the container and must use plain, legible letters.
The proprietor may place other marks or labels on the container if the
other marks or labels do not obscure the required warning. The required
warning is as follows:
[GRAPHIC] [TIFF OMITTED] TP08MY08.002

(b) Spirits. If a proprietor intends to transfer barrels, drums, or
similar portable containers of spirits to a distilled spirits plant
qualified under subpart D of this part, the proprietor must mark or
label each container. The proprietor must place the mark or label on
the head or side of the container and must use plain, legible letters.
The proprietor may place other marks or labels on the container if the
other marks or labels do not obscure the required marks or labels. The
required mark or label each container must contain the following
information:
(1) Quantity in wine gallons;
(2) Proof of the spirits;
(3) Name, address, and permit number of the alcohol fuel plant;
(4) The words ``Spirits--For Alcohol Fuel Use Only''; and
(5) The serial number of the container. Serial numbers must be
assigned as follows--
(i) Consecutively commencing with ``1'';
(ii) When the numbering system of any series reaches ``1,000,000''
the proprietor may begin the series again by adding an alphabetical
prefix or suffix to the series; and
(iii) When there is a change in proprietorship or a change in the

[[Page 26305]]

individual, firm, corporate name, or trade name, the series in use at
the time of the change may be continued.

(26 U.S.C. 5181, 5206)

Subpart Y--Paperwork Reduction Act

Sec. 19.761 OMB control numbers assigned under the Paperwork
Reduction Act.

(a) Purpose. This subpart displays the control numbers assigned to
information collection requirements in this part by the Office of
Management and Budget (OMB) under the Paperwork Reduction Act of 1995,
Public Law 104-13.
(b) Display. The following display identifies each section in this
part that contains an information collection requirement and the OMB
control number that is assigned to that information collection
requirement.

------------------------------------------------------------------------
Current OMB
Section where contained Control No.
------------------------------------------------------------------------
19.11................................................... 1513-0088
19.13................................................... 1513-0048
19.26................................................... 1513-0048
19.27................................................... 1513-0048
19.28................................................... 1513-0048
19.33................................................... 1513-0048
19.35................................................... 1513-0048
19.37................................................... 1513-0048
19.54................................................... 1513-0048
19.55................................................... 1513-0048
1513-0081
19.56................................................... 1513-0048
19.59................................................... 1513-0013
19.60................................................... 1513-0013
1513-0048
19.71................................................... 1513-0048
19.72................................................... 1513-0048
19.73................................................... 1513-0048
19.74................................................... 1513-0048
19.75................................................... 1513-0048
19.76................................................... 1513-0048
19.77................................................... 1513-0046
1513-0048
19.78................................................... 1513-0014
1513-0048
19.79................................................... 1513-0048
19.91................................................... 1513-0040
19.92................................................... 1513-0040
19.93................................................... 1513-0040
19.94................................................... 1513-0040
19.95................................................... 1513-0040
19.97................................................... 1513-0040
19.112.................................................. 1513-0048
19.113.................................................. 1513-0048
19.113.................................................. 1513-0088
19.114.................................................. 1513-0048
19.115.................................................. 1513-0048
19.116.................................................. 1513-0013
1513-0048
1513-0088
19.117.................................................. 1513-0013
1513-0048
19.118.................................................. 1513-0013
1513-0048
19.119.................................................. 1513-0048
1513-0088
19.120.................................................. 1513-0048
1513-0088
19.121.................................................. 1513-0048
19.122.................................................. 1513-0048
19.123.................................................. 1513-0048
19.126.................................................. 1513-0040
19.127.................................................. 1513-0088
19.128.................................................. 1513-0040
19.129.................................................. 1513-0040
1513-0088
19.130.................................................. 1513-0040
1513-0088
19.131.................................................. 1513-0040
1513-0088
19.132.................................................. 1513-0013
1513-0040
1513-0088
19.133.................................................. 1513-0013
1513-0040
19.134.................................................. 1513-0013
1513-0040
1513-0088
19.135.................................................. 1513-0040
19.141.................................................. 1513-0013
1513-0044
19.142.................................................. 1513-0044
19.143.................................................. 1513-0013
1513-0044
19.154.................................................. 1513-0044
19.155.................................................. 1513-0013
19.156.................................................. 1513-0014
19.168.................................................. 1513-0013
19.170.................................................. 1513-0048
19.171.................................................. 1513-0048
19.172.................................................. 1513-0048
19.187.................................................. 1513-0080
19.189.................................................. 1513-0080
19.191.................................................. 1513-0080
19.192.................................................. 1513-0048
19.198.................................................. 1513-0048
19.201.................................................. 1513-0088
1513-0113
19.202.................................................. 1513-0113
19.203.................................................. 1513-0113
19.205.................................................. 1513-0088
1513-0113
19.206.................................................. 1513-0088
1513-0113
19.207.................................................. 1513-0088
1513-0113
19.208.................................................. 1513-0088
1513-0113
19.209.................................................. 1513-0014
1513-0088
1513-0113
19.210.................................................. 1513-0113
19.211.................................................. 1513-0113
19.212.................................................. 1513-0113
19.213.................................................. 1513-0113
19.214.................................................. 1513-0113
19.222.................................................. 1513-0045
1513-0088
19.225.................................................. 1513-0045
19.226.................................................. 1513-0045
19.226.................................................. 1513-0056
19.227.................................................. 1513-0045
19.230.................................................. 1513-0045
1513-0083
19.231.................................................. 1513-0045
19.233.................................................. 1513-0045
1513-0083
1513-0088
19.234.................................................. 1513-0045
1513-0083
1513-0088
19.235.................................................. 1513-0088
19.236.................................................. 1513-0083
1513-0088
19.237.................................................. 1513-0045
1513-0083
19.238.................................................. 1513-0045
1513-0083
19.239.................................................. 1513-0045
1513-0083
1513-0088
19.240.................................................. 1513-0045
1513-0083
1513-0088
19.242.................................................. 1513-0045
1513-0083
19.243.................................................. 1513-0045
19.246.................................................. 1513-0045
19.247.................................................. 1513-0045
19.248.................................................. 1513-0045
19.249.................................................. 1513-0045
19.253.................................................. 1513-0088
19.256.................................................. 1513-0045
19.257.................................................. 1513-0045
19.261.................................................. 1513-0048
19.262.................................................. 1513-0030
1513-0045
1513-0088
19.263.................................................. 1513-0030
1513-0045
1513-0088
19.264.................................................. 1513-0030
1513-0045
1513-0088
19.265.................................................. 1513-0030
1513-0088
19.266.................................................. 1513-0030
1513-0045
1513-0088
19.267.................................................. 1513-0045
1513-0088
19.268.................................................. 1513-0088
19.269.................................................. 1513-0030
1513-0045
19.281.................................................. 1513-0048
19.283.................................................. 1513-0056
19.284.................................................. 1513-0056
19.286.................................................. 1513-0056
19.287.................................................. 1513-0056
19.288.................................................. 1513-0056
19.289.................................................. 1513-0056
1513-0056
19.292.................................................. 1513-0044
19.293.................................................. 1513-0047
19.294.................................................. 1513-0047
19.295.................................................. 1513-0047
19.303.................................................. 1513-0056
19.305.................................................. 1513-0039
1513-0056
19.306.................................................. 1513-0056
19.307.................................................. 1513-0056
19.308.................................................. 1513-0047
19.309.................................................. 1513-0047
19.312.................................................. 1513-0056
19.322.................................................. 1513-0039
1513-0056
19.324.................................................. 1513-0039
1513-0056
19.327.................................................. 1513-0039
19.329.................................................. 1513-0039
19.331.................................................. 1513-0056
19.333.................................................. 1513-0056
19.343.................................................. 1513-0041
19.352.................................................. 1513-0048
19.353.................................................. 1513-0041

[[Page 26306]]

19.354.................................................. 1513-0088
19.357.................................................. 1513-0041
19.360.................................................. 1513-0041
1513-0056
19.362.................................................. 1513-0041
19.363.................................................. 1513-0041
19.371.................................................. 1513-0056
1513-0088
19.372.................................................. 1513-0048
1513-0056
1513-0088
19.381.................................................. 1513-0049
19.383.................................................. 1513-0056
19.384.................................................. 1513-0048
19.386.................................................. 1513-0049
19.387.................................................. 1513-0049
19.388.................................................. 1513-0048
19.389.................................................. 1513-0056
19.392.................................................. 1513-0048
19.393.................................................. 1513-0049
19.394.................................................. 1513-0056
19.402.................................................. 1513-0056
19.403.................................................. 1513-0038
19.404.................................................. 1513-0038
19.405.................................................. 1513-0038
1513-0056
19.406.................................................. 1513-0038
1513-0056
19.407.................................................. 1513-0056
19.411.................................................. 1513-0039
19.414.................................................. 1513-0056
19.419.................................................. 1513-0056
19.420.................................................. 1513-0048
19.425.................................................. 1513-0056
19.427.................................................. 1513-0056
19.431.................................................. 1513-0056
19.434.................................................. 1513-0048
1513-0056
19.435.................................................. 1513-0056
19.436.................................................. 1513-0045
1513-0083
19.441.................................................. 1513-0048
19.452.................................................. 1513-0030
1513-0056
19.454.................................................. 1513-0056
19.457.................................................. 1513-0056
19.459.................................................. 1513-0048
1513-0056
19.461.................................................. 1513-0045
19.462.................................................. 1513-0030
1513-0039
1513-0048
1513-0056
19.464.................................................. 1513-0030
1513-0045
19.465.................................................. 1513-0045
1513-0056
1513-0083
19.478.................................................. 1513-0080
19.487.................................................. 1513-0048
19.513.................................................. 1513-0020
19.571.................................................. 1513-0039
1513-0045
1513-0049
1513-0056
1513-0088
19.572.................................................. 1513-0049
19.573.................................................. 1513-0039
1513-0049
1513-0056
1513-0088
19.574.................................................. 1513-0039
1513-0045
1513-0049
1513-0056
1513-0088
19.575.................................................. 1513-0039
1513-0045
1513-0049
1513-0056
1513-0088
19.576.................................................. 1513-0039
1513-0045
1513-0049
1513-0056
1513-0088
19.577.................................................. 1513-0039
1513-0045
1513-0056
1513-0088
19.580.................................................. 1513-0039
1513-0045
1513-0049
1513-0088
19.581.................................................. 1513-0039
1513-0045
1513-0049
1513-0088
19.584.................................................. 1513-0047
19.585.................................................. 1513-0047
19.586.................................................. 1513-0047
19.590.................................................. 1513-0039
19.591.................................................. 1513-0039
19.592.................................................. 1513-0039
19.593.................................................. 1513-0039
19.596.................................................. 1513-0041
19.597.................................................. 1513-0041
19.598.................................................. 1513-0041
19.599.................................................. 1513-0041
19.600.................................................. 1513-0041
19.601.................................................. 1513-0041
19.602.................................................. 1513-0041
19.603.................................................. 1513-0041
19.604.................................................. 1513-0041
19.606.................................................. 1513-0049
19.607.................................................. 1513-0049
19.611.................................................. 1513-0045
1513-0088
19.612.................................................. 1513-0045
1513-0088
19.613.................................................. 1513-0045
19.614.................................................. 1513-0045
19.615.................................................. 1513-0045
19.616.................................................. 1513-0056
19.617.................................................. 1513-0056
19.618.................................................. 1513-0056
19.619.................................................. 1513-0056
19.620.................................................. 1513-0038
1513-0056
19.621.................................................. 1513-0056
19.623.................................................. 1513-0056
19.624.................................................. 1513-0041
19.626.................................................. 1513-0056
19.627.................................................. 1513-0044
19.632.................................................. 1513-0039
1513-0041
1513-0047
1513-0049
1513-0049
1513-0088
19.641.................................................. 1513-0081
19.643.................................................. 1513-0081
19.644.................................................. 1513-0081
19.645.................................................. 1513-0081
19.650.................................................. 1513-0081
1513-0088
19.665.................................................. 1513-0052
19.666.................................................. 1513-0052
19.667.................................................. 1513-0052
19.669.................................................. 1513-0088
19.670.................................................. 1513-0088
1513-0113
19.673.................................................. 1513-0051
19.675.................................................. 1513-0051
19.676.................................................. 1513-0014
1513-0051
19.677.................................................. 1513-0051
19.680.................................................. 1513-0051
19.683.................................................. 1513-0051
1513-0052
19.684.................................................. 1513-0051
19.685.................................................. 1513-0051
1513-0052
1513-0088
19.686.................................................. 1513-0051
1513-0088
19.687.................................................. 1513-0052
1513-0088
19.688.................................................. 1513-0051
1513-0088
19.689.................................................. 1513-0051
1513-0088
19.690.................................................. 1513-0051
1513-0088
19.692.................................................. 1513-0051
1513-0052
1513-0088
19.695.................................................. 1513-0052
19.709.................................................. 1513-0052
19.710.................................................. 1513-0052
19.714.................................................. 1513-0052
19.715.................................................. 1513-0052
1513-0088
19.716.................................................. 1513-0052
1513-0088
19.717.................................................. 1513-0052
19.718.................................................. 1513-0052
1513-0088
19.719.................................................. 1513-0052
19.720.................................................. 1513-0052
19.724.................................................. 1513-0052
19.727.................................................. 1513-0052
19.729.................................................. 1513-0052
19.733.................................................. 1513-0052
19.734.................................................. 1513-0052
19.735.................................................. 1513-0038
1513-0052
19.736.................................................. 1513-0052
19.739.................................................. 1513-0052
19.746.................................................. 1513-0052
19.747.................................................. 1513-0052
19.749.................................................. 1513-0052
1513-0052
19.752.................................................. 1513-0052
------------------------------------------------------------------------

[[Page 26307]]

Signed: July 31, 2007.
John J. Manfreda,
Administrator.
Approved: November 14, 2007.
Timothy E. Skud,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).

Editorial Note: This document was received at the Office of the
Federal Register on April 22, 2008.
[FR Doc. E8-9095 Filed 5-7-08; 8:45 am]
BILLING CODE 4810-31-P