[Federal Register Volume 73, Number 82 (Monday, April 28, 2008)]
[Rules and Regulations]
[Pages 22816-22818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9173]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 4, 24, and 27
[Docket No. TTB-2007-0006; T.D. TTB-70; Re: T.D. TTB-31 and Notice No.
51]
RIN 1513-AB00
Certification Requirements for Imported Natural Wine (2005R-002P)
AGENCY: Alcohol and Tobacco Tax and Trade Bureau (TTB), Treasury.
ACTION: Final rule; Treasury decision.
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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is adopting as a
final rule, without changes, the temporary regulations implementing the
certification requirements regarding production practices and
procedures for imported natural wine. These requirements were adopted
in section 2002 of the Miscellaneous Trade and Technical Corrections
Act of 2004 as an amendment to section 5382 of the Internal Revenue
Code of 1986.
DATES: Effective Date: This final rule is effective on May 28, 2008.
FOR FURTHER INFORMATION CONTACT: Jennifer Berry, Alcohol and Tobacco
Tax and Trade Bureau, Regulations and Rulings Division, P.O. Box 18152,
Roanoke, VA 24014; telephone 540-344-9333.
SUPPLEMENTARY INFORMATION:
Background
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible
for
[[Page 22817]]
the administration of Chapter 51 of the Internal Revenue Code of 1986
(IRC) which includes provisions relating to the taxation of wine.
Section 5382(a) of the IRC (26 U.S.C. 5382(a)) sets forth standards
regarding what constitutes proper cellar treatment of natural wine.
On December 3, 2004, the President signed into law the
Miscellaneous Trade and Technical Corrections Act of 2004, Public Law
108-429, 118 Stat. 2434 (``the Act''), which revised section 5382(a) of
the IRC to accommodate two new provisions. The first new provision was
paragraph (1)(B), which provides that, in the case of wine produced and
imported subject to an international agreement or treaty, proper cellar
treatment of natural wine includes those practices and procedures
acceptable to the United States under the agreement or treaty. The
second new provision was paragraph (3), which sets forth a new
certification requirement regarding production practices and procedures
for imported natural wine produced after December 31, 2004.
Under section 5382(a)(3) the Secretary of the Treasury shall accept
the practices and procedures used to produce wine in another country
if, at the time of importation of the wine, one of the following
conditions is met:
The Secretary has on file or is provided with a
certification from the government of the producing country, accompanied
by an affirmed laboratory analysis, that the practices and procedures
used to produce the wine constitute proper cellar treatment under
regulations prescribed by the Secretary;
The Secretary has on file or is provided with a
certification required by an international agreement or treaty covering
proper cellar treatment, or the wine is covered by an international
agreement or treaty covering proper cellar treatment that does not
require a certification; or
In the case of an importer that owns or controls or that
has an affiliate that owns or controls a winery operating under a basic
permit issued by the Secretary, the importer certifies that the
practices and procedures used to produce the wine constitute proper
cellar treatment under regulations prescribed by the Secretary.
In addition, for purposes of the certification requirement, section
5382(a)(3) defines ``affiliate'' as having the meaning contained in
section 117(a)(4) of the Federal Alcohol Administration Act (27 U.S.C.
211(a)(4)), and as including ``a winery's parent or subsidiary or any
other entity in which the winery's parent or subsidiary has an
ownership interest.''
Temporary Rule and Notice of Proposed Rulemaking
On August 24, 2005, TTB published in the Federal Register (70 FR
49479) a temporary rule, T.D. TTB-31, which implemented the above
described certification requirements by amending 27 CFR parts 4, 24,
and 27. In conjunction with the publication of T.D. TTB-31, TTB
published a notice of proposed rulemaking, Notice No. 51, in the
Federal Register (70 FR 49516) on August 24, 2005, referencing and
inviting comments on T.D. TTB-31. The comment period closed October 24,
2005.
Comments and TTB Analysis
TTB received four comments during the comment period. Below, we
summarize and respond to the four comments.
Comment
The Embassy of Switzerland commented that requiring certification
for shipments of limited quantities could create impediments to the
introduction of new products. It therefore urged TTB to exempt from
certification shipments of limited quantities and non-commercial
shipments intended for trade fairs or exhibits.
TTB Response
The implementing regulations include an exemption for importations
of commercial samples of natural wine. Under 27 CFR
27.140(b)(2)(ii)(C), commercial samples include sales samples, samples
for trade shows, and samples imported for laboratory analysis. We
believe this provision addresses the commenter's concern regarding
shipments for trade shows and exhibits. We also believe that 27 CFR
27.140(b)(2)(ii)(B), which exempts importations of a personal, non-
commercial nature, could apply to many of the shipments of limited
quantities mentioned by the commenter.
Comment
The National Association of Beverage Importers, Inc. (NABI), in its
comment, stated that TTB did not define the word ``importer'' in the
temporary regulations, making it unclear who must retain a copy of the
certification. It stated that in the industry, ``importer'' could mean
either the ``authorized importer'' or the ``importer of record.''
According to NABI, the ``authorized importer'' is authorized by the
foreign supplier to import the supplier's wine into the U.S., whereas
the ``importer of record'' is the importer that physically imports the
wine (sic), usually using a certificate of label approval (COLA) owned
by the authorized importer. NABI therefore asked which type of importer
must maintain a copy of the certification in their records. NABI
believes that the COLA owner should be required to retain the
certification. NABI also requested clarification regarding wine that is
a blend of wines from multiple suppliers, asking if the importer must
obtain certifications for all the wines used in a blend or only for the
finished wine.
TTB Response
``Importer'' is defined in Sec. 27.140 of the implementing
regulations as ``any person importing wine who must obtain a permit as
provided in Sec. 27.55.'' Under Sec. 27.55, any person who intends to
engage in the business of importing wines must obtain a permit from
TTB. If a COLA holder is also the actual importer, that COLA holder
would have to both obtain a permit and retain the certification, a copy
of which is sufficient for this purpose. TTB believes the regulations
are sufficiently clear on this point.
With regard to NABI's second point, we note that the certification
requirement applies to the wine that is imported into the United
States, that is, the certification is required only for the finished
wine if that is the wine that is imported. If the component wines were
imported into the United States for blending here, then the
certification requirement would apply to each of the component wines
that is imported. If the wine is blended before importation, a
certificate is required only for the finished, blended wine. We believe
the regulatory language is also sufficiently clear on this point.
Comment
The Wine Institute filed a comment disagreeing with the position
taken by TTB in the temporary rule regarding self-certification, that
is, that the statute does not allow self-certification by a winery when
the winery owns or controls an importer rather than the other way
around. The Wine Institute stated that a winery operating under a basic
permit is the more qualified of the two entities to make this
certification. The Wine Institute contends that TTB has the authority
to infer that Congress did not intend to make this exclusion and that
TTB should therefore revise the temporary regulations to allow a winery
owning or controlling an importer to self-certify its imports.
TTB Response
TTB notes that the statutory language contained in 26 U.S.C.
5382(a)(3)(A)(iii)
[[Page 22818]]
very specifically refers only to an importer that owns or controls a
winery or that has an affiliate that owns or controls a winery
operating under a basic permit. The statutory language does not suggest
that Congress intended the statute also to allow self-certification by
a winery that owns or controls an importer or that has an affiliate to
that owns or controls an importer. Accordingly, we do not believe
Congress intended the interpretation suggested in this comment.
Comment
The Government of Canada submitted a comment requesting that
certain types of Canadian wines--non-grape wines, cider, and wines
containing less than 7 percent alcohol by volume--be exempt from the
certification requirements. These wines are outside the scope of the
``Agreement on Mutual Acceptance of Oenological Practices'' (MAA)
signed by several nations including Canada and the United States, which
covers only natural grape wines that are at least 7 percent alcohol by
volume, and are therefore subject to the certification requirements.
Canada contends that an exemption would be justified because Canadian
regulations require that fruit wines (other than cider) and wines
containing less than 7 percent alcohol by volume must be produced in
accordance with the same standards as wines covered by the MAA.
Canada also requested consideration of an exemption from the
certification requirements for the importation of small quantities of
non-grape natural wine from Canada in order to mitigate the potential
economic impact on small exporters. Canada stated that because these
wines are exported in limited quantities by small exporters the cost of
complying with the requirements will be prohibitive and may shut these
products out of the U.S. market. Finally, Canada requested that we
delay the implementation of the certification requirements until the
United States and Canada can reach an agreement on an import
certification regime covering these wines.
TTB Response
We are unable to provide the two requested exemptions. The non-
grape wines and other products described by Canada clearly fall within
the certification requirements of the statute. The fact that they are
produced in accordance with the same standards as wine covered by the
scope of the MAA or are only exported in limited quantities cannot
override the clear wording of the statute.
Regarding the request for a delay in the implementation date, TTB
does not have the authority to change the implementation date of the
certification requirements, which is prescribed by the statute.
TTB Finding
Based on the reasons set forth above and on the comments received,
we believe it is appropriate to adopt the temporary rule as a final
rule without change.
Regulatory Flexibility Act
We certify that this regulation will not have a significant impact
on a substantial number of small entities. This regulation adopts
without change a temporary rule that incorporated some reporting and
recordkeeping requirements. It was previously concluded that those
requirements were expected to be of minimal burden, and we have
received no information that contradicts that previous determination.
Therefore, no regulatory flexibility analysis is required.
Additionally, pursuant to section 7805(f) of the Internal Revenue Code,
we submitted the temporary rule to the Chief Counsel for Advocacy of
the Small Business Administration for comment on the impact to small
businesses. That office did not comment on the temporary rule.
Paperwork Reduction Act
The collections of information contained in this final regulation
have been previously reviewed and approved by the Office of Management
and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)) and assigned OMB control number 1513-0119. 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. This final rule restates the collection
of information without substantive change.
Comments concerning suggestions for reducing the burden of the
collections of information should be directed to Mary A. Wood, Alcohol
and Tobacco Tax and Trade Bureau, at any of these addresses:
P.O. Box 14412, Washington, DC 20044-4412;
202-927-8525 (facsimile); or
[email protected] (e-mail).
Executive Order 12866
This rule is not a significant regulatory action as defined in
Executive Order 12866. Therefore, it requires no regulatory assessment.
Drafting Information
The principal author of this document was Jennifer K. Berry,
Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade
Bureau. Other personnel also participated in its development.
List of Subjects
27 CFR Part 4
Advertising, Customs duties and inspection, Imports, Labeling,
Packaging and containers, Reporting and recordkeeping requirements,
Trade practices, Wine.
27 CFR Part 24
Administrative practice and procedure, Claims, Electronic fund
transfers, Excise taxes, Exports, Food additives, Fruit juices,
Labeling, Liquors, Packaging and containers, Reporting and
recordkeeping requirements, Research, Scientific equipment, Spices and
flavoring, Surety bonds, Vinegar, Warehouses, Wine.
27 CFR Part 27
Alcohol and alcoholic beverages, Beer, Customs duties and
inspection, Electronic funds transfers, Excise taxes, Imports,
Labeling, Liquors, Packaging and containers, Reporting and
recordkeeping requirements, Wine.
The Regulatory Amendment
For the reasons stated in the preamble, the temporary rule
published in the Federal Register at 70 FR 49479 on August 24, 2005, is
adopted as a final rule without change.
Signed: January 2, 2008.
John J. Manfreda,
Administrator.
Approved: March 24, 2008.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. E8-9173 Filed 4-25-08; 8:45 am]
BILLING CODE 4810-31-P