1.Special rules for nonbeverage
products manufactured in a United States foreign trade zone
(a)Subpart E of part I of subchapter A of chapter 51 of the
Internal Revenue Code of 1986 is amended by inserting after section 5062 the
following new section:
5063.Exception for
nonbeverage products manufactured in a United States foreign trade
zone
(a)In the case of domestic distilled spirits on which a tax
would be determined under this subchapter, when used in a foreign trade zone
for the manufacture or production of nonbeverage products, in lieu of payment
of the tax under this subchapter by the distilled spirits plant proprietor,
distilled spirits may be transferred without payment of tax to an activated
foreign trade zone. Upon demonstration to the Secretary of the manufacture or
production of nonbeverage products in a foreign trade zone using the distilled
spirits withdrawn from bond without payment of tax, authorized manufacturers
and producers of nonbeverage products, are not subject to the tax under section
5001. In case of any removal, sale, transport, or use of distilled spirits not
authorized under section 5061 for which taxes have not been paid, the full rate
of tax under section 5001 shall be paid by any person responsible.
(b)The
Secretary may require persons eligible for the application of this section to
file an adequate bond and permit as reasonably determined by the Secretary.
Every person subject to the application of this section shall register annually
with the Secretary, keep such books and records as may be necessary to
establish the fact that distilled spirits received on which no tax has been
determined were used in the manufacture or production of nonbeverage products,
and be subject to monthly reporting and such rules and regulations in relation
thereto as the Secretary may prescribe to secure the Treasury against
fraud.
(c)For purposes of ascertaining the correctness of the
application of this section, the Secretary is authorized to examine any books,
papers, records, or memoranda as may be necessary to establish the fact that
the distilled spirits received were used in the manufacture or production of
nonbeverage products, to require the attendance of the person or of any officer
or employee of such person or the attendance of any other person having
knowledge of the premises, to take testimony with reference to any matter
covered, and to administer oaths to any person giving such testimony.
(d)Demonstration
of use in the manufacturing or production of nonbeverage
productsExcept in the case of knowing and willful noncompliance,
application of this section shall not be denied in the case of failure to
comply with any requirement imposed under this section, or any rule or
regulation issued pursuant to this section, upon the person manufacturing or
producing the nonbeverage product demonstrating that distilled spirits for
which taxes have not been paid transferred to an activated foreign trade zone
were in fact used in the manufacture or production of nonbeverage
products.
(e)Formula and
manufacturing infractions for manufacturers and producers of nonbeverage
products in foreign trade zonesIn the case of failure to comply
with any formula or manufacturing requirement imposed under this section or any
rule or regulations issued pursuant to this section, the manufacturer or
producer of nonbeverage products shall be liable for a penalty up to $1,000 for
each failure to comply unless it is shown that the failure to comply was due to
reasonable cause. No penalty imposed under this subsection shall exceed the
amount of tax which would have been determined under this subchapter without
regard to this section. The penalty imposed by this subsection shall be
assessed, collected, and paid in the same manner as taxes under this
subchapter, within 30 days of notification by the Secretary. Any excise tax
determined to be owed through monthly reporting processes and procedures for
submission and approval of formulas, on-site inspection, or audit shall be paid
by the manufacturer or producer of nonbeverage products within 30 days of
notification by the Secretary.
(f)For
purposes of this section—
(1)Authorized
manufacturers and producersThe term authorized
manufacturers and producers means those manufacturers and producers of
nonbeverage products that are registered with the Secretary, agree to monthly
reporting and have received manufacturing or processing authority from the
United States Foreign Trade Zones Board.
(2)The term nonbeverage product means
medicines, medicinal preparations, food products, flavors, flavoring extracts,
or perfume, which are unfit for beverage
purposes.
.
(b)
(1)The table of
sections for subpart E of part I of subchapter A of chapter 51 of the Internal
Revenue Code of 1986 is amended by inserting after the item relating to section
5062 the following new item:
Sec. 5063. Exception for
nonbeverage products manufactured in a United States foreign trade
zone.
.
(2)Section
5005(e)(2) of such Code is amended by inserting used as described in
section 5063,
after deposited in a foreign-trade
zone,
.
(3)Section 5214(a)
of such Code is amended by striking the period at the end of paragraph (13) and
inserting ; or
, and by adding at the end the following new
paragraph:
(14)without payment
of tax as authorized by section
5063.
.
(4)Section 5003 of
such Code is amended by adding at the end the following new paragraph:
(18)For provisions
relating to an exception for nonbeverage products manufactured in a United
States foreign trade
zone.
.
(c)Section 3 of the Act of
June 18, 1934 (commonly known as the Foreign Trade Zones Act; 19 U.S.C. 81c) is
amended—
(1)in subsection (a), in the second proviso,
by inserting or determined
after paid
; and
(2)in subsection (c)(2)—
(A)by inserting in the second sentence before
the end period the following: and such products, upon approval by the
Secretary of the Treasury and the Foreign Trade Zones Board, shall be eligible
for tax treatment pursuant to section 5063 of the Internal Revenue Code of
1986.
;
(B)by striking
or flavoring extract
and inserting flavoring extract, or
perfume
; and
(C)by adding at the
end the following: Distilled spirits for manufacturing or production of
nonbeverage products for which taxes have not been paid shall be admitted to
the foreign trade zone in domestic status and reported to the Bureau of Customs
and Border Protection in accordance with admission procedures, including direct
delivery as applicable.
.
(d)The amendments made by this section shall take effect on the
date of the enactment of this Act.