[Federal Register Volume 61, Number 115 (Thursday, June 13, 1996)]
[Proposed Rules]
[Pages 30017-30018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14860]
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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
27 CFR Part 18
[Notice No. 823]
RIN 1512-AB59
Production of Volatile Fruit-Flavor Concentrate (95R-026P)
AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of
the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: Pursuant to the President's regulatory reform initiative, the
Bureau of Alcohol, Tobacco and Firearms (ATF) is proposing to amend the
regulations in 27 CFR Part 18. The proposed amendment would
specifically authorize the transfer of volatile fruit-flavor
concentrate (VFFC) unfit for beverage use from one VFFC plant to
another for further processing. The proposed amendment would clarify
the regulations in order to allow greater flexibility in the production
processes of VFFC plants.
DATES: Written comments must be received on or before August 12, 1996.
ADDRESSES: Submit written comments to: Chief, Wine, Beer, and Spirits
Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, P.O. Box
50221, Washington, DC 20091-0221. ATTN: Notice No. 823.
FOR FURTHER INFORMATION CONTACT: Mary A. Wood, Wine, Beer, and Spirits
Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, 650
Massachusetts Avenue NW.ca a13jn2.071, Washington, DC 20226; (202) 927-
8210.
SUPPLEMENTARY INFORMATION:
Background
On February 21, 1995, President Clinton announced a regulatory
reform initiative. As part of this initiative, each Federal agency was
instructed to conduct a page by page review of all agency regulations
to identify those which are obsolete or burdensome and those whose
goals could be better achieved through the private sector, self-
regulation or state and local governments. In cases where the agency's
review disclosed regulations which should be revised or eliminated, the
agency would, as soon as possible, propose administrative changes to
its regulations.
The page by page review of all regulations was completed as
directed by the President. In addition, on April 13, 1995, the Bureau
published Notice No. 809 (60 FR 18783) in the Federal Register
requesting comments from the public regarding which ATF regulations
could be improved or eliminated. No comments were received regarding 27
CFR part 18, Production of Volatile Fruit-Flavor Concentrate; however,
ATF is proposing a clarifying amendment to this part based on a
variance request received from a volatile fruit-flavor concentrate
(VFCC) producer.
The Internal Revenue Code of 1986, 26 U.S.C. 5511, authorizes the
manufacture of volatile fruit-flavor concentrate by any process which
includes evaporations from the mash or juice of any fruit. Section 5511
also places certain restrictions on the manufacture of volatile fruit-
flavor concentrate. Pursuant to section 5511(1), the concentrate, and
the mash or juice from which it is produced, must contain no more
alcohol than is reasonably unavoidable in the manufacture of such
concentrate. Section 5511(2) provides that the concentrate must be
rendered unfit for use as a beverage before removal from the place of
manufacture; however, concentrate which is fit for beverage use and
which does not exceed 24 percent alcohol by volume may be transferred
to a bonded wine cellar for use in production of natural wine. Finally,
section 5511(3) authorizes the Secretary to prescribe such regulations
as are necessary for the protection of the revenue regarding
applications, records, reports, bonds, and other requirements with
respect to the production, removal, sale, transportation, and use of
concentrate and the mash or juice from which the concentrate is
produced.
Volatile fruit-flavor concentrate which is produced in accordance
with the requirements of the regulations is not subject to the
distilled spirits or wine excise tax. However, section 5001(a)(6)
provides for the imposition of tax on any volatile fruit-flavor
concentrate (or any fruit mash or juice from which such concentrate is
produced) containing one-half of 1 percent or more of alcohol by
volume, which is manufactured free from tax under section 5511, and is
then sold, transported, or used by any person in violation of Chapter
51 or the regulations promulgated thereunder.
Proposed Amendment
The current regulations in 27 CFR 18.54(a) allow the transfer of
volatile fruit-flavor concentrate (``concentrate'') which is unfit for
beverage use for any purpose authorized by law. However, ATF recently
received a request from a VFFC producer as to whether a concentrate
unfit for beverage use could be transferred from one VFFC plant to
another for further processing. Apparently it was more cost-effective
for the second VFFC plant to conduct the processing operation at issue.
While the transfer of the concentrate was clearly authorized by current
regulations, since the concentrate was unfit for beverage use, there
was nothing in the current regulations which specifically authorized
the second VFFC plant to receive concentrate for further processing.
The existing regulations in section 18.51 allow proprietors to
receive processing material which is produced elsewhere, subject to
certain restrictions
[[Page 30018]]
and recordkeeping requirements. However, the term ``processing
material'' is defined in section 18.11 to mean ``[t]he fruit mash or
juice from which concentrate is produced.'' This definition does not
include concentrate intended for further processing. The regulations in
section 18.56 authorize a VFFC producer to accept the return of a
shipment of concentrate shipped by it, and provide recordkeeping and
reporting requirements regarding the returned concentrate. However,
these regulations do not specifically authorize the proprietor to
accept concentrate from another proprietor for further processing.
In response to the request from the VFFC producer, ATF determined
that nothing in the Internal Revenue Code or existing regulations
precludes one VFFC proprietor from accepting concentrate from another
VFFC proprietor for further processing. However, since the existing
regulations do not specifically authorize such an operation, ATF is
proposing to amend section 18.56 to specifically allow a proprietor to
accept concentrate which is unfit for beverage use for further
processing. Such concentrate will be subject to the existing
recordkeeping and reporting requirements for concentrate which is
returned to the proprietor. ATF believes that the proposed amendment
will clarify to VFFC proprietors that the transfer of concentrate from
one plant to another for further processing is allowed, as long as the
concentrate meets the definition of a concentrate unfit for beverage
use at the time it leaves the place of manufacture. This liberalizing
amendment will allow VFFC proprietors greater flexibility in production
operations without jeopardizing the revenue in any way.
Other Possible Changes
ATF also solicits public comment concerning other possible changes
to the regulations in Part 18, such as amendments which would authorize
VFFC plants to alternate the use of their premises so as to operate
temporarily as a distilled spirits plant, bonded winery, or other
regulated facility. Comments on this proposal, as well as any other
suggestions, are welcome.
Public Participation
ATF requests written comments from all interested persons. All
comments received on or before the closing date will be carefully
considered. Comments received after that date will be given the same
consideration if it is practical to do so, but assurance of
consideration cannot be given except as to comments received on or
before the closing date.
ATF will not recognize any material as confidential. Any material
which the commenter considers to be confidential or inappropriate for
disclosure should not be included in the comment. The name of the
person submitting the comment is not exempt from disclosure.
Any interested person who desires an opportunity to comment orally
at a public hearing should submit a request, in writing, to the
Director within the 60-day comment period. The Director, however,
reserves the right to determine, in light of all circumstances, whether
a public hearing will be scheduled.
Written comments will be available for public inspection during
normal business hours at the following address: ATF Reading Room,
Office of Public Affairs and Disclosure, Room 6480, 650 Massachusetts
Avenue, NW, Washington, DC.
Regulatory Flexibility Act
It is hereby certified that this proposed regulation, if
implemented as a final rule, will not have a significant economic
impact on a substantial number of small entities. The proposed
amendment would liberalize the regulations to add a provision that will
allow for the transfer of concentrate from one VFFC plant to another
for further processing. Accordingly, a regulatory flexibility analysis
is not required because the proposal, if promulgated as a final rule,
will not have a significant economic impact on a substantial number of
small entities.
Pursuant to section 7805(f) of the Internal Revenue Code, this
proposed regulation has been submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small business.
Executive Order 12866
It has been determined that this proposed regulation is not a
significant regulatory action as defined in Executive Order 12866.
Accordingly, this proposal is not subject to the analysis required by
this Executive Order.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995, no persons are required
to respond to a collection of information unless it displays a valid
OMB control number. The collections of information contained in the
regulations proposed to be amended by this notice have been previously
reviewed and approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 3504(h))
under control numbers 1512-0046 and 1512-0098. The proposed amendment
is not expected to result in any change in the total number of burden
hours.
Drafting Information: The principal author of this document is
Mary A. Wood of the Wine, Beer, and Spirits Regulations Branch,
Bureau of Alcohol, Tobacco and Firearms.
List of Subjects in 27 CFR Part 18
Administrative practice and procedure, Authority delegations,
Excise taxes, Exports, Labeling, Reporting requirements, Security
measures, Spices and flavorings, Stills, and Surety bonds.
Authority and Issuance
ATF is proposing to amend Part 18 in Title 27 of the Code of
Federal Regulations as follows:
PART 18--PRODUCTION OF VOLATILE FRUIT-FLAVOR CONCENTRATE
Par. 1. The authority citation for Part 18 continues to read as
follows:
Authority: 26 U.S.C. 5001, 5172, 5178, 5179, 5203, 5511, 5552,
6065, 7805; 44 U.S.C. 3504(h).
Par. 2. Section 18.56 is revised to read as follows:
Sec. 18.56 Receipt of concentrate.
(a) General. The proprietor of a concentrate plant may accept the
return of concentrate that it shipped. In addition, concentrate that is
unfit for beverage use may be received from another concentrate plant
for further processing in accordance with this part.
(b) Record of concentrate received. When concentrate is received,
the proprietor shall record the receipt, including the name of the
consignor and a notation regarding any loss in transit or other
discrepancy.
(c) Report of concentrate received. The quantity of concentrate
received shall be reported on an unused line on the annual report, ATF
Form 1695 (5520.2).
(Approved by the Office of Management and Budget under control
numbers 1512-0046 and 1512-0098).
Signed: May 20, 1996.
John W. Magaw,
Director.
Approved: May 24, 1996.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 96-14860 Filed 6-12-96; 8:45 am]
BILLING CODE 4810-31-U