[Federal Register Volume 61, Number 155 (Friday, August 9, 1996)]
[Rules and Regulations]
[Pages 41500-41505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20327]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 252 and 290

[Notice No. 835; Re: Notice Numbers 752, 754, 761 and 764]
RIN 1512-AA98 and 1512-AB03


Exportation of Alcoholic Beverages, Denatured Alcohol, Tobacco 
Products and Cigarette Papers and Tubes (95R-046P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Advance notice of proposed rulemaking.

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

SUMMARY: As part of a regulatory reform initiative, the Bureau of 
Alcohol, Tobacco and Firearms (ATF) is proposing to revise and recodify 
the regulations covering exportation of alcoholic beverages, beer 
concentrate, specially denatured alcohol, tobacco products, and 
cigarette papers and tubes. Proposed changes include: setting standards 
for satisfactory evidence of exportation, streamlining export 
procedures, and reducing the paperwork burden on exporters.

DATES: Written comments must be received by October 8, 1996.

ADDRESSES: Send 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. 835. Copies of 
written comments received in response to this advance notice of 
proposed rulemaking will be available for public inspection during 
normal business hours at: ATF Reference Library, Office of Public 
Affairs and Disclosure, Room 6300, 650 Massachusetts Avenue, NW., 
Washington, DC 20226.

FOR FURTHER INFORMATION CONTACT: Marjorie D. Ruhf, Wine, Beer and 
Spirits Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, 
650 Massachusetts Avenue, NW., Washington, DC 20226 (202-927-8230).

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 propose administrative changes to its regulations. In 
addition, on April 13, 1995, the Bureau published Notice 809 (60 FR 
18783) requesting comments from the public regarding which ATF 
regulations could be improved or eliminated. No specific comments were 
received from the public concerning 27 CFR parts 252 and 290, but the 
Bureau wishes to substantially revise these parts of the regulations 
for reasons discussed later in the supplementary information.

Statutory Basis for Regulations

    Since ATF wishes to open all areas of the export regulations for 
comment at this time, we will begin with a brief summary of the 
underlying statutes. In particular, we note there are some areas where 
the statutory treatment of different commodities varies widely. Any 
future regulations will reflect these statutory differences.
    Distilled spirits may be withdrawn without payment of tax for 
exportation (after making such application, filing such bonds, and 
complying with such other requirements as may by regulations be 
prescribed), for transfer to foreign-trade zones, for use of certain 
vessels and aircraft, or for transfer to a customs bonded warehouse for 
exportation, storage pending exportation, or withdrawal and use by 
eligible diplomatic personnel. See 26 U.S.C. 5175, 5214 and 5066.
    Wine may be withdrawn from bonded premises without payment of tax 
for export by the proprietor or by any authorized exporter (under such 
regulations and bonds as the Secretary may deem necessary); for 
transfer to any foreign-trade zone; for use of certain vessels and 
aircraft as authorized by law; or for transfer to any customs bonded 
warehouse. Wine entered into customs bonded warehouses may be withdrawn 
free of tax by eligible diplomatic personnel. See 26 U.S.C. 5362.
    Beer may be removed from brewery premises without payment of tax 
for exportation, use as supplies for certain vessels and aircraft, or 
deposit in a foreign trade zone for exportation or storage pending 
exportation (in such containers and under such regulations, and on the 
giving of such notices, entries, and bonds and other security, as the 
Secretary may by regulations prescribe). The brewer may also withdraw 
beer concentrate without payment of tax for exportation or for deposit 
in a foreign trade zone. See 19 U.S. C. 81c, 26 U.S.C. 5053.
    Distilled spirits may be withdrawn free of tax for exportation 
after denaturation in the manner prescribed by law. See 26 U.S.C. 5214.
    When taxpaid distilled spirits which have been manufactured, 
produced, bottled, or packaged in the United States and marked 
especially for export are exported, laden for use as supplies on 
qualified vessels or aircraft, deposited in a foreign trade zone for 
exportation or storage pending exportation, or deposited in a customs 
bonded warehouse for tax free withdrawal and use by accredited foreign 
diplomatic personnel, the bottler or packager of the spirits may claim 
drawback of the taxes paid. The Secretary is authorized to prescribe 
regulations governing the determination and payment or crediting of 
drawback, including the requirements of such notices, bonds, bills of 
lading, and other evidence indicating payment and determination of tax 
and exportation as are deemed necessary. See 19 U.S.C. 81c and 1309, 26 
U.S.C. 5062, 5066.
    When taxpaid wine which has been manufactured, produced, bottled, 
or packaged in the United States is exported, laden for use as supplies 
on qualified vessels or aircraft, or deposited in a foreign trade zone 
for exportation or storage pending exportation, drawback of tax may be 
claimed by the proprietor of the bonded wine cellar, taxpaid wine 
bottling house, or wholesale liquor dealer who withdrew the wine. The 
Secretary is authorized to prescribe regulations governing the 
determination and payment or crediting of drawback, including the 
requirements of such notices, bonds, bills of lading, and other 
evidence indicating payment and determination of tax and exportation as 
are deemed necessary. See 19 U.S.C. 81c and 1309, 26 U.S.C. 5062, 5066.
    On the exportation of beer which has been brewed or produced in the 
United States, the brewer thereof shall be allowed a drawback equal in 
amount to the tax found to have been paid on such beer, to be paid on 
submission of such

[[Page 41501]]

evidence, records and certificates indicating exportation, as the 
Secretary may by regulations prescribe. Exportation includes delivery 
for use as supplies on certain vessels or aircraft, or deposit in a 
foreign trade zone for exportation or for storage pending exportation. 
See 19 U.S.C. 81c and 1309, 26 U.S.C. 5055.
    A manufacturer or export warehouse proprietor may remove tobacco 
products and cigarette papers and tubes, without payment of tax, for 
shipment to a foreign country, Puerto Rico, the Virgin Islands, or a 
possession of the United States, or for consumption beyond the 
jurisdiction of the internal revenue laws of the United States. See 26 
U.S.C. 5704(b).
    Drawback of tax paid on tobacco products and cigarette papers and 
tubes which have been exported will be allowed in accordance with the 
regulations, upon the filing of a bond. See 26 U.S.C. 5706.

Rulemaking History

    With minor exceptions, the export regulations for alcoholic 
beverages and tobacco products date from 1960 and 1966, respectively. 
The Internal Revenue Service, which administered these regulations at 
the time, issued Revenue Rulings 71-208 (1971-1 C.B. 480) and 72-300 
(1972-1 C.B. 425) to advise exporters that it would consider 
applications for permission to submit alternative forms of 
documentation of export. By 1982, ATF identified the need for a major 
revision of the export regulations and set a policy of allowing such 
variances as were needed from the existing regulations until the 
revision could be accomplished. Numerous variances and pilot projects 
were approved under this policy, at both the district and national 
level. Revisions to the regulations were discussed and reviewed, but no 
Federal Register documents were published until 1992.
    On September 8, 1992, ATF published advance notices of proposed 
rulemaking to solicit comments from interested persons on revision and 
recodification of Part 252, Exportation of liquors (Notice No. 752, 57 
FR 40887) and Part 290, Exportation of tobacco products and cigarette 
papers and tubes, without payment of tax, or with drawback of tax 
(Notice No. 754, 57 FR 40889). The comment periods, both originally 
scheduled to close October 8, 1992, were subsequently extended until 
December 7, 1992, for liquors and March 9, 1993, for tobacco products 
and cigarette papers and tubes.
    First, the advance notices outlined the underlying statutory 
requirements for exportation of the various commodities they covered. 
Second, the advance notices suggested liberalizing export documentation 
rules. Proposals included:

--Using a continuing application and a record of individual withdrawals 
to be maintained by the proprietor instead of applications or notices 
covering individual export transactions;
--Having the proprietor submit a monthly summary of export transactions 
with its monthly operation report instead of sending advance copies of 
the individual transaction forms;
--Using commercial records in place of ATF forms;
--Accepting certain commercial transaction records in place of Customs 
certification as evidence of exportation; and
--Allowing exporters to maintain evidence of exportation at their 
premises rather than sending it to ATF.

    The two notices also made suggestions specific to individual 
commodities, such as permitting dealers in specially denatured spirits 
to withdraw such spirits free of tax for export and allowing greater 
flexibility in the export marks placed on tobacco products.
    Finally, the two notices solicited general comments on ways to 
reduce paperwork, simplify procedures, and eliminate unnecessary 
regulations in this area while continuing to maintain adequate 
safeguards to the revenue.

Public Comments on Previous ANPRMs

    Notice No. 752 concerning liquors received seven comments from 
alcoholic beverage industry members or their representatives. All 
comments were generally supportive of the goal of liberalizing export 
procedures as stated in the notices. However, the suggestion that a 
monthly summary of exports be submitted to ATF was opposed by two 
commenters. The Brandy Association of America and the National 
Association of Beverage Importers, Inc. both commented that this 
proposal was unnecessary and duplicative. Glen Ellen Winery supported 
ATF's suggestion that proprietors maintain evidence of exportation at 
their premises instead of sending such evidence to ATF. They further 
noted that proprietors ``found to have a system lacking in controls 
could be required to continue submitting documents each month.'' We 
will discuss these issues in greater detail in the sections of this 
document on monthly summaries of export removals and allowing 
proprietors to maintain evidence of exportation at their own premises.
    On another subject, Miller Brewing Company suggested allowing 
brewers to take credit on their tax returns instead of waiting for ATF 
to issue a refund check for drawback of tax on exported beer. This is 
not something ATF can change through rulemaking, since the underlying 
statute, 26 U.S.C. 5055, which authorizes payment of export drawback on 
beer, does not authorize credit. Section 5062(b), which covers drawback 
for wine and spirits, authorizes either credit or payment. Under 
current law, ATF believes it would be possible to credit proceeds of an 
allowed claim, pursuant to authorization of the claimant, against tax 
owed by such claimant. We will propose a regulatory procedure to comply 
with requests for credit of the proceeds of an allowed claim from 
brewers. Finally, the alcoholic beverage industry commenters were 
unanimous and enthusiastic in their endorsement of ATF's proposal to 
substitute commercial records for ATF export forms.
    Notice No. 754 on tobacco products received two comments from 
tobacco product manufacturers. Both Brown & Williamson Tobacco 
Corporation and R.J. Reynolds Tobacco Company supported continued use 
of ATF Form 2149/2150, saying it provided the best method of 
documenting export removals for both ATF and industry. R.J. Reynolds 
went on to request clarification of export marking requirements and 
procedures for shipments of domestic and export tobacco products to 
Class 9 Customs Bonded Warehouses.

Diversion Problems

    As ATF noted in Industry Circular 94-1, dated April 14, 1994, and 
Industry Circular 95-1, dated January 19, 1995, we have encountered a 
number of situations in which distilled spirits were withdrawn from 
bond for exportation overseas, but were smuggled into Canada or 
remained illegally in the United States. Although these circulars dealt 
specifically with spirits, other commodities regulated by ATF are also 
being found outside of legitimate export channels. As a result of these 
findings, ATF is increasing its investigations of exports, and taking 
appropriate action where it finds goods have been diverted. Industry 
Circular 95-1 points out the tax and permit consequences of improperly 
documenting exports, as well as the potential civil and criminal 
penalties for violations of Titles 18 and 26 of the U.S. Code.

[[Page 41502]]

Summary of Export Variances and Pilot Programs

    ATF has approved numerous individual variances and pilot programs 
for exporters of alcoholic beverages and tobacco products or cigarette 
papers and tubes. Recently, the Bureau has begun evaluating the 
component parts of these variances and pilot programs to determine 
which have been successful for both exporters and the Bureau and which 
have not. The variances and pilot programs that have been approved by 
ATF are summarized below. We are requesting comments on whether these 
procedures should be incorporated into the regulations in the manner 
described below or with some modifications. While some of the 
procedures dealt with alcoholic beverages and others with tobacco 
products, we are interested in comments on whether the procedures 
should apply to only some of these taxable commodities or should apply 
equally to alcoholic beverages, denatured alcohol, tobacco products or 
cigarette papers and tubes destined for exportation.

Substituting Commercial Documents for ATF Forms

    Existing regulations require exporters to use ATF forms to record 
shipments destined for export and obtain certification of export. Under 
approved variances, some exporters substitute commercial documents 
containing required minimum information for the ATF forms. This 
variance has been generally successful. Exporters using this variance 
have stamped certificate of receipt information on an empty area of the 
commercial document and obtained appropriate certifications. ATF users 
(inspectors, auditors, and specialists) found that the commercial 
records met their needs, except that with a variety of different 
documents covering different types of shipments, the benefit of 
serially numbered export documents was no longer available. Since 
invoices and bills of lading must be generated to cover export 
shipments anyway, this variance has reduced the paperwork burden on 
exporters. ATF is considering eliminating the ATF export forms in favor 
of commercial transaction forms, with minimum information requirements 
to be set forth in regulations. However, the two commenters on the 
tobacco export proposals expressed a preference for continued 
availability of ATF forms. We would like details of instances where ATF 
forms work better than commercial documents, so that we may determine 
if they should be retained for certain types of transactions.

Notice and Application Requirements

    Under existing regulations, people who export alcoholic beverages, 
tobacco products, or cigarette papers and tubes without payment of tax 
file an advance copy (or copies) of the appropriate ATF form as either 
a notice or an application. Proprietors of DSPs, wineries, breweries 
and export warehouses, and tobacco product and cigarette paper and tube 
manufacturers file a notice. Other exporters file an application and a 
bond which must be approved before the export shipment can be made. 
Some proprietors who are required by regulation to file a notice have 
requested and received permission to maintain records of pending 
exports at their premises, either on the ATF form or on an approved 
substitute document. The terms and conditions of the individual 
variances differ, but such variances are granted only to proprietors 
with maximum bond coverage and good compliance history. Proprietors are 
asked to submit a monthly summary of export shipments to ATF in lieu of 
filing individual notices. These variances have generally worked well, 
and most ATF users of this information feel the notice requirement can 
be eliminated without jeopardy to the revenue. Exporters appear to 
prefer maintaining the records of pending export shipments at their 
premises. ATF is considering a proposal to eliminate the notice 
requirement for proprietors with maximum bond coverage. The application 
requirement would be retained, as would the notice requirement for 
proprietors with less than maximum bond coverage. Comments are 
solicited on this proposal.

Monthly Summaries of Export Removals

    As noted above, two commenters on Notice No. 752 specifically 
stated they believed the proposed monthly summary of export shipments 
was an unnecessary burden on the industry. We do not agree such a 
summary is an added burden, since the exporter must summarize and total 
export shipments to arrive at the export figure shown in the monthly 
report of operations. We simply propose that a copy of this workpaper 
be filed with the report. Further, in ATF's experience, this summary 
provides needed structure in the absence of notices and serially 
numbered ATF export forms. Despite the commenters' claim that the 
information is available elsewhere in the proprietor's records, we 
believe the preparation of a summary gives both ATF and the exporter a 
basis to determine if all exports are accounted for. If ATF proposes 
amending the regulations to eliminate the notice requirement, allow use 
of commercial documents as evidence of export, and allow proprietors to 
maintain such evidence at their premises instead of mailing it to ATF, 
we will also propose requiring submission of some sort of summary of 
pending export shipments. Additionally, now that certain small wineries 
are allowed to file annual operational reports and certain small 
brewers are allowed to file quarterly operational reports, we must 
consider whether proprietors who file less frequent operational reports 
should also file less frequent summaries. Commenters who disagree with 
the summary proposal are requested to provide specific alternative 
suggestions for insuring that all exports are accounted for.

Allowing Proprietors To Maintain Evidence of Exportation at Their Own 
Premises

    Under variances approved by ATF, some proprietors are maintaining 
evidence of exportation at their premises instead of sending it to ATF 
Technical Services in support of export drawback claims or in order to 
be relieved of liability for shipments withdrawn for export without 
payment of tax. This variance has presented more administrative 
problems than any other, but we believe this may be due to an 
incomplete understanding of the exporter's responsibility under such 
variances. When the export evidence is filed with ATF, ATF examines the 
evidence, notes any discrepancies, and follows up with the exporter. 
Post audits have revealed exporters sometimes rely on evidence which is 
not approved by ATF, and some proprietors who export without payment of 
tax do not follow up appropriately if they do not receive evidence of 
exportation. Even in cases where exportation is ultimately documented, 
ATF reviewers encounter substantial administrative difficulty in this 
area.
    When ATF examines documentation we receive on products withdrawn 
without payment of tax for exportation, ATF follows up with the 
exporter in cases where the evidence of exportation is not received 
within 90 days of withdrawal for exportation. The exporter is usually 
given another 45 days to obtain evidence of exportation or make a 
voluntary payment of tax. After that, if no evidence of exportation is 
received, ATF will enter an assessment for the tax due. Export 
proprietors operating under variances

[[Page 41503]]

which allow maintenance of export documentation at their premises often 
do not realize they have the same responsibility to voluntarily pay 
taxes if evidence of exportation was not received in a reasonable 
amount of time.
    If we are to consider allowing proprietors to maintain their own 
export documentation at their premises as part of this rulemaking, we 
believe it will be necessary to include safeguards, such as very 
specific time limits and instructions as to when tax becomes due on 
undocumented exports. In addition, if such a liberalization is 
proposed, we will also propose the delegation of authority to the 
District Directors and Chiefs, Technical Services to require filing of 
this documentation with ATF in cases where it is deemed necessary. One 
further safeguard under consideration is a requirement that exporters 
submit a summary of shipments withdrawn without payment of tax for 
export during a given period with their operational reports for that 
period (as discussed above) and, 90 days later, submit a second copy of 
the summary showing by a check mark or other notation that each of the 
summarized shipments has been documented. For those exports which are 
not documented at the time, the 45-day notice and assessment process 
would begin. We will also propose adding procedures for claiming refund 
of any taxes paid in these circumstances (subject to the time limits in 
26 U.S.C.6511) if exportation is subsequently documented. Comments on 
these proposals and any alternative suggestions are solicited.

Alternate Evidence of Export

    ATF has had mixed results from allowing alternatives to Customs 
certification as evidence of export. We will discuss some of the major 
categories below, and then give our proposals.
    Export bills of lading signed by a representative of the export 
carrier or certificates of landing signed by a representative of the 
destination country have proven to be generally reliable, but there 
have been exceptions which raise questions about the reliability of any 
export documentation. One difficulty with these alternate 
certifications is that there is no standardized way to verify that the 
person signing is employed by and authorized to sign for the carrier or 
the receiving country. We request input from industry members on 
commercial safeguards available to assure the validity of such 
receipts. ATF may be able to adapt any such safeguards for use in 
verifying export certifications.
    In some cases we approved variances allowing evidence of payment by 
the foreign customer to be used as evidence of exportation, but we 
found that this variance was not always successful. Some foreign 
customers paid a foreign subsidiary of the U.S. exporter, and the 
financial record offered as evidence of export was an internal company 
document or, conversely, the U.S. exporter was paid by a U.S. 
subsidiary of the foreign customer, or even by an unrelated broker 
located in the U.S. The anticipated safeguard of a foreign source of 
funds unrelated to the exporter was not present, so these forms of 
documentation, by themselves, have not been adequate. If we propose to 
accept evidence of payment at all, we will propose limitations on the 
types of transactions where it can be used. We solicit comments on this 
approach.
    In some post-audits, exporters presented facsimile transmitted 
copies of signed export bills of lading or copies of unsigned computer 
printouts of bills of lading from shipping companies as evidence of 
exportation where the original document was unavailable. We are 
considering what circumstances would warrant the use of such forms, and 
what evidence might be available to assure that these facsimile records 
represent true copies of the original documents. ATF must be able to 
rely on any documents accepted. We solicit comments on both the need 
for facsimile copies and computer generated forms to document 
exportation, and any appropriate safeguards.

Proposals on Export Documentation

    As discussed above, we have found problems with some of the forms 
of export documentation which we allowed under variances. As we analyze 
the reports of investigation, we have tried to define the features or 
characteristics we want to see in future export documentation. Here is 
a list of proposed standards:

--The document should clearly relate to the goods in question;
--Certification should come from someone other than the exporter or its 
affiliate; and
--Certification should come from someone with firsthand knowledge that 
the goods were exported.

    Exporters have offered such items as the Commerce Department's 
Shipper's Export Declaration or inland bills of lading with export 
shipping instructions attached, both of which are prepared by the 
exporter alone, or a freight bill from the export carrier, which may 
not identify the merchandise well enough for our purposes, or a 
broker's certification, which may not be based on firsthand knowledge. 
In addition to ATF's revenue protection interest in assuring these 
goods were actually exported, exporters have their own commercial 
reasons for wanting reliable shipping documents. We request examples or 
descriptions of documents or records generated as part of export 
transactions which may meet the standards proposed above or otherwise 
provide assurance that goods destined for export did, in fact, leave 
the country. Finally, we solicit comments on whether exporters would 
prefer a list of specific documents which would be acceptable (with the 
option of applying for permission to use other specific documents), or 
a more general statement of standards which must be met by any document 
used as evidence of export.

Export Transportation, Consignment and Ownership

    Another important safeguard built into the requirement that ATF 
receive and review copies of all export transaction forms was our 
ability to screen export shipments to insure that the export 
transaction warranted such status. As we review records retained at 
their premises by exporters operating under a variance, we find that 
there are misunderstandings in two areas: eligibility for exportation 
without payment of tax, and need for permits and special taxes on the 
part of some purchasers. We believe that clarification of the 
regulations in these areas will improve compliance.

Eligibility for Export Without Payment of Tax

    Some exporters were found to be making withdrawals of merchandise 
without payment of tax for export, and then failing to transport the 
merchandise directly to the foreign destination or place it under 
Customs supervision. In addition, ATF has received applications for 
permission to store, repack or consolidate shipments of products 
withdrawn without payment of tax for export while such products were in 
transit to the point of export. ATF's main concern in reviewing these 
arrangements is that the locations where the storage, repacking or 
consolidation occur are not covered by an ATF bond, and are not under 
the supervision of the Customs Service. ATF is concerned that these 
arrangements do not afford adequate protection to the revenue and they 
present administrative problems, in that ATF would have to regulate 
many temporary storage facilities.

[[Page 41504]]

    Under the current law and regulations, the storage, repacking or 
consolidation of taxable products withdrawn for exportation without 
payment of tax can only occur on ATF bonded premises, in a customs 
bonded warehouse, in a foreign trade zone, or at the port of export 
under the supervision of the District Director of the Customs Service. 
However, there is no such restriction on storage, repacking or 
consolidation of taxpaid export shipments in transit.
    If commenters wish to request that ATF reconsider its position on 
this matter, we request suggestions as to appropriate safeguards to 
assure protection to the revenue without placing undue restrictions on 
persons transporting taxable merchandise in bond. Should there be 
limitations on allowable location, responsible persons, or time spent 
in storage? Are records generated during repacking or consolidation 
which would permit positive identification of the shipment and a 
``paper trail'' for both commercial and regulatory purposes? What sort 
of permit or bonding requirement should be imposed on facilities where 
untaxpaid merchandise is stored, repacked or consolidated while in 
transit?

Wholesaler's Basic Permits and Special Tax Requirements for 
Purchasers

    A second issue noted during ATF review of documentation retained at 
exporters' premises is the need for wholesalers' permits and payment of 
special (occupational) tax when someone other than the producer exports 
alcoholic beverages. Revenue Ruling 60-299 (1960-2 C.B. 619) stated:

    A ship chandler who engages in the domestic purchase of 
distilled spirits, wine or beer for sale (even though he sells them 
exclusively to vessels engaged in foreign trade) for use as ships 
supplies must obtain a basic permit as a wholesaler. * * *
    A ship chandler who withdraws alcoholic beverages for sale to a 
ship which is engaged in foreign trade and which uses them as ships' 
supplies solely outside the jurisdictional limits of the United 
States, is not subject to special tax as a wholesale dealer since 
such vessel is not considered a dealer within the meaning of section 
5112(a) of the Code, and the sale of spirits to such vessel is not a 
sale to another dealer as provided in section 5112(b) and (c) of the 
Code. Such a ship chandler is, however, subject to the special tax 
as a retail dealer.

    ATF believes information on this requirement should be incorporated 
into the revised regulations.

Other Changes Under Consideration

    ATF is considering allowing exporters to claim drawback on ATF Form 
5620.8 (2635), a general-purpose claim form, using commercial documents 
to show exportation instead of the ATF export drawback claim forms. 
There are several variances in place to permit exporters to maintain 
full evidence of exportation at their premises and submit a summary of 
the export shipments covered by a given claim. ATF is evaluating the 
success of these variances from its own point of view, and solicits 
industry comments on this subject. As with evidence of exports without 
payment of tax, if ATF decides to propose allowing exporters to 
maintain export documentation at their premises, we will propose 
authority for the District Director and Chief, Technical Services to 
require submission of the forms where it is deemed necessary. Where the 
export drawback claimant is also a taxpayer, we are considering 
allowing the claimant the option of requesting that the proceeds of an 
approved claim be credited against tax owed by such claimant.
    Under existing regulations, all wine exporters must prepare two 
documents, an export form, and a certificate of tax determination, Form 
2605. ATF plans to eliminate the certificate requirement for exports by 
the bottler who makes the tax determination, and only require such a 
certificate when the exporter is not the bottler.
    Under current alcohol and tobacco export regulations and approved 
variances, the marks showing that goods are destined for export are 
sometimes required and sometimes not. The only statutory requirement 
for export marks applies to taxpaid distilled spirits exported subject 
to drawback, but many sections of the regulations require export marks. 
The marking requirements have historically been viewed as a useful 
enforcement tool. For instance, a consumer may report finding products 
marked for export on domestic retail shelves. Such ``leads'' may result 
in the government's apprehension of a smuggler or enhance a producer's 
ability to identify an individual who is selling returned goods which 
should have been destroyed for quality control reasons. ATF is 
considering whether export marks should be mandatory in all situations 
and whether any product so marked that is found in domestic commerce 
should be subject to forfeiture as property used in violation of the 
internal revenue laws. Accordingly, we solicit comments from interested 
persons concerning the advantages or disadvantages of export markings.
    In ATF's review of its own regulations, we noted that there was 
considerable duplication of regulatory language because there are 
separate parts of the regulations which cover exportation of 
``liquors'' (alcoholic beverages and denatured alcohol) and tobacco 
products and cigarette papers and tubes. Since the concepts of tax 
liability, bond coverage and need for evidence of exportation are the 
same for all these commodities, and some exporters handle both 
alcoholic beverages and tobacco products, we solicit comments on the 
idea of merging the export provisions for alcoholic beverages and 
denatured alcohol, currently in part 252, and those for tobacco 
products and cigarette papers and tubes, currently in part 290, into a 
single part. The export warehouse qualification and operation 
requirements, which are also in part 290, may then be retained as a 
separate part or merged into part 270, Manufacture of Tobacco Products, 
since the qualification, bonding and operational requirements for these 
activities are closely related and derived from the same or similar 
sections of the law. Interested persons are invited to comment on these 
alternatives.

Verification of Evidence Presented

    ATF is developing methods of verifying the accuracy of any piece of 
export documentation presented in support of an export without payment 
of tax or an export drawback claim by confirming that such shipment was 
received through legitimate channels at the stated destination. Such 
confirmation will be done by contacting appropriate officials at the 
stated destination, either under a bilateral agreement with the 
destination country under 26 U.S.C. 6103(k)(4) or pursuant to new 
regulations which ATF is considering adding to the export regulations 
under the provisions of 26 U.S.C. 6103(k)(6). This section allows 
disclosure of tax information for investigative purposes in such 
situations and under such conditions as the Secretary may prescribe by 
regulations.

Administrative Provisions

    The tobacco export regulations at 27 CFR part 290 clearly noted 
ATF's right of entry and examination and assessment authority, but the 
liquor export regulations in 27 CFR part 252 do not. We plan to propose 
such provisions as a part of the revised regulations, along with a 
reference to the criminal penalties imposed by Titles 18 and 26 of the 
U.S. Code for falsification or fraudulent execution of export 
documentation.

[[Page 41505]]

Transition to New Rules

    When new export rules are implemented, they will supersede existing 
regulations and all variances under those regulations. Since there are 
so many different arrangements in place, we understand that a period of 
transition will be needed. We believe that allowing two months from 
publication of the final rule to its effective date should provide 
adequate time for exporters to change to the new procedures. We solicit 
comments on this subject.

Public Participation

    ATF requests comments from all interested persons on the proposals 
presented in this advance notice. We particularly request statements 
from exporters on the significance and reliability of available 
commercial documentation. We also solicit comments on any additional 
issues related to exportation of alcoholic beverages, denatured 
alcohol, tobacco products, or paper tubes.
    Comments received on or before the closing date will be carefully 
considered. Comments received after the closing 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 or 
comments as confidential. All comments submitted in response to this 
notice will be available for public inspection. Any material that the 
commenter considers confidential or inappropriate for disclosure to the 
public should not be included in the comment. The name of the person 
submitting the comment is not exempt from disclosure.

Executive Order 12866

    It has been determined that this document is not a major regulation 
as defined in E.O. 12866; therefore, a regulatory impact analysis is 
not required. The proposals discussed in this advance notice of 
proposed rulemaking, if adopted in regulations, will not have an annual 
effect on the economy of $100 million or more, will not result in a 
major increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographical regions, 
and will not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or on the ability of 
the United States-based enterprises to compete with foreign-based 
enterprises in domestic or export markets.

    Drafting Information: The principal author of this document is 
Marjorie D. Ruhf of the Wine, Beer and Spirits Regulations Branch, 
Bureau of Alcohol, Tobacco and Firearms.

List of Subjects

27 CFR Part 252

    Aircraft, Alcohol and alcoholic beverages, Armed Forces, Authority 
delegations (government agencies), Beer, Claims, Excise taxes, Exports, 
Fishing vessels, Foreign trade zones, Labeling, Liquors, Packaging and 
containers, Reporting and recordkeeping requirements, Surety bonds, 
Vessels, Warehouses, Wine.

27 CFR Part 290

    Administrative practice and procedure, Aircraft, Authority 
delegations (government agencies), Cigarette papers and tubes, Claims, 
Customs duties and inspection, Excise taxes, Exports, Foreign trade 
zones, Labeling, Packaging and containers, Penalties, Surety bonds, 
Vessels, Warehouses.

    Authority: This advance notice of proposed rulemaking is issued 
under the authority in 26 U.S.C. 7805.

    Signed: May 13, 1996.
John W. Magaw,
Director.

    Approved: June 5, 1996.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 96-20327 Filed 8-8-96; 8:45 am]
BILLING CODE 4810-31-P