[Federal Register Volume 63, Number 229 (Monday, November 30, 1998)]
[Proposed Rules]
[Pages 65720-65725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30942]



[[Page 65720]]

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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 19

[Notice No. 870]
RIN 1512-AB58


Distilled Spirits Plant Regulatory Initiative Proposals

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: ATF is proposing changes to the distilled spirits plant 
regulations to implement the Administration's Reinventing Government 
effort to reduce the regulatory burden and streamline requirements on 
the regulated public.
    Proposals for change include removing an obsolete provision 
relating to special (occupational) tax; liberalizing the requirement 
for approval of changes in plant security personnel or procedures; 
reducing the paperwork when plant premises are alternated with other 
premises according to a previously approved plan; providing for 
alternation of distilled spirits plant and brewery premises; allowing 
denaturation and manufacture of articles to be done in a single, 
unified process; specifying marks for packages of spirits withdrawn 
taxpaid for industrial use; clarifying regulations that refer to a 
transfer record required when spirits are transferred in bulk from 
customs custody to the bonded premises of a distilled spirits plant; 
and incorporating a provision of Industry Circular 80-6 regarding the 
importation of alcohol fuel.
    ATF believes these proposed changes will benefit distilled spirits 
plant proprietors and other industry members by enabling them to 
operate more easily and with less regulatory oversight from the 
Government.
    Besides proposing and soliciting comments on these specific 
changes, ATF is requesting suggestions for additional changes that may, 
in the future, be proposed for the general system of recordkeeping at 
distilled spirits plants.

DATES: Written comments on specific proposals for which regulatory 
language is set forth in this notice must be received by January 29, 
1999. Comments suggesting future possible changes pertaining to the 
general system of recordkeeping at distilled spirits plants must be 
received by March 30, 1999.

ADDRESSES: Send written comments to: Chief, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 
20091-0221; Notice No. 870.
    Copies of written comments in response to this notice of proposed 
rulemaking will be available for public inspection during normal 
business hours in the ATF Reference Library, Room 6480, 650 
Massachusetts Avenue NW., Washington, DC 20226.

FOR FURTHER INFORMATION CONTACT: Steven C. Simon, Regulations Division, 
650 Massachusetts Avenue NW., Washington, DC 20226; telephone (202) 
927-8210.

SUPPLEMENTARY INFORMATION:

Delegations of Authority

    Since the authorities formerly assigned to the ``regional director 
(compliance)'' have been reassigned to other officials, references to 
``regional director (compliance)'' in regulations proposed to be 
amended or promulgated by this document are proposed to be changed to 
``appropriate ATF official.''

Special Tax Provisions

    ATF proposes to delete obsolete provisions in Sec. 19.49(a)(2) 
which refer to the special (occupational) tax rate applicable to 
distilled spirits plants in business as of January 1, 1988. There are 
no substantive changes proposed relating to special tax.

Change in Security Personnel or Procedures

    Currently, Sec. 19.153(b) requires an application for amended plant 
registration (ATF Form 5110.41) to be filed each time there is a change 
in plant security personnel or procedures. ATF has determined that this 
requirement may be liberalized without jeopardy to the revenue. 
Therefore, this notice proposes to amend Sec. 19.153(b) to require a 
letterhead application for changes in security procedures 
(Sec. 19.153(a) (1)-(4)), and a letterhead notice for changes in 
security personnel (Sec. 19.153(a)(5)). The plant registration would be 
updated on an annual basis to incorporate changes made during the 
preceding year.

Alternation of Premises

    Current regulations in Secs. 19.203-206 require the filing of a 
notice on ATF Form 5110.34 every time distilled spirits plant premises 
are alternated with general premises or with other ATF-regulated 
premises. However, ATF has determined that this requirement is 
unnecessary and burdensome when, as frequently occurs, these premises 
are regularly alternated according to a set plan of operations. 
Therefore, this notice proposes to amend Secs. 19.203-206 to provide 
that after the proprietor has received approval of the plan (defining 
the boundary of the premises to be alternated), the alternation may 
take place pursuant to records to be kept in a logbook. The content of 
those records is prescribed in new Sec. 19.781. Further, it is proposed 
to provide for alternation of distilled spirits plant and brewery 
premises, which is not currently provided for. With respect to 
alternation of proprietors under Sec. 19.201 and alternation with 
customs premises under Sec. 19.202, this notice proposes to substitute 
a letterhead notice for the filing of Form 5110.34; thus, that form 
(OMB control number 1512-0202) will become obsolete. The notice of 
suspension of production operations for 90 days or more in section A of 
Form 5110.34 will be covered by an amendment of Sec. 19.311.

Denaturation and Article Manufacture

    Regulations in Sec. 19.454 require gauges both before and after 
denaturation. If followed, this requirement prevents a distilled 
spirits plant from conducting denaturation and article manufacture in a 
single, unified process. A unified process may be desirable, for 
example, when manufacture of an article involves addition of more of 
the same chemicals as are used as denaturants in making the denatured 
spirits formula from which the article is manufactured. Clearly, in 
this case, and in other similar situations, it would be helpful to be 
able to add the entire quantity of chemicals for denaturation and 
article manufacture in a single step, rather than pausing to take a 
gauge after the chemicals necessary to denature the spirits had been 
added. The purpose of requiring gauges before and after denaturation is 
to obtain accurate measurements of spirits used for denaturation, and 
of denatured spirits produced. However, when denatured spirits and 
articles are manufactured in a unified process, the quantity of 
denatured spirits produced can be accurately determined by a 
computation. Therefore, this notice proposes to amend Sec. 19.454 to 
allow proprietors using such a process to use a prescribed method of 
computation to determine the quantity of denatured spirits produced.

Marks on Packages of Tax-Paid Industrial Spirits

    Regulations in Sec. 19.596 require certain information to be marked 
on ``packages'' (i.e. barrels or drums) of distilled spirits. These 
regulations primarily envision barrels of beverage spirits (e.g. 
whisky) entering bonded storage. Thus, in Sec. 19.596(a), only ``rated 
capacity'' need

[[Page 65721]]

be shown on packages filled in production or storage, since the actual 
contents of wooden barrels changes during the aging process. For 
packages filled in processing (Sec. 19.596(b)), not even the rated 
capacity is required; the proof must be shown, but not the quantity. In 
general, there is no requirement for quantity of contents to be shown 
on packages. This may be appropriate for beverage spirits, which will 
be put in bottles before withdrawal from bond, but it can be 
problematic for industrial spirits. Particularly, if spirits in drums 
are withdrawn on tax determination for shipment to a manufacturer of 
nonbeverage products, that manufacturer does not have a ready means of 
determining their contents for taking a physical inventory. Moreover, 
the absence of a requirement for quantity of contents to be shown on 
packages is abnormal, when compared with regulations governing similar 
situations. Thus, quantity of contents must be shown on cases of 
spirits filled in processing (Sec. 19.607), on cases of industrial 
alcohol (Sec. 19.608), on containers of imported spirits (Sec. 19.484), 
on containers of spirits from an alcohol fuel plant (Sec. 19.1008), on 
bulk conveyances (Sec. 19.606), and even on packages of denatured 
spirits (Sec. 19.601). ATF feels that the advantage to nonbeverage 
manufacturers in having contents information as a required package mark 
outweighs any added burden on distilled spirits plant proprietors in 
being required to provide such information. Therefore, this notice 
proposes an amendment to Sec. 19.605 to require proof, tare, and proof 
gallons to be marked on packages of spirits withdrawn on determination 
of tax.

Transfer Record for Shipments From Customs Custody

    The transfer record for spirits being received into ATF bond from 
customs custody is mentioned in Sec. 19.770 in a way that implies that 
this transfer record would be prepared under that section. However, 27 
CFR 251.138 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. 
Therefore, it is 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. 251.138. ATF also proposes to add a 
sentence to Sec. 19.481, cross referencing the requirements of part 251 
pertaining to transfers from customs custody.

Importation of Alcohol Fuel

    Industry Circular 80-6, titled ``Distilled Spirits for Fuel Use,'' 
explained that an alcohol fuel plant may receive shipments of imported 
alcohol from customs custody, provided the alcohol was not produced 
from petroleum, natural gas, or coal. Subsequently, ATF has determined 
that, under the statute, this privilege only applies to medium and 
large alcohol fuel plants, since small plants are not covered by a 
bond. (Nontaxpaid bulk spirits transferred from customs custody are 
required by 26 U.S.C. 5232 to go to premises that are ``bonded.'') 
Further, 26 U.S.C. 5181(a)(1) provides that an alcohol fuel plant may 
be established solely for the purpose of (A) producing, processing, and 
storing, and (B) using or distributing distilled spirits for fuel use. 
Therefore, an alcohol fuel plant may not be established solely for the 
purpose of receiving and processing imported alcohol, since no 
distilled spirits would be ``produced.'' For the same reason, imported 
spirits received at an alcohol fuel plant must be subjected to some 
form of manufacture or processing (such as addition of materials to 
render the spirits unfit for beverage use). However, 26 U.S.C. 5232 
prevents such spirits from being redistilled or denatured if they were 
imported at less than 185 deg. proof. This notice proposes to 
incorporate expressly these determinations in the regulations by adding 
a new Sec. 19.1003.

General System of Recordkeeping

    In general, the system of recordkeeping prescribed in part 19 is 
derived from the system that was in place prior to the institution of 
``all-in-bond'' in 1980. In many instances, use of commercial records 
is prescribed in lieu of previously required Government forms, but the 
content of the commercial record must be the same as was formerly shown 
on the Government form. Thus, the present recordkeeping system is not 
as different from the former system as it might appear. Ultimately, the 
present system descends from the era when Federal officers were 
permanently stationed at distilled spirits plants and kept many of the 
records that are now required to be kept by the plant proprietors. ATF 
feels that this is a situation that calls for examination under the 
Administration's Reinventing Government initiative. Modern methods of 
recordkeeping, particularly the use of computers, should be taken into 
account. The entire system should be looked at globally to determine 
whether the Government's goal of ensuring that all distilled spirits 
are accounted for, from production to taxpayment, can be met by a 
modern system that is based as much as possible on the industry's own 
recordkeeping methods. Before proposing specific regulatory changes, 
comments and suggestions should be considered from all segments of the 
distilled spirits industry and others concerned. Accordingly, this 
notice requests such comments and suggestions.

Public Participation--Written Comments

    ATF requests 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 in comments as confidential. 
Comments may be disclosed to the public. Any material which a 
respondent considers to be confidential or inappropriate for disclosure 
to the public should not be included in the comment. The name of any 
person submitting a comment is not exempt from disclosure.
    Comments may be submitted by facsimile transmission to (202) 927-
8602, provided the comments: (1) are legible; (2) are 8\1/2\'' x 11'' 
in size; (3) contain a written signature; and (4) are three pages or 
less in length. Please mail (do not FAX) any comments that exceed three 
pages. Receipt of FAX transmittals will not be acknowledged. Facsimile 
transmitted comments will be treated as originals.

Disclosure

    Copies of this notice and written comments will be available for 
public inspection during normal business hours at the ATF Reading Room, 
located in the ATF Reference Library, Room 6480, 650 Massachusetts 
Avenue NW., Washington, DC.

Executive Order 12866

    It has been determined that this proposed rule is not a significant 
regulatory action, because it will not: (1) Have an annual effect on 
the economy of $100 million or more or adversely affect in a material 
way the economy, a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local or 
tribal governments or communities; (2) Create a serious inconsistency 
or otherwise interfere with an action taken or planned by another 
agency; (3) Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan

[[Page 65722]]

programs or the rights and obligations of recipients thereof; or (4) 
Raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866.

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 
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 1995 (44 U.S.C. 3507) 
under control numbers 1512-0202, 1512-0206, 1512-0215, 1512-0250, and 
1512-0461. The proposed amendments are expected to result in a net 
annual reduction of 450 burden hours, due to (1) the elimination of 
control number 1512-0202 (1,000 burden hours), (2) a net increase of 50 
burden hours under control number 1512-0206, and (3) an increase of 500 
burden hours under control number 1512-0250. Comments on these 
collections of information should be sent to the Office of Management 
and Budget, Attention: Desk Officer for the Bureau of Alcohol, Tobacco 
and Firearms, Office of Information and Regulatory Affairs, Washington, 
DC 20503, with copies to the Chief, Document Services Branch, Room 
3110, Bureau of Alcohol, Tobacco and Firearms, 650 Massachusetts Avenue 
NW., Washington, DC 20226.

Regulatory Flexibility Act

    Pursuant to Sec. 7805(f) of the Internal Revenue Code, this 
regulation has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.
    It is hereby certified that this regulation will not have a 
significant economic impact on a substantial number of small entities. 
As discussed elsewhere in this preamble, this proposed rule will ease 
the regulatory burden on small proprietors and will not: (1) impose, or 
otherwise cause, a significant increase in recordkeeping or other 
compliance burdens on a substantial number of small entities or (2) 
have significant secondary or incidental effects on a substantial 
number of small entities. The factual basis for this certification is 
that the proposed regulatory amendments will result in a reduced burden 
on small entities. Accordingly, an initial regulatory flexibility 
analysis is not required.

Drafting Information

    This notice was written by Steven C. Simon, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms.

List of Subjects in 27 CFR Part 19

    Administrative practice and procedure, Alcohol and alcoholic 
beverages, Authority delegations (Government agencies), Chemicals, 
Claims, Customs duties and inspection, Electronic fund 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.
    Issuance. Accordingly it is proposed to amend Title 27, Code of 
Federal Regulations, as follows:

PART 19--DISTILLED SPIRITS PLANTS

    Paragraph 1. The authority citation for 27 CFR Part 19 continues to 
read as follows:

    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, 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.

    Par. 2-3. Section 19.49(a) is revised to read as follows:

Sec. 19.49  Liability for special tax.

    (a) Proprietor of distilled spirits plant. Except as provided in 
Sec. 19.906, every proprietor of a distilled spirits plant shall pay a 
special (occupational) tax at a rate specified by Sec. 19.50. The tax 
shall be paid on or before the date of commencing business as a 
distilled spirits plant proprietor, and thereafter every year on or 
before July 1. On commencing business, the tax shall be computed from 
the first day of the month in which liability is incurred, through the 
following June 30. Thereafter, the tax shall be computed for the entire 
year (July 1 through June 30).
* * * * *
    Par. 4. Section 19.153 is amended by revising paragraph (b) to read 
as follows:


Sec.  19.153  Statement of physical security.

* * * * *
    (b) Changes. For changes in any of the information provided under 
paragraphs (a)(1) through (a)(4) of this section, the proprietor shall 
submit a letterhead application to the appropriate ATF official and 
receive approval thereof before instituting the change. For changes in 
security personnel listed in paragraph (a)(5) of this section, the 
proprietor shall submit a letterhead notice within 30 days after the 
change. Annually on May 1 (or other date approved by the appropriate 
ATF official), if there have been any changes, the proprietor shall 
submit an application for amended registration reflecting the changes 
made during the preceding year.
 * * * * *
    Par. 5. In Sec. 19.201, the second, fourth, and last (fifth) 
sentences of paragraph (a) are revised, and new paragraph (f) is added, 
to read as follows:


Sec. 19.201  Procedure for alternating proprietors.

    (a) General. * * * Where operations by alternating proprietors are 
limited to parts of the plant, the notice of registration shall 
describe the areas, rooms or buildings, or combinations thereof, which 
will be alternated, indicate the method to be used to separate the 
premises being alternated from those not being alternated, and be 
accompanied by special diagrams designating the parts of the plant 
which are to be alternated. * * * Once such qualifying documents have 
been approved, the plant or parts thereof may be alternated pursuant to 
letterhead notices filed in accordance with paragraph (f) of this 
section by each proprietor involved in the alternation. A single notice 
may be filed if it is signed by an authorized representative of each 
proprietor.
* * * * *
    (f) Filing of notices. The letterhead notices required by paragraph 
(a) of this section shall be submitted to the area supervisor for 
transmission to the appropriate ATF official. Separate notices shall be 
submitted for each alternation of premises. The notices must be 
received by the area supervisor prior to the effective date of the 
alternation and shall contain the following information:
    (1) The name and plant number of the proprietor(s) filing the 
notice.
    (2) Identification (by name and plant number) of the outgoing 
proprietor and the incoming proprietor.
    (3) The date and hour of the alternation.
    (4) Identification of any applicable special diagrams, in the 
registration documents of each proprietor named under paragraph (a)(1) 
of this section, depicting the portions of the premises to be 
alternated.
    (5) The purpose of the alternation.

[[Page 65723]]

    (6) Whether distilling materials, unfinished or finished spirits, 
denatured spirits, or wine will be transferred to the incoming 
proprietor.
    (7) Whether denatured spirits or articles in the processing account 
will be retained in locked tanks during the period of alternating 
proprietorship.
* * * * *
    Par. 6. In Sec. 19.202, the fifth sentence of paragraph (a) and the 
entirety of paragraph (c) are revised, and new paragraph (d) is added, 
to read as follows:


Sec. 19.202  Alternate use of premises and equipment for customs 
purposes.

    (a) General. * * * Once such qualifying documents have been 
approved by the appropriate ATF official, the designated premises and 
equipment may be alternately curtailed or extended pursuant to a 
letterhead notice filed in accordance with paragraph (d) of this 
section. * * *
* * * * *
    (c) Exception. Notwithstanding the provisions of paragraphs (a) and 
(b) of this section, the bonded premises may be used temporarily 
without filing Form 5110.41 or the notice described in paragraph (d) of 
this section, for the sole purpose of gauging bulk distilled spirits to 
effect their transfer from customs custody to ATF bond.
    (d) Filing of notice. The notice required by paragraph (a) of this 
section shall be submitted to the area supervisor for transmission to 
the appropriate ATF official. A separate notice shall be submitted for 
each alternation of premises. The notice must be received by the area 
supervisor prior to the effective date of the alternation and shall 
contain the following information:
    (1) The name and plant number of the proprietor filing the notice.
    (2) The date and hour of the alternation.
    (3) Whether the premises are being curtailed or extended.
    (4) Identification of the special diagrams in the registration 
documents depicting the premises as they exist before and after the 
alternation;
    (5) The purpose of the alternation, including the class of customs 
warehouse (if any) temporarily occupying the curtailed premises.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1349, as amended, 1353, as amended 
(26 U.S.C. 5172, 5178))

    Par. 7. Section 19.203 is amended by revising the heading and 
paragraphs (a), (c), (d), and the authority citation, and by adding new 
paragraph (e), to read as follows:


Sec. 19.203  Alternation of distilled spirits plant and bonded wine 
cellar or taxpaid wine bottling house premises.

    (a) General. A proprietor of a distilled spirits plant operating a 
contiguous bonded wine cellar or taxpaid wine bottling house, who 
desires to alternate the use of such premises with distilled spirits 
plant premises by temporary extension and curtailment, shall file 
qualifying documents, keep records, and conduct operations as 
prescribed in this section.
* * * * *
    (c) Records. After approval of qualifying documents for the 
alternation of premises, the proprietor may alternate the premises 
according to the plan described in those documents. Each time the 
premises are alternated, the proprietor shall prepare the record of 
alternating premises prescribed by Sec. 19.781.
    (d) Separation of premises. Separation of distilled spirits plant 
premises from bonded wine cellar or taxpaid wine bottling house 
premises shall be in a manner which satisfies the appropriate ATF 
official that the revenue will not be jeopardized. The method of 
separation shall be in accordance with the approved plan of alternation 
described in the qualifying documents.
    (e) Segregation of products. Prior to alternation, all spirits, 
denatured spirits, articles, and wine shall be removed from premises to 
be alternated to wine premises, except that spirits may remain if they 
are being withdrawn for use in wine production under Sec. 19.532 or for 
use in the production of nonbeverage wine or wine products under 
Sec. 19.534, and wine may remain if it is being transferred in bond 
under Sec. 19.505(b)(1)(ii); and all wine and spirits shall be removed 
from premises to be alternated to distilled spirits plant premises, 
except that wine may remain if it is being transferred in bond under 
Sec. 19.505(b)(1)(i), and spirits may remain if they are being returned 
from bonded wine cellar to distilled spirits plant bonded premises 
under Sec. 19.686(b).

(Sec. 201, Pub. L. 85-859, 72 Stat. 1349, as amended, 1353, as amended 
(26 U.S.C. 5172, 5178))

    Par. 10. Section 19.204 is revised to read as follows:


Sec. 19.204  Alternation of distilled spirits plant and brewery 
premises.

    (a) General. A proprietor of a distilled spirits plant operating a 
contiguous brewery, who desires to alternate the use of brewery 
premises with distilled spirits plant premises by temporary extension 
and curtailment, shall file qualifying documents, keep records, and 
conduct operations as prescribed in this section.
    (b) Qualifying documents. The proprietor shall file with the 
appropriate ATF official:
    (1) Form 5110.41 and Form 5130.10 to cover the proposed alternation 
of premises;
    (2) 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 and spirits 
lines (identified individually by letter or number) which are to be 
subject to alternation, in their relative operating sequence; and
    (3) Evidence of existing bond, consent of surety, or a new bond to 
cover the proposed alternation of premises.
    (c) Records. After approval of qualifying documents for the 
alternation of premises, the proprietor may alternate the premises 
according to the plan described in those documents. Each time the 
premises are alternated, the proprietor shall prepare the record of 
alternating premises prescribed by Sec. 19.781.
    (d) Separation of premises. Separation of distilled spirits plant 
premises from brewery premises shall be in a manner which satisfies the 
appropriate ATF official that the revenue will not be jeopardized. The 
method of separation shall be in accordance with the approved plan of 
alternation described in the qualifying documents.
    (e) Segregation of products. Prior to alternation, all spirits, 
denatured spirits, articles, and wine shall be removed from premises to 
be alternated to brewery premises; and all beer shall be removed from 
premises to be alternated to distilled spirits plant premises, except 
that beer may remain if it is being received for production of 
distilled spirits as provided in Sec. 19.312.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1349, as amended, 1353, as amended 
(26 U.S.C. 5172, 5178))
    Par. 9. Section 19.205 is amended by revising paragraphs (c) and 
(d), and by adding new paragraph (e), to read as follows:


Sec. 19.205  Alternate curtailment and extension of bonded premises for 
use as general premises.

* * * * *
    (c) Records. After approval of qualifying documents for the 
alternation of bonded and general premises, the proprietor may 
alternate the premises according to the plan described in those 
documents. Each time the premises are alternated, the proprietor shall 
prepare the record of alternating premises prescribed by Sec. 19.781.

[[Page 65724]]

    (d) Separation of premises. Separation of bonded premises from 
general premises shall be in a manner which satisfies the appropriate 
ATF official that the revenue will not be jeopardized. The method of 
separation shall be in accordance with the approved plan of alternation 
described in the qualifying documents.
    (e) Removal of products. Prior to alternation, all spirits, 
denatured spirits, articles, and wine shall be removed from premises to 
be alternated, except that--
    (1) Bonded spirits may remain on portions of bonded premises to be 
alternated to general premises if the spirits are taxpaid concurrently 
with the alternation; and
    (2) Taxpaid spirits may remain on portions of general premises to 
be alternated to bonded premises if the spirits are to be immediately 
dumped and returned to bond under the provisions of subpart U of this 
part.
* * * * *
    Par. 10. Section 19.206 is amended by revising paragraphs (c) and 
(d), and by adding new paragraph (e), to read as follows:


Sec. 19.206  Curtailment and extension of plant premises for the 
manufacture of eligible flavors.

* * * * *
    (c) Records. After approval of qualifying documents for the 
alternate curtailment and extension of distilled spirits plant plant 
premises, the proprietor may alternately curtail and extend the 
premises according to the plan described in those documents. Each time 
the premises are alternated, the proprietor shall prepare the record of 
alternating premises prescribed by Sec. 19.781.
    (d) Separation of premises. The portion of the premises which is to 
be curtailed or extended as provided in this section shall be separated 
from the remaining portion of the distilled spirits plant in a manner 
which satisfies the appropriate ATF official that the revenue will not 
be jeopardized. The method of separation shall be in accordance with 
the approved plan of alternation described in the qualifying documents.
    (e) Removal of products. Prior to alternation, all spirits, 
denatured spirits, articles, and wine shall be removed from premises to 
be alternated, except that--
    (1) Bonded spirits may remain on portions of bonded premises to be 
curtailed if the spirits are taxpaid concurrently with the curtailment; 
and
    (2) Taxpaid spirits which have not been used in the manufacture of 
a nonbeverage product may remain on portions of premises to be included 
by extension of bonded premises if the spirits are to be immediately 
dumped and returned to bond under the provisions of subpart U of this 
part.
* * * * *
    Par. 11. Section 19.311 is revised to read as follows:


Sec. 19.311  Notice by proprietor.

    (a) Commencement of operations. The proprietor shall, before 
commencing production operations or resuming production operations 
after having given notice of suspension, file a letterhead notice with 
the area supervisor, specifying the date on which the proprietor 
desires to commence or resume operations for the production of spirits. 
The proprietor shall not commence or resume operations prior to the 
time specified in the notice.
    (b) Suspension of operations. Any proprietor desiring to suspend 
production operations for a period of 90 days or more shall file a 
letterhead notice with the area supervisor, specifying the date on 
which the operations will be suspended. In case of an accident which 
makes it apparent that operations cannot be conducted for 90 days or 
more, the proprietor shall immediately notify the area supervisor. (If 
such notification is verbal, it shall be followed up with a written 
notice.)

(Sec. 201, Pub. L. 85-859, 72 Stat. 1364, as amended (26 U.S.C. 5221))
    Par. 12. Section 19.454 is revised by designating the existing text 
as ``(a),'' and by adding a heading to paragraph (a) and a new 
paragraph (b), to read as follows:


Sec. 19.454  Gauge for denaturation.

    (a) General. * * *
    (b) Denaturation and article manufacture in a single process. When 
spirits are denatured and articles are immediately produced therefrom 
in a unified process, the spirits and denatured spirits may be gauged 
by the following method:
    (1) The spirits to be denatured are gauged by weight.
    (2) The denaturants to be used are gauged by weight.
    (3) The following computation is performed:
    (i) The weight (in pounds) of denaturants used for denaturation 
(not to include any additional quantity of the same chemicals being 
used for article manufacture) is added to the weight (in pounds) of the 
spirits.
    (ii) The sum thus obtained is divided by a number consistent with 
the data in Sec. 21.161 of this chapter under the heading ``Wt./gal. in 
air (lbs.),'' extrapolated as necessary to the exact proof of the 
spirits.
    (iii) The result is the number of wine gallons of denatured spirits 
produced; this figure shall be entered in the record required by 
Sec. 19.752(b).
* * * * *


Sec. 19.481  [Amended]

    Par. 13. Section 19.481 is amended by adding at the end of the 
existing text the following new sentence:


Sec. 19.481  General.

    * * * The procedures in subpart L of part 251 of this chapter 
pertain to the transfer of spirits from customs custody to the bonded 
premises of a distilled spirits plant.
* * * * *
    Par. 14. Paragraph (a) of Sec. 19.605 is revised to read as 
follows:


Sec. 19.605  Additional marks on portable containers.

    (a) In addition to the other marks required by this part, portable 
containers (other than bottles enclosed in cases) of spirits or 
denatured spirits to be withdrawn from the bonded premises shall bear 
the following marks:
    (1) If withdrawn without payment of tax for export, for transfer to 
a customs manufacturing bonded warehouse or to a foreign trade zone, or 
for use as supplies on certain vessels or aircraft: the marks required 
by part 252 of this chapter.
    (2) If withdrawn tax free for shipment to a permittee under part 22 
of this chapter: the word ``Tax-Free.''
    (3) If withdrawn in packages on determination of tax: the tare, 
proof, and proof gallons.
* * * * *
    Par. 15. In Sec. 19.770, paragraph (a)(6)(i) is revised and new 
paragraph (c) is added, to read as follows:


Sec. 19.770  Transfer record.

    (a) Consignor. * * *
    (6) * * *
    (i) 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, record 
the name and plant number of the warehouseman or processor who received 
the spirits from customs custody. For Virgin Islands or Puerto Rican 
spirits, show the name of the producer in the Virgin Islands or Puerto 
Rico. For spirits of different producers or warehousemen which have 
been mixed in the processing account, record the name of the 
processor.);
* * * * *

[[Page 65725]]

    (c) Receipt of spirits from customs custody. When spirits are 
transferred from customs custody as provided in subpart O of this part, 
the transfer record shall contain the information prescribed by 
Sec. 251.138 of this chapter.
* * * * *
    Par. 16. New Sec. 19.781 is added immediately following 
Sec. 19.780, to read as follows:


Sec. 19.781  Record of alternating premises.

    When distilled spirits plant bonded premises are alternated to or 
from bonded wine cellar, taxpaid wine bottling house, brewery, 
manufacturer of nonbeverage products, or general premises, under an 
approved plan of alternation described in the plant registration, the 
proprietor shall record the following information:
    (a) The date and hour of the alternation;
    (b) The kind of premises being curtailed, including plant 
identification number, if applicable;
    (c) The kind of premises being extended, including plant 
identification number, if applicable;
    (d) Identification of the special diagrams in the registration 
documents depicting the premises as they exist before and after the 
alternation; and
    (e) The purpose of the alternation.
    Par. 17. In Sec. 19.1001, the first sentence of paragraph (a) is 
revised to read as follows:


Sec. 19.1001  Consignee premises.

    (a) General. When spirits are received by transfer in bond or from 
customs custody, the proprietor shall examine each conveyance to 
determine whether the locks, seals, or other devices are intact upon 
arrival at the premises. * * *
* * * * *
    Par. 18. New Sec. 19.1003 is added immediately following 
Sec. 19.1002, to read as follows:


Sec. 19.1003  Transfer from customs custody.

    (a) General. Spirits imported or brought into the United States in 
bulk containers may be withdrawn from customs custody and transferred 
in such bulk containers or by pipeline, without payment of tax, to the 
bonded premises of a large or medium alcohol fuel plant, but only if 
the spirits were not produced from petroleum, natural gas, or coal. 
Spirits received on alcohol fuel plant premises as provided in this 
section shall be subjected to further manufacturing or processing after 
receipt. Such spirits may be redistilled or denatured only if imported 
at 185 degrees or more of proof, and withdrawn for fuel use only, in 
the same manner and subject to the same requirements as domestically 
produced alcohol fuel.
    (b) Transfer procedures. The procedures in Sec. 19.1001 and in 
subpart L of part 251 of this chapter pertain to the transfer of 
spirits from customs custody to an alcohol fuel plant.
    (c) Restriction. A proprietor who intends not to produce spirits, 
but to engage solely in the business of receiving spirits from customs 
custody as authorized in this section, must qualify as a regular 
distilled spirits plant under 26 U.S.C. 5171 and subpart G of this 
part.


Sec. 19.1010(b)  [Amended]

    Par. 19. Section 19.1010(b) is revised to:
    (a) Remove references to control number 1512-0202 from 
Secs. 19.201-19.205,
    (b) Revised the reference to control number 1512-0202 in 
Sec. 19.311 to a reference to control number 1512-0206,
    (c) Remove all references to obsolete control number 1512-0189,
    (d) Remove all entries for Secs. 19.661-19.672,
    (e) Remove entries for Secs. 19.610 and 19.772, and
    (f) Add an entry for Sec. 19.781, to read as follows:


Sec. 19.1010  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

* * * * *
    (b) Display.

------------------------------------------------------------------------
                                                             Current OMB
                  Section where identified                   control no.
------------------------------------------------------------------------
 
                  *        *        *        *        *
19.781.....................................................    1512-0250
                  *        *        *        *        *
------------------------------------------------------------------------

    Signed: August 5, 1998.
John W. Magaw,
Director.

    Approved: October 26, 1998.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 98-30942 Filed 11-27-98; 8:45 am]
BILLING CODE 4810-31-P