[Federal Register Volume 66, Number 201 (Wednesday, October 17, 2001)]
[Proposed Rules]
[Pages 52730-52733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-25843]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 40

[Notice No. 931]
RIN 1512-AC32


Elimination of Application To Remove Tobacco Products From 
Manufacturer's Premises For Experimental Purposes (2000R-353P)

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposed rule eliminates the requirements that 
manufacturers of tobacco products apply to ATF to remove tobacco 
products from their factories in bond for experimental purposes and 
maintain the approved applications for their records. In place of these 
requirements, manufacturers of

[[Page 52731]]

tobacco products will prepare and maintain records of tobacco products 
removed from their factories in bond for experimental purposes. In 
addition, this proposed rule defines ``experimental purposes'' under 
section 5704(a) of Title 26 of the United States Code.

DATES: Written comments must be received on or before December 17, 
2001.

ADDRESSES: Send written comments to: Chief, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, Room 5003, 650 Massachusetts 
Avenue, NW., Washington, DC 20226, (Attention: Notice Number 931). See 
the Public Participation section of this notice for alternative means 
of commenting.

FOR FURTHER INFORMATION CONTACT: Robert Ruhf, Regulations Division, 650 
Massachusetts Avenue, NW., Washington, DC 20226; (202) 927-8210; or 
[email protected].

SUPPLEMENTARY INFORMATION:

1. Background

Elimination of Application

    We are proposing to eliminate the applications that manufacturers 
of tobacco products are required to submit for removing tobacco 
products in bond from their factories for experimental purposes. We 
believe that these applications are not necessary to protect the 
revenue. ATF will continue to conduct selected examinations and audits 
of manufacturers of tobacco products, including those who remove 
tobacco products in bond for experimental purposes.
    In addition, manufacturers of tobacco products will continue to 
report the kind and amounts of tobacco products removed in bond for 
experimental purposes for use off factory premises. This reporting is 
done every month on ATF Form 5210.5 as a separate item and provides ATF 
an invaluable tool to monitor the operations of tobacco manufacturers 
in respect to such removals. Overall, this proposed rule allows greater 
flexibility and choice in managing our limited government resources.
    The amount of taxes involved in such removals for experimental 
purposes is not significant. The total potential tax liability at the 
present tax rates for such shipments is estimated to be no more than 
$500,000. This potential tax liability is not significant when compared 
to the total excise tax collections for tobacco products. It is less 
than 0.001 percent of the total excise taxes collected from tobacco 
products. In addition, ATF has not had any significant tax losses 
associated with such removals. Also, ATF has rarely, if ever, denied an 
application submitted by a manufacturer for removing tobacco products 
in bond for experimental purposes.
    This notice of proposed rulemaking eliminates the burdens imposed 
on the manufacturer to prepare and file applications and on ATF to take 
action on such applications. A manufacturer typically spends about 30 
minutes to prepare, send and file each application. ATF typically 
spends a similar amount of time acting upon, sending and filing each 
application. ATF estimates that 100 of these applications are received 
each year.

Definition of Experimental Purposes

    This notice of proposed rulemaking defines ``experimental 
purposes'' under section 5704(a) of Title 26 of the United States Code 
and provides additional examples of uses for such experimental 
purposes. However, the proposed rule retains the examples that are not 
considered experimental.

2. Public Participation

Who May Comment on This Notice?

    ATF requests comments on the proposed regulations from all 
interested persons. 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 practicable to do so. However, 
assurance of consideration can only be given if comments are received 
on or before the closing date.

Will ATF Keep My Comments Confidential?

    ATF cannot recognize any material in comments as confidential. 
Comments may be disclosed to the public. If you consider your material 
to be confidential or inappropriate for disclosure to the public, you 
should not include it in the comment. We may also disclose the name of 
any person who submits a comment.

Can I Review Comments Received?

    Yes. You may view and copy written comments on this project during 
normal business hours in the ATF Public Reading Room, Room 6480, 650 
Massachusetts Avenue, NW., Washington, DC 20226, telephone (202) 927-
8480. For information on filing a Freedom of Information Act request 
for a copy of the comments, please call (202) 927-8480, FAX (202) 927-
8866 or E-mail: [email protected]. (ATF cannot accept FOIA 
requests via E-mail).

How Do I Send Facsimile Comments?

    You may submit comments of not more than three pages of facsimile 
transmission to (202) 927-8525. Facsimile comments must:
     Be legible;
     Be 8\1/2\"  x  11" in size;
     Contain a legible written signature; and
     Be not more than three pages.
    We will not acknowledge receipt of facsimile transmissions. We will 
treat facsimile transmissions as originals.

How Do I Send Comments by E-mail?

    If you send an e-mail, you must follow these instructions. E-mail 
comments must:
     Contain your name, mailing address, and e-mail address;
     Contain the word ``Notice'' and its number in the subject 
or reference line of the e-mail;
     Contain your company or association affiliation, if 
pertinent to your comment;
     Contain your reason for commenting (manufacturer, 
importer, consumer, etc.);
     Be legible when printed in a 8\1/2\" x 11" size (no 
special characters or symbols); and
     Be addressed to [email protected].
    We will not acknowledge receipt of e-mail. We will treat e-mail as 
originals.

Can I Request a Public Hearing?

    If you desire the opportunity to comment orally at a public hearing 
on this proposed regulation, you must submit a request in writing to 
the Director within the 60-day comment period. The Director reserves 
the right, in light of all circumstances, to determine if a public 
hearing is necessary.

3. Regulatory Analyses and Notices

Is This a Significant Regulatory Action as Defined by Executive Order 
12866?

    It has been determined that this proposed rule is not a significant 
regulatory action as defined by Executive Order 12866. Therefore, a 
regulatory assessment is not required.

How Does the Regulatory Flexibility Act Apply to This Proposed Rule?

    It is certified that these proposed regulations will not have a 
significant economic impact on a substantial number of small entities 
(see the following discussion concerning the Paperwork Reduction Act. 
Accordingly, a regulatory flexibility analysis is not required. 
Pursuant to 26 U.S.C. 7805(f), this proposed regulation was submitted

[[Page 52732]]

to the Chief Counsel for Advocacy of the Small Business Administration 
for comment on its impact on small business. No comments were received.

Does the Paperwork Reduction Act Apply to This Proposed Rule?

    Yes. The collection of information contained in this notice of 
proposed rulemaking has been submitted to the Office of Management and 
Budget for review in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)). Comments on the collection(s) of information 
should be sent to the Office of Management and Budget, Attention: Desk 
Officer for the Department of the Treasury, Bureau of Alcohol, Tobacco 
and Firearms (ATF), Office of Information and Regulatory Affairs, 
Washington, D.C., 20503, with copies to the Chief, Document Services 
Branch, Room 3450, Bureau of Alcohol, Tobacco and Firearms, 650 
Massachusetts Avenue, NW., Washington, DC 20226. Comments are 
specifically requested concerning:
     Whether the proposed collection of information is 
necessary for the proper performance of the functions of the Bureau of 
Alcohol, Tobacco and Firearms, including whether the information will 
have practical utility;
     The accuracy of the estimated burden associated with the 
proposed collection of information;
     How the quality, utility, and clarity of the information 
to be collected may be enhanced; and
     How the burden of complying with the proposed collection 
of information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology.
    The collection of information in this proposed regulation is 
contained in 27 CFR 40.232(e). ATF uses this information to verify the 
kind and amount of tobacco products removed in bond from the premises 
of manufacturers for experimental purposes. In addition, ATF may use 
this information to determine that the persons to whom such removals 
are made are using the tobacco products for legitimate experimental 
purposes and that the tobacco products are properly destroyed or 
returned to the premises of a manufacturer following their experimental 
use. If such tobacco products are not destroyed or returned to the 
premises of a manufacturer, ATF will use this information to collect 
the taxes due.
    The collection of information is mandatory. The likely respondents 
may include small businesses or organizations. The estimated annual 
burden per respondent will vary depending on the number of shipments 
that manufacturers of tobacco products remove from their premises in 
bond for experimental purposes. Estimated total annual recordkeeping 
burden under this proposed rule is 1 hour since the records to be 
maintained are customary and usual for private and business purposes. 
Estimated average annual burden per respondent and/or recordkeeper is 
less than 1 hour. The estimated number of recordkeepers is 165.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.

``Plain Language'' Changes

    During the revision of the regulations in this document, we also 
tried to simplify and clarify the language of the affected section of 
the regulations. Any suggestions for improving the readability of these 
regulations may be submitted as comments to the cross-referenced notice 
of proposed rulemaking.

4. Drafting Information

    The principal author of this document is Robert Ruhf, Regulations 
Division, Bureau of Alcohol, Tobacco and Firearms. However, other 
personnel of ATF and the Treasury Department participated in developing 
the document.

List of Subjects in 27 CFR Part 40

    Administrative practice and procedure, Authority delegations, 
Cigars and cigarettes, Claims, Electronic fund transfers, Excise taxes, 
Imports, Labeling, Packaging and containers, Penalties, Reporting and 
recordkeeping requirements, Seizures and forfeitures, Surety bonds, 
Tobacco.

Authority and Issuance

    We propose to amend Title 27 of the Code of Federal Regulations as 
follows:

PART 40--MANUFACTURERS OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES

    Paragraph 1. The authority citation for part 40 continues to read 
as follows:

    Authority: 26 U.S.C. 5142, 5143, 5146, 5701, 5703-5705, 5711-
5713, 5721-5723, 5731, 5741, 5751, 5753, 5761-5763, 6061, 6065, 
6109, 6151, 6301, 6302, 6311, 6313, 6402, 6404, 6423, 6676, 6806, 
7011, 7212, 7325, 7342, 7502, 7503, 7606, 7805, 31 U.S.C. 9301, 
9303, 9304, 9306.

    Par. 2. Section 40.232 is revised to read as follows:


Sec. 40.232  Experimental purposes.

    A manufacturer of tobacco products may use tobacco products without 
determination and payment of tax as set forth in this section.
    (a) What are experimental purposes? Experimental purposes are 
operations or tests carried out under controlled conditions to discover 
an unknown scientific principle or to gather facts about an existing 
scientific principle. Examples of experimental purposes are:
    (1) Use by manufacturers to determine scientific facts relating to 
tobacco products, such as content of certain chemicals;
    (2) Use by producers of machines designed to package such products 
for testing and experimenting in the operation of these machines; and
    (3) Use in laboratories, hospitals, medical centers, institutes, 
colleges, and universities, for scientific, technical, or medical 
research.
    (b) What purposes are not experimental? Tobacco products used for 
advertising or consumer testing outside the factory premises, or as 
salesmen's or customers' samples are not experimental purposes.
    (c) Use in factory. A manufacturer of tobacco products may use 
tobacco products without determination and payment of tax for 
experimental purposes in a factory.
    (d) Use outside factory. A manufacturer may remove tobacco products 
in bond for experimental purposes outside a factory. When tobacco 
products are shipped for experimental purposes outside the factory, the 
proprietor of the factory remains liable for the taxes imposed by 26 
U.S.C. 5701 until the occurrence of one of the following events:
    (1) The tobacco products are returned to the premises of the 
factory from which they were shipped; or
    (2) The tobacco products are destroyed during or after the use of 
such products for experimental purposes.
    (e) Record of use. In addition to the records prescribed by 
Sec. 40.183, a manufacturer who removes tobacco products in bond for 
experimental purposes outside a factory must prepare and maintain a 
record containing the following information:
    (1) Name and address of the consignee;
    (2) Kind and quantity of tobacco products removed;
    (3) Description of packaging, if any, of the tobacco products 
removed;
    (4) Description of how and when the consignee will use the tobacco 
products; and

[[Page 52733]]

    (5) Disposition of any remaining tobacco products after the 
consignee's use.

    (Approved by the Office of Management and Budget under Control 
Number 1512-)
(72 Stat. 1418, as amended; 26 U.S.C. 5704)

    Signed: August 28, 2001.
Bradley A. Buckles,
Director.
    Approved: September 12, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 01-25843 Filed 10-16-01; 8:45 am]
BILLING CODE 4810-31-U