[Federal Register Volume 73, Number 62 (Monday, March 31, 2008)]
[Rules and Regulations]
[Pages 16755-16758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6513]


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

DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 41

[T.D. TTB-68; Re: T.D. ATF-444 and Notice No. 912]
RIN 1513-AB38


Puerto Rican Tobacco Products and Cigarette Papers and Tubes 
Shipped From Puerto Rico to the United States (2007R-368P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule (Treasury decision).

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

SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is adopting as a 
final rule, with some clarifying changes and editorial corrections, the 
temporary regulations set forth in T.D. ATF-444. These temporary 
regulations eliminated the onsite preshipment inspection of, and the 
requirement to complete several ATF forms for, shipments to the United 
States of tobacco products and cigarette papers and tubes manufactured 
in Puerto Rico.

DATES: Effective Date: March 31, 2008.

FOR FURTHER INFORMATION CONTACT: Amy R. Greenberg, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street, NW., Suite 200E, Washington, DC 20220; telephone 202-927-8210; 
or e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Chapter 52 of the Internal Revenue Code of 1986 (IRC) pertains to 
the Federal excise tax on tobacco products and cigarette papers and 
tubes. Section 5701 of the IRC (26 U.S.C. 5701) imposes a tax on such 
products manufactured in, or imported into, the United States. Section 
7652(a) of the IRC (26 U.S.C. 7652(a)) imposes the same tax, with 
certain exceptions not pertinent here, on articles of merchandise of 
Puerto Rican manufacture coming into the United States and withdrawn 
for consumption or sale. The Alcohol and Tobacco Tax and Trade Bureau 
(TTB) is responsible for administering the provisions of chapter 52 and 
section 7652(a) of the IRC as they pertain to the tax on tobacco 
products and cigarette papers and tubes, including promulgating 
regulations concerning payment and collection of the tax and other 
requirements that protect the revenue. Prior to January 24, 2003, our 
predecessor agency, the Bureau of Alcohol, Tobacco and Firearms (ATF) 
administered these regulations.
    On March 8, 2001, ATF published in the Federal Register (66 FR 
13849) a temporary rule, T.D. ATF-444, amending the regulations in 27 
CFR part 275 to eliminate certain regulatory requirements related to 
the shipment of tobacco products and cigarette papers and tubes of 
Puerto Rican manufacture from Puerto Rico to the United States. 
Specifically, ATF amended Sec. Sec.  275.105, 275.106, 275.110, and 
275.111 to eliminate the requirement that persons who ship tobacco 
products and cigarette papers and tubes of Puerto Rican manufacture 
from Puerto Rico to the United States notify ATF prior to the shipment, 
and to eliminate the requirements that an ATF officer: (1) Inspect each 
shipment of such articles; (2) certify that the amount of tax on the 
articles has been calculated correctly; and (3) release each shipment. 
The amended regulations set forth recordkeeping requirements in place 
of the former processes of notification, physical inspection, 
certification, and release. Under the temporary rule, persons who ship 
Puerto Rican tobacco products and cigarette papers and tubes to the 
United States must keep and maintain records to show that the amount of 
tax is correctly calculated, paid (where applicable), and recorded for 
audit and examination purposes.
    The temporary rule amendments to Sec. Sec.  275.106, 275.110, and 
275.111 also eliminated the requirements for the completion of four 
specific forms. Two forms, ATF forms 2987 (5210.8) and 3075 (5200.9), 
were required to be submitted to ATF by the company shipping the 
products to the United States, and contained information readily 
available from common commercial records. The elimination of these 
forms was intended to relieve the taxpayer of a duplicative 
recordkeeping requirement. The other two forms, ATF forms 2989 and 3074 
(5200.6), were certificates which were prepared by ATF officers and 
affixed to the outside

[[Page 16756]]

of each shipping container, affirming that the appropriate tax had been 
paid. These forms were eliminated because ATF determined that they were 
not necessary to protect the Federal excise tax revenue due on tobacco 
products and cigarette papers and tubes.
    T.D. ATF-444 also included some technical corrections to the 
regulations, including updating the delegation order numbers appearing 
in Sec. Sec.  275.11 and 275.29.
    On the same day that T.D. ATF-444 was published, ATF also published 
in the Federal Register (66 FR 13864), a notice of proposed rulemaking 
(NPRM), (Notice No. 912) soliciting comments on the regulatory 
amendments contained in T.D. ATF-444. ATF did not receive any comments 
in response to Notice No. 912 by the close of the public comment 
period.
    Since the publication of T.D. ATF-444, ATF and then TTB continued 
to conduct audits of the commercial records of companies that ship 
Puerto Rican tobacco products or cigarette papers and tubes from Puerto 
Rico to the United States. These audits have demonstrated that the 
elimination of the required inspection prior to shipment, the 
elimination of certain forms, and the replacement of other forms with 
the requirement to maintain records, have allowed TTB and the regulated 
industry members to avoid unnecessary administrative burdens without 
creating any jeopardy to the revenue.

Subsequent Regulatory Changes

    Following the publication of T.D. ATF-444, 27 CFR part 275 was 
recodified as 27 CFR part 41 pursuant to T.D. TTB-16, published in the 
Federal Register (69 FR 52421) on August 26, 2004. Thus, all provisions 
of the temporary rule identified as sections in part 275 appear in this 
final rule as sections in part 41.

Adoption of Final Rule

    Based on the background information provided above, TTB has 
determined that the temporary regulations published in T.D. ATF-444, 
recodified and updated pursuant to T.D. TTB-16, should be adopted as a 
final rule with only minor organizational, plain language, and 
editorial changes. We have made such changes to Sec. Sec.  41.105, 
41.106, 41.110, 41.111, and 41.121 to enhance their clarity and 
readability without substantively affecting their texts. We have 
modified the section headings to Sec. Sec.  41.106 and 41.111 to more 
clearly reflect the content of these provisions. We have also updated 
the Office of Management and Budget (OMB) control numbers for 
Sec. Sec.  41.105, 41.106, 41.110, and 41.121.

Inapplicability of Delayed Effective Date

    Pursuant to the provisions of 5 U.S.C. 553(d)(1) and (d)(3), we are 
issuing these regulations without a delayed effective date. This rule 
finalizes regulations which provided relief from regulatory 
restrictions by eliminating several administrative burdens on industry 
members associated with onsite preshipment inspection of, and the 
requirement to complete several ATF forms for, shipments to the United 
States of tobacco products and cigarette papers and tubes manufactured 
in Puerto Rico. By eliminating these administrative burdens, these 
final regulations fit within the meaning of the relief from a 
restriction standard in section 553(d)(1). Furthermore, TTB has 
determined that good cause exists in accordance with section 553(d)(3) 
to finalize these regulations immediately, and without delayed 
effective date, in order to continue the alleviation of these 
administrative burdens on the industry.

Regulatory Flexibility Act

    Pursuant to the requirements of the Regulatory Flexibility Act (5 
U.S.C. chapter 6), we certify that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
These regulations relieve and simplify certain administrative 
obligations. Primarily, the regulations replace onsite, preshipment 
inspections with less burdensome, periodic recordkeeping and audit 
requirements. The regulations also eliminate four reporting forms in 
further reducing administrative and recordkeeping burdens. Accordingly, 
these regulations will not have a significant economic impact on a 
substantial number of small entities and a regulatory flexibility 
analysis is not required. Pursuant to 26 U.S.C. 7805(f), the temporary 
regulation was submitted to the Chief Counsel for Advocacy of the Small 
Business Administration for comment on its impact on small businesses, 
and we received no comments.

Executive Order 12866

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

Paperwork Reduction Act

    The collections of information in the regulations contained in this 
final rule have been previously reviewed and approved by Office of 
Management and Budget (OMB) in accordance with the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3504(h)) and assigned control numbers 1513-0083, 
1513-0090, and 1513-0108. 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 OMB. Although 
sections of the regulations covered by these approvals are amended for 
clarity, this final rule imposes no new or revised collection of 
information, and does not change the reporting or recordkeeping burden.
    Comments concerning suggestions for reducing the burden of the 
collections of information should be directed to Mary A. Wood, Alcohol 
and Tobacco Tax and Trade Bureau, at any of these addresses:
     P.O. Box 14412, Washington, DC 20044-4412;
     202-927-8525 (facsimile); or
     [email protected] (e-mail).

Drafting Information

    Amy R. Greenberg of the Regulations and Rulings Division, Alcohol 
and Tobacco Tax and Trade Bureau, drafted this document.

List of Subjects in 27 CFR Part 41

    Administrative practice and procedure, Authority delegations, 
Cigarette papers and tubes, Claims, Electronic fund transfer, Customs 
duties and inspection, Excise taxes, Imports, Labeling, Packaging and 
containers, Penalties, Reporting requirements, Seizures and 
forfeitures, Surety bonds, Tobacco products, U.S. possessions, 
Warehouses.

Amendments to the Regulations

0
Accordingly, for the reasons set forth in the preamble, the temporary 
rule published on March 8, 2001, at 66 FR 13849, is adopted as a final 
rule with the changes as discussed above and set forth below.

PART 41--IMPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES

0
1. The authority citation for part 41 continues to read as follows:

    Authority: 18 U.S.C. 2342; 26 U.S.C. 5701, 5703, 5704, 5705, 
5708, 5712, 5713, 5721, 5722, 5723, 5741, 5754, 5761, 5762, 5763, 
6301, 6302, 6313, 6404, 7101, 7212, 7342, 7606, 7651, 7652, 7805; 31 
U.S.C. 9301, 9303, 9304, 9306.

0
2. Section 41.105 is revised to read as follows:


Sec.  41.105  Prepayment of tax.

    To prepay, in Puerto Rico, the internal revenue tax imposed by 26 
U.S.C.

[[Page 16757]]

7652(a) on tobacco products and cigarette papers and tubes of Puerto 
Rican manufacture to be shipped to the United States, the shipper must 
file, or cause to be filed, a tax return, TTB F 5000.25, with full 
remittance of the tax which will become due on those products.

    (Approved by the Office of Management and Budget under control 
number 1513-0090)

0
3. Section 41.106 is revised to read as follows:


Sec.  41.106  Record of shipment by taxpayer.

    (a) Shipments other than noncommercial mail shipments. The taxpayer 
must ensure that the tax has been prepaid on the tobacco products and 
cigarette papers and tubes in each shipment. The taxpayer must identify 
the tobacco products or cigarette papers or tubes by including on the 
bill of lading or similar record accompanying the shipment the 
following information:
    (1) The marks and numbers on the shipping containers;
    (2) The number of containers to be shipped;
    (3) The kind of taxable article(s) to be shipped and the rate of 
tax applicable to each kind of article, as specified in Sec. Sec.  
41.30 through 41.35;
    (4) The number of small cigarettes, large cigarettes, or small 
cigars to be shipped;
    (5) The number and total sale price of large cigars having a sale 
price of not more than $235.294 per thousand to be shipped;
    (6) The number of large cigars having a sale price equal to or more 
than $235.294 per thousand to be shipped;
    (7) The pounds and ounces of chewing tobacco or snuff to be 
shipped;
    (8) The pounds and ounces of pipe tobacco or roll-your-own tobacco 
to be shipped;
    (9) The number of cigarette papers or tubes to be shipped;
    (10) The amount of the tax paid for each kind of article under this 
subpart;
    (11) The name and address of the consignee in the United States to 
whom the products are to be shipped; and
    (12) A notation identifying the particular TTB F 5000.25 by which 
the taxes were prepaid.
    (b) Noncommercial mail shipments. Noncommercial mail shipments of 
tobacco products and cigarette papers and tubes to the United States 
are exempt from the requirements of paragraph (a) of this section, 
except that the taxpayer must provide a copy of the TTB F 5000.25 upon 
the request of an appropriate TTB officer.

(Approved by the Office of Management and Budget under control 
number 1513-0108)

0
4. Section 41.110 is revised to read as follows:


Sec.  41.110  Record of tax computation and shipment by bonded 
manufacturer under deferred taxpayment.

    Where tobacco products or cigarette papers or tubes are to be 
shipped to the United States with deferred taxpayment, the bonded 
manufacturer must calculate the tax prior to shipment. The tax 
calculation must conform to the information on the bill of lading or a 
similar record accompanying the shipment, and the date of completing 
the bill of lading or similar record accompanying the shipment will be 
treated as the date of computation of the tax. Tobacco products or 
cigarette papers or tubes may be shipped to the United States in 
accordance with the provisions of this section only after computation 
of the tax. The bill of lading or similar record accompanying the 
shipment must include the following information:
    (a) The marks and numbers on the shipping containers;
    (b) The number of containers to be shipped;
    (c) The kind of taxable article(s) to be shipped and the rate of 
tax applicable to each kind of article, as specified in Sec. Sec.  
41.30 through 41.35;
    (d) The number of small cigarettes, large cigarettes, or small 
cigars to be shipped;
    (e) The number and total sale price of large cigars having a sale 
price of not more than $235.294 per thousand to be shipped;
    (f) The number of large cigars having a sale price equal to or more 
than $235.294 per thousand to be shipped;
    (g) The pounds and ounces of chewing tobacco or snuff to be 
shipped;
    (h) The pounds and ounces of pipe tobacco or roll-your-own tobacco 
to be shipped;
    (i) The number of cigarette papers or tubes to be shipped;
    (j) The amount of the tax to be paid for each kind of article under 
this subpart; and
    (k) The name and address of the consignee in the United States to 
whom the products are to be shipped.

(Approved by the Office of Management and Budget under control 
number 1513-0108)

0
5. Section 41.111 is revised to read as follows:


Sec.  41.111  Verification of bond and agreement to pay tax.

    (a) Verification of bond. Prior to shipment of tobacco products or 
cigarette papers or tubes to the United States, the manufacturer must 
verify:
    (1) That there is no default in payment of tax chargeable against 
the manufacturer's bond on TTB F 2986 (5210.12); and
    (2) That the amount of the manufacturer's bond is sufficient or is 
in the maximum penal sum to cover the tax that will become due on the 
shipment.
    (b) Agreement to pay tax. The shipment of tobacco products or 
cigarette papers or tubes by the bonded manufacturer serves as an 
agreement by the manufacturer to pay the tax on that shipment.
0
6. Section 41.121 is revised to read as follows:


Sec.  41.121  Amount and account of bond.

    (a) Bond amount. Except for the maximum and minimum amounts stated 
in this paragraph, the total amount of the bond or bonds required under 
this subpart must be in an amount not less than the amount of unpaid 
tax chargeable at any one time against the bond or bonds. The maximum 
and minimum amounts of such bond or bonds are as follows:

------------------------------------------------------------------------
                                                             Bond amount
                                                Bond amount     minimum
                Taxable article                 maximum (in      (in
                                                  dollars)     dollars)
------------------------------------------------------------------------
(1) Cigarettes................................      250,000        1,000
(2) Any combination of taxable articles.......      250,000        1,000
(3) One kind of taxable article other than          150,000        1,000
 cigarettes...................................
------------------------------------------------------------------------


[[Page 16758]]

    (b) Bond account. Where the amount of a bonded manufacturer's bond 
is less than the maximum amount prescribed in paragraph (a) of this 
section, the bonded manufacturer must maintain an account reflecting 
all outstanding taxes for which the manufacturer's bond is chargeable. 
A manufacturer must debit that account with the amount of tax that was 
agreed to be paid under Sec.  41.111 or that is otherwise chargeable 
against the bond and then must credit the account for the amount paid 
on TTB F 5000.25 or other TTB-prescribed document, at the time it is 
filed. A manufacturer who will defer payment of tax for a shipment of 
tobacco products or cigarette papers or tubes under this subpart must 
have sufficient credit in this account to cover the taxes prior to 
making the shipment to the United States.

(Approved by the Office of Management and Budget under control 
number 1513-0108)


    Signed: January 17, 2008.
John J. Manfreda,
Administrator.
    Approved: February 27, 2008.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
 [FR Doc. E8-6513 Filed 3-28-08; 8:45 am]
BILLING CODE 4810-31-P