[Federal Register Volume 73, Number 82 (Monday, April 28, 2008)]
[Rules and Regulations]
[Pages 22816-22818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9173]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 4, 24, and 27

[Docket No. TTB-2007-0006; T.D. TTB-70; Re: T.D. TTB-31 and Notice No. 
51]
RIN 1513-AB00


Certification Requirements for Imported Natural Wine (2005R-002P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau (TTB), Treasury.

ACTION: Final rule; Treasury decision.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is adopting as a 
final rule, without changes, the temporary regulations implementing the 
certification requirements regarding production practices and 
procedures for imported natural wine. These requirements were adopted 
in section 2002 of the Miscellaneous Trade and Technical Corrections 
Act of 2004 as an amendment to section 5382 of the Internal Revenue 
Code of 1986.

DATES: Effective Date: This final rule is effective on May 28, 2008.

FOR FURTHER INFORMATION CONTACT: Jennifer Berry, Alcohol and Tobacco 
Tax and Trade Bureau, Regulations and Rulings Division, P.O. Box 18152, 
Roanoke, VA 24014; telephone 540-344-9333.

SUPPLEMENTARY INFORMATION:

Background

    The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible 
for

[[Page 22817]]

the administration of Chapter 51 of the Internal Revenue Code of 1986 
(IRC) which includes provisions relating to the taxation of wine. 
Section 5382(a) of the IRC (26 U.S.C. 5382(a)) sets forth standards 
regarding what constitutes proper cellar treatment of natural wine.
    On December 3, 2004, the President signed into law the 
Miscellaneous Trade and Technical Corrections Act of 2004, Public Law 
108-429, 118 Stat. 2434 (``the Act''), which revised section 5382(a) of 
the IRC to accommodate two new provisions. The first new provision was 
paragraph (1)(B), which provides that, in the case of wine produced and 
imported subject to an international agreement or treaty, proper cellar 
treatment of natural wine includes those practices and procedures 
acceptable to the United States under the agreement or treaty. The 
second new provision was paragraph (3), which sets forth a new 
certification requirement regarding production practices and procedures 
for imported natural wine produced after December 31, 2004.
    Under section 5382(a)(3) the Secretary of the Treasury shall accept 
the practices and procedures used to produce wine in another country 
if, at the time of importation of the wine, one of the following 
conditions is met:
     The Secretary has on file or is provided with a 
certification from the government of the producing country, accompanied 
by an affirmed laboratory analysis, that the practices and procedures 
used to produce the wine constitute proper cellar treatment under 
regulations prescribed by the Secretary;
     The Secretary has on file or is provided with a 
certification required by an international agreement or treaty covering 
proper cellar treatment, or the wine is covered by an international 
agreement or treaty covering proper cellar treatment that does not 
require a certification; or
     In the case of an importer that owns or controls or that 
has an affiliate that owns or controls a winery operating under a basic 
permit issued by the Secretary, the importer certifies that the 
practices and procedures used to produce the wine constitute proper 
cellar treatment under regulations prescribed by the Secretary.
    In addition, for purposes of the certification requirement, section 
5382(a)(3) defines ``affiliate'' as having the meaning contained in 
section 117(a)(4) of the Federal Alcohol Administration Act (27 U.S.C. 
211(a)(4)), and as including ``a winery's parent or subsidiary or any 
other entity in which the winery's parent or subsidiary has an 
ownership interest.''

Temporary Rule and Notice of Proposed Rulemaking

    On August 24, 2005, TTB published in the Federal Register (70 FR 
49479) a temporary rule, T.D. TTB-31, which implemented the above 
described certification requirements by amending 27 CFR parts 4, 24, 
and 27. In conjunction with the publication of T.D. TTB-31, TTB 
published a notice of proposed rulemaking, Notice No. 51, in the 
Federal Register (70 FR 49516) on August 24, 2005, referencing and 
inviting comments on T.D. TTB-31. The comment period closed October 24, 
2005.

Comments and TTB Analysis

    TTB received four comments during the comment period. Below, we 
summarize and respond to the four comments.
Comment
    The Embassy of Switzerland commented that requiring certification 
for shipments of limited quantities could create impediments to the 
introduction of new products. It therefore urged TTB to exempt from 
certification shipments of limited quantities and non-commercial 
shipments intended for trade fairs or exhibits.
TTB Response
    The implementing regulations include an exemption for importations 
of commercial samples of natural wine. Under 27 CFR 
27.140(b)(2)(ii)(C), commercial samples include sales samples, samples 
for trade shows, and samples imported for laboratory analysis. We 
believe this provision addresses the commenter's concern regarding 
shipments for trade shows and exhibits. We also believe that 27 CFR 
27.140(b)(2)(ii)(B), which exempts importations of a personal, non-
commercial nature, could apply to many of the shipments of limited 
quantities mentioned by the commenter.
Comment
    The National Association of Beverage Importers, Inc. (NABI), in its 
comment, stated that TTB did not define the word ``importer'' in the 
temporary regulations, making it unclear who must retain a copy of the 
certification. It stated that in the industry, ``importer'' could mean 
either the ``authorized importer'' or the ``importer of record.'' 
According to NABI, the ``authorized importer'' is authorized by the 
foreign supplier to import the supplier's wine into the U.S., whereas 
the ``importer of record'' is the importer that physically imports the 
wine (sic), usually using a certificate of label approval (COLA) owned 
by the authorized importer. NABI therefore asked which type of importer 
must maintain a copy of the certification in their records. NABI 
believes that the COLA owner should be required to retain the 
certification. NABI also requested clarification regarding wine that is 
a blend of wines from multiple suppliers, asking if the importer must 
obtain certifications for all the wines used in a blend or only for the 
finished wine.
TTB Response
    ``Importer'' is defined in Sec.  27.140 of the implementing 
regulations as ``any person importing wine who must obtain a permit as 
provided in Sec.  27.55.'' Under Sec.  27.55, any person who intends to 
engage in the business of importing wines must obtain a permit from 
TTB. If a COLA holder is also the actual importer, that COLA holder 
would have to both obtain a permit and retain the certification, a copy 
of which is sufficient for this purpose. TTB believes the regulations 
are sufficiently clear on this point.
    With regard to NABI's second point, we note that the certification 
requirement applies to the wine that is imported into the United 
States, that is, the certification is required only for the finished 
wine if that is the wine that is imported. If the component wines were 
imported into the United States for blending here, then the 
certification requirement would apply to each of the component wines 
that is imported. If the wine is blended before importation, a 
certificate is required only for the finished, blended wine. We believe 
the regulatory language is also sufficiently clear on this point.
Comment
    The Wine Institute filed a comment disagreeing with the position 
taken by TTB in the temporary rule regarding self-certification, that 
is, that the statute does not allow self-certification by a winery when 
the winery owns or controls an importer rather than the other way 
around. The Wine Institute stated that a winery operating under a basic 
permit is the more qualified of the two entities to make this 
certification. The Wine Institute contends that TTB has the authority 
to infer that Congress did not intend to make this exclusion and that 
TTB should therefore revise the temporary regulations to allow a winery 
owning or controlling an importer to self-certify its imports.
TTB Response
    TTB notes that the statutory language contained in 26 U.S.C. 
5382(a)(3)(A)(iii)

[[Page 22818]]

very specifically refers only to an importer that owns or controls a 
winery or that has an affiliate that owns or controls a winery 
operating under a basic permit. The statutory language does not suggest 
that Congress intended the statute also to allow self-certification by 
a winery that owns or controls an importer or that has an affiliate to 
that owns or controls an importer. Accordingly, we do not believe 
Congress intended the interpretation suggested in this comment.
Comment
    The Government of Canada submitted a comment requesting that 
certain types of Canadian wines--non-grape wines, cider, and wines 
containing less than 7 percent alcohol by volume--be exempt from the 
certification requirements. These wines are outside the scope of the 
``Agreement on Mutual Acceptance of Oenological Practices'' (MAA) 
signed by several nations including Canada and the United States, which 
covers only natural grape wines that are at least 7 percent alcohol by 
volume, and are therefore subject to the certification requirements. 
Canada contends that an exemption would be justified because Canadian 
regulations require that fruit wines (other than cider) and wines 
containing less than 7 percent alcohol by volume must be produced in 
accordance with the same standards as wines covered by the MAA.
    Canada also requested consideration of an exemption from the 
certification requirements for the importation of small quantities of 
non-grape natural wine from Canada in order to mitigate the potential 
economic impact on small exporters. Canada stated that because these 
wines are exported in limited quantities by small exporters the cost of 
complying with the requirements will be prohibitive and may shut these 
products out of the U.S. market. Finally, Canada requested that we 
delay the implementation of the certification requirements until the 
United States and Canada can reach an agreement on an import 
certification regime covering these wines.
TTB Response
    We are unable to provide the two requested exemptions. The non-
grape wines and other products described by Canada clearly fall within 
the certification requirements of the statute. The fact that they are 
produced in accordance with the same standards as wine covered by the 
scope of the MAA or are only exported in limited quantities cannot 
override the clear wording of the statute.
    Regarding the request for a delay in the implementation date, TTB 
does not have the authority to change the implementation date of the 
certification requirements, which is prescribed by the statute.

TTB Finding

    Based on the reasons set forth above and on the comments received, 
we believe it is appropriate to adopt the temporary rule as a final 
rule without change.

Regulatory Flexibility Act

    We certify that this regulation will not have a significant impact 
on a substantial number of small entities. This regulation adopts 
without change a temporary rule that incorporated some reporting and 
recordkeeping requirements. It was previously concluded that those 
requirements were expected to be of minimal burden, and we have 
received no information that contradicts that previous determination. 
Therefore, no regulatory flexibility analysis is required. 
Additionally, pursuant to section 7805(f) of the Internal Revenue Code, 
we submitted the temporary rule to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on the impact to small 
businesses. That office did not comment on the temporary rule.

Paperwork Reduction Act

    The collections of information contained in this final regulation 
have been previously reviewed and approved by the Office of Management 
and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 
(44 U.S.C. 3507(d)) and assigned OMB control number 1513-0119. 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. This final rule restates the collection 
of information without substantive change.
    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).

Executive Order 12866

    This rule is not a significant regulatory action as defined in 
Executive Order 12866. Therefore, it requires no regulatory assessment.

Drafting Information

    The principal author of this document was Jennifer K. Berry, 
Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade 
Bureau. Other personnel also participated in its development.

List of Subjects

27 CFR Part 4

    Advertising, Customs duties and inspection, Imports, Labeling, 
Packaging and containers, Reporting and recordkeeping requirements, 
Trade practices, Wine.

27 CFR Part 24

    Administrative practice and procedure, Claims, Electronic fund 
transfers, Excise taxes, Exports, Food additives, Fruit juices, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Research, Scientific equipment, Spices and 
flavoring, Surety bonds, Vinegar, Warehouses, Wine.

27 CFR Part 27

    Alcohol and alcoholic beverages, Beer, Customs duties and 
inspection, Electronic funds transfers, Excise taxes, Imports, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Wine.

The Regulatory Amendment

    For the reasons stated in the preamble, the temporary rule 
published in the Federal Register at 70 FR 49479 on August 24, 2005, is 
adopted as a final rule without change.

    Signed: January 2, 2008.
 John J. Manfreda,
Administrator.
    Approved: March 24, 2008.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
 [FR Doc. E8-9173 Filed 4-25-08; 8:45 am]
BILLING CODE 4810-31-P